BWC Rating – an Ohio Economic Development Issue

As I tweeted updates from an Ohio Workers’ Compensation briefing earlier this month, I could almost hear the collective yawns from those reading. Yes, the latest controversies of the Ohio Bureau of Workers’ Compensation (BWC) are best debated by actuaries, but the consequences of recent Bureau action will be far-reaching for Ohio business.

In response to the San Allen case in Cuyahoga County alleging inequities in the Ohio BWC group rating program, the Ohio General Assembly passed HB 79 allowing Ohio’s group rating program to continue, but with modifications. Group rating allows businesses with records of workplace safety to form groups that qualify for premium discounts. Group participants have an incentive to keep claims lower to stay in the group, and the BWC’s own data demonstrates that groups have resulted in reduced claims. To illustrate, participants in OSCPA’s group rating pool have received an annual premium discount of $542,000.

Responding to the case, the Ohio BWC was more than eager to be reactionary, approving sweeping changes introduced in the name of “rate reform” at its March meeting. The most significant changes include:

  • Overall base rate reductions for non-group employers, resulting in 25% overall savings.
  • A “penalty” for group employers of 31%, accompanied with a previously approved reduction in the maximum group rating discount from 85% to 77%. (A subsequent move to 65% has been proposed.)
  • Elimination of the “stacking” of discounts such as the Drug-Free Workplace discount on top of a group rating discount.

These rates were established to correct a $295 million “off-balance” calculation of the Bureau between current group and non-group employers.

Opponents of the rapid action by BWC claim that little transparency was provided in the calculations to allow Ohio employers and their representatives to question the calculation assumptions. Concerns have also been expressed that unintended consequences are not accurately modeled, including:

  • Are the discontinuation of groups with lower discounts, and employers leaving groups due to the impact of the penalty, adequately anticipated in projected revenue?
  • Does the introduction of regulatory complication and uncertainty further decrease the attractiveness of Ohio as a destination for employers?
  • What will be the Ohio business consequences of introducing increased costs of doing business during current economic challenges?

If projected revenue targets are not met due to unintended consequences, does this force increases in the group penalty in future years to correct the new “off-balance,” resulting in a downward spiral of additional unintended consequences that ultimately end the group rating program?

The cumulative result of the Ohio BWC changes is that the selection of the best approach for an employer will be a very individual determination. The best success strategy we can recommend is to stay in close touch with your group sponsor as we progress through current and forthcoming changes. OSCPA will keep the 450 CPA firms in its group rating program informed as this continues to unfold.

Changes approved for 2009 will not likely be noticed by many employers until checks are written in January of 2010. It has been difficult to get the Governor or legislators excited until employers begin realizing the effects. BWC continues to study additional changes for the July 1, 2010 premium year. Legislators and the Strickland administration need to hear from constituents about the true financial impact these changes make for businesses struggling to thrive and grow in these tough economic times.

The Ohio Society of CPAs has been actively involved in working toward minimizing unintended consequences and enacting rate changes over an appropriate timeframe to allow for public transparency and feedback. If you have a relationship with an Ohio legislator or someone on the Ohio BWC Board, now is the time to have an impact. Contact Amy Mignogna, OSCPA Senior Manager of Governmental Affairs, to learn how you can get involved.

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