Tag Archives: payroll

An Open Letter on the Oklahoma Option

I’m the founder and CEO of WorkersCompensationOptions.com (WCO), a company dedicated to workers’ compensation (WC) and its legal alternatives. This letter is intended to quell the concerns of employees in our client companies—employees who may have been distressed by the recent (mostly negative) publicity from ProPublica and NPR regarding options to WC in Texas and Oklahoma.

In case you only saw one installment from the Insult to Injury series, I’ll provide a quick summary. In 2014, the project’s authors started to assimilate massive amounts of data from their research concerning each state’s (and the federal government’s) WC system. In March 2015, the authors began releasing articles with an indisputable premise: Collectively, these systems need improvement.

That commendable beginning eventually gave way, however, to a hypothesis that is supported neither by reality nor by the overwhelming quantity of data the authors provide. Their conclusion (that employers are in cahoots with insurers to pressure attorneys, anonymous doctors and legislators into discarding the lives of an unfortunate few for the sake of bolstering corporate profits) completely misses the mark in pinpointing why so many WC systems are broken beyond repair. In fact, attorneys and doctors put at least as much pressure on WC systems as insurers, and any attempt to depict the medical and legal communities as innocent bystanders in the WC feud is simply too naive to be taken seriously.[1] I do not doubt the authors’ sincerity in addressing a serious societal problem, but I also do not believe they are equipped to understand the problem they sought—however earnestly—to demystify for their readers. Worse yet, I fear they have positioned themselves in the WC space in a manner that is only likely to retard the implementation of practical solutions.

This letter is prompted by the article on Oct. 14, 2015, which painted an inaccurate—even an irresponsible—picture of both Texas nonsubscription (TXNS) and the Oklahoma option (OKO). As that article’s title (“Inside Corporate America’s Campaign to Ditch Workers’ Comp”) is lengthy, I’ll shorten it to CDWC going forward.

Texas Nonsubscribing Employees: What Can We Learn?

Texas is exceptional in the WC world because it has, for more than a century, offered employers a viable alternative to WC. Of approximately 380,000 employers in Texas, roughly two-thirds subscribe to a traditional WC system; the other third are nonsubscribers who develop their own models. That’s about 120,000 different systems, and there is plenty to be learned. We’ve seen various organically grown components develop from these disparate systems, many of which superficially resemble WC. Despite those similarities, however, industry experts understand how counterproductive it is to make unilateral comparisons between TXNS and WC.

The authors of CDWC didn’t get that memo.

Of all the various lessons learned from diverse TXNS models, one runs counter to conventional WC dogma: Employers can protect themselves while delivering superior care for employees at a fraction of the cost of WC. Eliminating the inflated costs associated with abusive practices that run rampant in WC is a critical component of that particular lesson.

Because the CDWC authors insist on judging TXNS through the lens of WC, TXNS looks to them like a system that would appeal to skinflint employers who simply do not care whether their employees get hurt. However, because employees of nonsubscribing companies can sue their employers for tort, the decision to opt out of WC is likely to be penny-wise and pound-foolish for employers who do not take measures to ensure the safety of employees. The CDWC authors’ failure to unpack the importance of tort negligence means many readers will come away from the article without understanding that a typical $50,000 payout in WC could easily be either $0 or $5 million in TXNS—depending on who is at fault for the accident. Even more disappointing is CDWC’s attempt, in a one-sentence paragraph, to gloss over one of WC’s most dangerous shortcomings: the extent to which the no-fault arrangement between employers and employees has removed incentives for safety in the workplace throughout the country.

If you are an employee of one of our Texas nonsubscribers, rest assured that your employer has every reason to minimize workplace accidents and to take very good care of you if an occupational injury occurs.

In a nutshell, your interests are aligned with your employer’s—another critical lesson we’ve learned from TXNS.

Oklahoma Option Employees: A Whack-a-Mole WC System Led You Here

ProPublica and NPR harp on a consistent theme throughout the Insult to Injury series: WC is broken. We at WCO agree, and Oklahoma may provide the single best example of how and why a state’s WC system becomes unsustainable.

The WC ecosystem is made up of five major communities: insurance, medical, legal, employer and employee. Abuse within the system by any of these communities leads to adjustments to the boundaries of the system. Throughout the Insult to Injury series, the authors go out of their way to sidestep the discussion of systemic abuse. They even attempt to dismiss fraud by citing a study that minimizes its role. Abuse and fraud in WC are, in some ways, analogous to speeding on the highway: Almost all drivers abuse the speed limit, but very few are issued citations. Similarly, the cases of clear-cut fraud in WC only reflect a small portion of the amount of abuse going on. But even if we allow the authors to exclude all instances of clear-cut fraud from the WC conversation, we are still left with rampant abuse driven by insidious systemic incentives.

For decades, abuses and inefficiencies within the WC system have led to each of the five communities touting the need for major reforms—at the others’ expense. Real reform threatens each community, which leads to stalemates in negotiations. Major upheaval has been avoided via the compromise of pushing and pulling the system’s boundaries, resulting in a decades-long game of whack-a-mole being played across the nation. If one voice cries, “Data shows an alarming trend in opioid abuse,” that mole gets swatted by requiring more medical credentials for prescribing pain killers. When another shrieks, “Overutilization is surging,” that mole is whacked through costly and time-consuming independent medical examinations. When someone else observes, “Our disability payouts are higher than neighboring jurisdictions,” that mole prompts us to lower disability payouts. Immediately, a fourth voice shouts, “Pharmaceutical abuses make up 8.4% of total costs,” and that mole persuades us to introduce drug formularies. But there isn’t even a moment of silence before another voice remarks, “Our analysis shows dismemberment payouts in this jurisdiction are lower than those of our neighboring jurisdiction.” That mole gets whacked by proposing legislation to increase dismemberment payouts—legislation that is dead on arrival.[2] At some point, we have to realize the moles are multiplying faster than we can whack them. (If my commentary doesn’t apply to other jurisdictions, I’m happy to restrict it to Oklahoma and Texas because writers can best serve their readers by acknowledging the limitations of their own expertise.)

Even if we concede that the changes detailed in the paragraph above aren’t necessarily bad (which I’m not conceding; I’m just trying to be polite and move the argument along), they demonstrate a persistent pattern of outcomes, inclusive of abuse, inherent in any hierarchical bureaucratic system. Regulators are busy reacting to entrenched abuses while market participants find new and exciting ways to game the system. This futile game of whack-a-mole is endless.

The Sooner State had a front row seat to witness what TXNS accomplished—both the good and the bad.[3] With that first-hand knowledge, the Oklahoma legislature has finally provided the state—and the country—with an opportunity to see whether real change can restore function to a malfunctioning system. While WC stakeholders assure us they are only a few more whacks-at-the-mole away from making WC hum, Oklahoma lawmakers have written a new chapter in the history of workplace accident legislation. The OKO is neither WC nor TXNS.

The brilliance of the OKO is that it doesn’t attempt to overhaul a broken WC system. The legislators effectively stepped away from that decades-old stalemate. Instead of an all-out overthrow, they left WC in place and created an option for employers who were willing to try something new—which is exactly how WC itself was introduced a century ago.

Because the OKO is substantially modeled on TXNS, it is easy to see why the CDWC writers conflated the two in their analysis. The errors in CDWC concerning ERISA’s applicability, employee benefits and appeals committee processes in Oklahoma are all presumably honest mistakes made by writers who, in their zeal to distinguish TXNS and the OKO from WC, failed to distinguish TXNS and the OKO from each other.

Nevertheless, it’s important for employees to understand that TXNS varies dramatically from one employer to another, and many of the rules concerning TXNS do not apply north of the Red River.

Although the CDWC authors misleadingly couple TXNS and the OKO with respect to ERISA’s applicability, ERISA plays no direct role in occupational accidents in the OKO.[4] We’ll be happy to get you a legal opinion on that, but for our purposes regarding CDWC, take my non-legal opinion as on the record. If others disagree, they should go on the record, as well. While ERISA has served employers and employees well in TXNS, its role in the OKO is only implied (if that). We are free to use it where we wish, as long as we are compliant at the state level.

Presumably tied to their ERISA misapplication, the CDWC authors assert that “benefits under opt-out plans are subject to income and payroll taxes.” Such tax advice is unusual from investigative journalists without citation, and I have asked the authors to share their source. Although the jury is still out on this tax issue, it is a point the CDWC authors must distort to substantiate their otherwise baffling claim that the workplace accident plans of OKO employers “almost universally have lower benefits.”[5] If any OKO plans really do offer benefits that aren’t at least as good as those provided by WC, they’re illegal. That’s how the legislators have written the law, and it’s what they’re dedicated to achieving for workers, regardless of obfuscations invoking TXNS, ERISA and unresolved tax implications.

The authors of CDWC also completely misrepresent appeals committees for at least a majority of OKO employers. The authors overlook a dramatic improvement to employee protection that the OKO makes to TXNS when they claim that appeals committees in Oklahoma work analogously to appeals committees in Texas: “Workers must accept whatever is offered or lose all benefits. If they wish to appeal, they can—to a committee set up by their employers.” That’s dead wrong. Executives at each of our OKO employers are fully aware that, in case of an employee appeal, the employer has nothing to do with the selection of the appeals committee panel members or the work they complete. The process is independent from the employer and extremely fair.[6] The CDWC authors would do well to read Section 211 of the law more carefully.

On the subject of benefit denials, I’ll share a single data point from our OKO book: To date, we have denied exactly one claim. This is a nascent system, so we must be very careful in drawing actuarial conclusions. Still, our company has led more employers from traditional WC into the new OKO than any other retailer, so we have a bit of credibility to offer on this subject. The point of the system isn’t to deny benefits to deserving employees but to ensure benefits are delivered more efficiently. The system is working.

The CDWC authors only provide one OKO case study, Rachel Jenkins. Strangely, they lump Jenkins in with four TXNS case studies. The Jenkins case is still being tried. We will withhold opinions—as we hope others would—until a more appropriate time.

As a reminder, while the OKO law is stronger today than ever, if it were to be deemed unconstitutional by the Oklahoma Supreme Court, we would have 90 days to get everyone back into traditional WC (per Section 213.B.4.).

Next: Vigilance and Diligence

My comments are mine and mine alone. I do not speak for any associations or lobbyists. I have no interest in debating those who inexplicably assume that any alternatives proposed to a failing system must stem from sinister motives. However, I encourage anyone (from prospective clients to employees of existing clients) with questions or concerns to call me.

Another option for learning more is to click here and watch a formal debate regarding the OKO. This footage was shot in September 2015. It features Michael Clingman arguing against the OKO while I, predictably, argue for it. One thing you can’t miss in that video is my desire to oust most attorneys from the scene. To help explain, I’ll adapt a quotation from John F. Kennedy (who was discussing taxation) to my own area of concern (the well-being of employees): “In short, it is a paradoxical truth that employee outcomes from increased WC protections are worse today, while economic results suffer, and the soundest way to create higher and better standards of living for employees is to eliminate these abused protections.” For philosopher kings, the theory of the OKO may not sound as good as the theory of WC, but when it comes to practical realities the results demand everyone’s attention.

To summarize my primary criticism of Insult to Injury, it simply hasn’t done enough. The story it tells is insufficient and smacks of partisanship and ideology, two biases that ProPublica’s journalists allegedly avoid. WC is substantially more complex than a corporation-out-to-exploit-its-workforce short story. Ignoring abuse in each of the communities in a five-sided WC debate demonstrates a lack of journalistic impartiality and a stunning deficiency of perception. Moreover, to my knowledge, ProPublica hasn’t crafted any relevant suggestions for legislation, simply leaving its readers with the vague and implicit notion that federal oversight is needed. If that is the goal of Insult to Injury—to provide one-sided, emotional yarns alongside a treasure trove of data, hoping it will all spur some federally elected officials to create real change at long last—then I suspect ProPublica will still be holding this subject up to the light of opprobrium upon the retirement of each of the series’ authors.

We do not aspire to win over the authors or even their followers. We will focus our energies each day on providing the best workplace accident programs for employers and employees alike. Our results should speak for themselves.

Finally, I am not an attorney, and nothing in this letter should be taken as legal advice.

Sincere regards,

Daryl Davis

Footnotes:

[1] With medical providers, overutilization is always a concern. Click here and watch the video from the 12-minute to the 15-minute mark for a detailed description of rampant WC abuse by surgeons who provide unnecessary and damaging back procedures. If the workers weren’t disabled prior to the surgeries, many were afterward. As for the legal community, simply view slide 73 of the NCCI’s 2013 Oklahoma Advisory Forum. WC disability payments, which is where attorneys get their cut, were 38% higher in Oklahoma than in neighboring states—not because jobs are 38% more dangerous in Oklahoma than in Kansas or Texas but because Oklahoma attorneys are 38% more effective at gaming the state’s WC system.

[2] Alabama SB 330—which was prompted by Insult to Injurynever got out of conference. From what I could gather, lengthy negotiations between several different interest groups led nowhere, with the Alabama Medical Association at the center of this particular stalemate. Not surprisingly, the two special sessions called by Alabama Gov. Bentley in 2015 were strictly focused on the state’s budgetary crisis; this bill was never discussed.

[3] The final Texas case study offered in CDWC deals with Billy Walker, who fell to his death while on the job. The upside to TXNS is his estate’s common law right to pursue a tort lawsuit against his employer. The employer could have been ordered to pay Walker’s estate a settlement in the millions, but the employer filed bankruptcy before any such judgment could be awarded, which is plainly an unacceptable outcome. This demonstrates a lack of surety—the single biggest problem in TXNS. OKO addresses this issue in various ways, most notably in Section 205 of Title 85A, which guarantees surety for injured workers.

[4] For the non-occupational components of your OKO program, ERISA does apply.

[5] Per Section 203.B. of the statute, compliant plans “shall provide for payment of the same forms of benefits included in the Administrative Workers’ Compensation Act for temporary total disability; temporary partial disability; permanent partial disability; vocational rehabilitation; permanent total disability; disfigurement; amputation or permanent total loss of use of a scheduled member; death; and medical benefits as a result of an occupational injury, on a no-fault basis, with the same statute of limitations, and with dollar, percentage and duration limits that are at least equal to or greater than the dollar, percentage and duration limits contained in Sections 45, 46 and 47 of this act.” (Emphasis mine.)

[6] Details of OKO appeals committee procedures are generally misunderstood—for now—by plaintiffs’ attorneys (and, apparently, investigative journalists). Attorneys frequently assume that, because the employer foots the bill, the employer controls the process. For a peek at how the appeals committee process really works for a majority of OKO employers, those curious should watch this video.

healthcare

Why Healthcare Costs Soar (Part 6)

In most healthcare discussions today, “the exchange” is usually described as a solution to address employers’ health and cost challenges. The exchange model is now being offered by carriers, by consulting firms and by independent companies. Accenture says the enrollment in private exchanges exceeded 6 million in 2015, and it’s projected to be 40 million by 2018.

Since the age of consumerism began back in the early ‘90s, the theory has been that, if we can transform employees into consumers of healthcare services, the free market will drive out the price variation among the providers as patients question the cost of services. But, despite increasing deductibles and pushing more of the cost burden to employees, many employers are still waiting for those employees to become healthcare consumers.

The reality is that healthcare is complex, so individuals have trouble deciphering medical terminology and obtaining the actual price for a specific service, especially because most people access the healthcare system infrequently.

Is the exchange the answer for consumerism to take hold?

At a recent exchange conference, national experts discussed the impact of the exchanges, providing various messages and statistics. It became clearer that the value of the private exchange is basically as an administrative platform to give individuals plan and program choices, so they can make decisions based on their needs.

Now, the concept of giving employees’ choices and allowing them to make a personalized decision is not new–cafeteria plans have been around for 25-plus years. Cafeteria plans in the ’90s had some big problems. The main one was serious adverse selection. When you have big bills planned, you switch to the “richest” plan, and then switch to a low-cost option later. When this happens, the “sponsor” gets shorted on payroll deductions as well the spread of the costs among those not using services.

It will be interesting to see if the exchanges have a better design these days.

When questions were posed to the exchange experts on whether the data was showing an impact to the healthcare decisions and to the health of the population, the consistent response was—we’re not sure.

It’s important not to get caught up in the marketing claim that an administrative platform is going to solve the healthcare challenges confronting employers today. As we discussed in Part 5 of this series, the marketing around value-based contracts/ACOs has also positioned that concept as a solution, when, in reality, performance contracts with provider have also been around for 25-plus years.

Employers continue to be faced with this problem: About 8% of their population consumes 80% of the total healthcare spending, and that 8% changes every 12-18 months.

Is it time to get back to the basics? Should the focus be on finding the right physicians committed to delivering evidence-based healthcare, and then ensuring that patients are accessing care from these providers?

When providers see that employers are truly committed to supply chain management, we can expect the process of care to change significantly, and there will be a commitment to removing the waste from the system. As with many other industries, the ultimate purchaser has the ultimate power, by working with the interested suppliers to improve the process and to increase quality and lower costs.

Healthcare Exchanges: Math Doesn’t Work

Employers of all sizes are rushing into healthcare exchanges these days — often after heavy prompting by their consulting firm or broker. Part of the expectation is that employers can cap their future health plan costs while giving active employees more options. Sounds great, doesn’t it?

The problem is the math doesn’t work. In addition, this approach has been tried before and flopped miserably.

The previous iteration of healthcare exchanges was in the early ’90s and was called “cafeteria” plans. The same claims were made: “No longer will your costs be at the mercy of healthcare inflationary trends. You can control how much you want to increase your subsidy each year – that is, if you want to increase it at all.” This failed because the math worked against the strategy then, too.

Let’s take a steely-eyed look at the numbers. If a company puts employees into an exchange because it wants to cap its costs going forward, that creates a reverse leveraging effect on employee payroll deductions.

Here’s an example: Assume premiums (or self-insured budget dollars) are $10,000 per employee per year and the company contributes 75%. The company pays $7,500 per employee per year (PEPY), and the employee pays $2,500. If plan costs increase 10%, and the company’s contribution stays flat, the employee cost will increase by $1,000 per year ($10,000 x 10%). That means the employee payroll deductions will go from $2,500 to $3,500, or an increase of 40%!

If costs go up another 10% in the next year or two, and the company contribution remains flat, the employee payroll deduction will increase another $1,100, for a total of $4,600, or a total increase of nearly 85% over a few years.

What employers quickly realized in the ’90s was that, if they didn’t keep increasing their subsidy level at a market rate, the cost to employees became intolerable. This reality led to the demise of so-called cafeteria plans.

If that is not enough, consider this. Some benefit managers hope exchanges will lead employees to choose less costly plans, ones with even higher deductibles. However, in an era in which 80% of plan dollars are being spent by 6% to 8% of plan members (called outliers), that notion is flawed. Why? The 92% who aren’t spending much may choose plans with higher deductibles and copays, but the outliers won’t. Period. The result is having about the same claim dollars as before but collecting less in employee contributions, an unsustainable proposition for employers.

Further, some outlier spending is deferrable. An outlier-to-be in a high-deductible plan can switch to a low-deductible plan in the following year, have an expensive surgery and then switch back. That, of course, is the definition of adverse selection.

A private exchange may look like a good fit for your situation, but beware. If your consulting firm owns an exchange, really beware.

Alas, considering the rush into exchanges today, it looks like history is doomed to repeat itself.

Police Shooting Shows Gaps in Work Comp

Timely response and clear communication are critical for handling workers’ compensation claims. However, when it comes to gathering information, “timing” might be just as important as “timely.” A story out of Ft. Worth, TX highlights that the process needs to be a well-choreographed dance, or significant problems can arise.

Fort Worth Mayor Betsy Price publicly admonished CorVel Enterprise Comp for asking “inflammatory questions” of a police officer the morning after he was shot and seriously wounded in the line of duty.

The officer, a 19-year veteran of the Fort Worth Police Department, was shot in the abdomen while he and another officer responded to a mother’s 911 call asking for help with her son. The son, who was barricaded in a bedroom, opened the door and shot the officer. Both officers returned fire, killing him. The officer underwent surgery at Texas Health Harris Methodist Hospital.

Mayor Price, in a letter to CorVel, said the company’s workers’ compensation representative showed up at the hospital the morning after the shooting and proceeded to ask questions of the family, officers and hospital staff. The letter calls the questions “inflammatory” and criticizes the timing “as one of our police officers rests in a hospital bed recovering from gunshot wounds received last night.” The mayor is requesting CorVel CEO Gordon Clemons and his staff meet with her to “determine the facts and get to the bottom of this matter.” The company did not respond for the initial newspaper article and, as of this writing, still does not appear to have responded publicly.

I must state unequivocally that we do not know what questions were asked, or in what tone they were delivered. Clearly, however, people were upset by what they perceived to be an entirely inappropriate line of questioning, and people’s perceptions will be their reality. The questions might have been of a simple, by-the-book initial claims investigation nature. Given the emotionally charged atmosphere, however, I would suggest the timing was likely poor. Perhaps the best question that could be asked in that highly volatile 24-hour period should have been, “How can we help?” [Editor’s Note: It now appears that this question was, in fact, the point of the visit, but communication was poor. Here is a link to a followup column by the author. ]

This highlights such a critical issue for our industry. If there are two things workers’ comp is routinely criticized for, it is lack of timeliness and of communication. After all, we are the industry that invented the concept of “hurry up and wait.”

Under normal circumstances, having a workers’ comp representative present and involved within 24 hours would be a great thing – assuming, of course, that the representative did not make it a confrontational affair. Yet, somehow, an employee in this case has produced the opposite effect, angering an injured worker’s family, his associates and employer – the client responsible for paying the bills.

Perceptions can have lasting and damaging effects. Unfortunately for the workers’ compensation industry, perception is not something we spend a great deal of time worrying about.

We are a statutorily driven industry, going through the regulated processes day after day after day. It is sometimes easy to forget that there is a human being attached on the other side of that claim, and that our actions are continually creating perceptions about us and our trade. That lack of awareness on our part can lead to costly errors, and that may be exactly what has occurred in this case.

We do not have the full details; this is a one-sided story to date. What we do know is that something riled the mayor enough to write that letter and take the entire matter public.

In one way, her actions accent a positive point of the story, as they show an employer actively engaged in the welfare of an employee, as well as the management of his recovery. It is something we need to see far more of across the nation.

As for the CorVel employee involved, we do not know if the person was a competent employee just trying to perform the processes required of the job — or is living proof that a company is only as good as the biggest idiot on its payroll. It really doesn’t matter, as the perceptions of the one side are the only ones that are of concern at a public level.

Those perceptions tell us that proper timing may be more important than proper timeliness, and that showing compassion is essential. Sometimes, we can show compassion just through proper timing.

It’s Time to Revisit Payroll Calculations Used in Work Comp

For as long as anyone can remember, the basic method for calculating workers’ compensation premiums is RATE x PAYROLL x EXPERIENCE MOD. Rates vary based on job classification codes (which is much more complicated than it sounds), and the experience mod is based on prior losses. This is how premiums have been calculated for years.

This method inevitably leads to a payroll audit at the end of the policy term to determine whether any audit premium is owed. This issue can lead to conflict between the carrier and the policyholder.

One reason there is so much conflict is because of how “payroll” is defined by the rating agencies (NCCI, WCIRB, etc.). Actual wages paid to your employees are easy to define. But “payroll” goes beyond wages. There is some variation by state but, for the most part, “payroll” used to calculate workers’ compensation premiums includes things like vacation pay, holiday pay, bonuses (including stock), sick pay, auto allowances and commissions. The list is very extensive.

An area of much contention right now relates to the inclusion of bonuses. Bonuses in the form of cash or stock are both treated as payroll. But I have frequently heard complaints from employers who were upset because they received a large premium audit bill because of these bonuses. Employers argue that these bonuses usually do not increase carriers’ claim exposures.

Each state has a maximum indemnity benefit rate, with the highest being around $1,000 a week. That means that, if an employee earned wages of more than $80,000 a year, there is no impact on his benefit rate if he has a workers’ compensation claim. So a bonus would have no material impact on the claims exposure for a carrier.

The problem arises because the payroll rules are outdated based on the reality of the U.S. workforce today. It used to be that only the top executives in companies received substantial bonuses. The payroll rules in every state include caps for the directors and officers of companies for this very reason: the recognition that their higher wages did not increase the carrier’s exposures.

However, we are no longer a country where the majority of our workforce is in the manufacturing industry. A significant percentage of the workforce is now in highly skilled “white collar” jobs. More and more companies are using bonuses to assist in retaining their skilled workforce. Companies are making these benefits available to a wide segment of their workforce, far beyond the directors and officers who were considered in the rules for calculating workers’ compensation premium based on payroll.

The solution to this is relatively simple – extend to all employees the director/officer payroll caps used in calculating premiums. Nevada has done this for several years. Implementing this change would not be overly complex, as these payroll caps and the methods for calculating them are already in place.

This issue is currently being discussed by the NCCI Underwriting Committee. If NCCI were to recommend such a change, I would expect it would be quickly adopted by both NCCI states and the independent bureau states.

Would these changes result in lower premiums for employees? Perhaps for some employers, it could. But other employers could see higher premiums as carriers adjust their rates to ensure adequate premiums are being collected. The workers’ compensation industry’s combined ratios have been more than 100% for a number of years. Because of this, carriers have to be cognizant of the impact any changes in premiums would have on their surplus.

As workers’ compensation continues to evolve, we must constantly review the rules and regulations governing the industry to ensure they are still appropriate. Perhaps it is time to review one of the most basic issues, the method of calculating premiums.