Workers' comp insurance rates likely to fall
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By Louis Porter Vermont Press Bureau - Published: December 5, 2008
MONTPELIER — Workers' compensation insurance rates are likely to go down again in Vermont.
The National Council on Compensation Insurance, which consults with states as they set rates for the insurance employers provide for workers hurt on the job, is recommending a 13 percent drop in rates in Vermont. Jobs in each sector of the economy, and indeed individual companies, get their own rates.
However, if as expected state regulators follow NCCI's recommendation, rates overall for the largest piece of workers' compensation will drop again in Vermont, after being reduced by more than 4 percent last year.
"It is a piece of positive news in an otherwise dismal climate," said Sen. Vincent Illuzzi, R-Essex/Orleans, whose committee is one of those responsible for workers' compensation law.
"I think it is extraordinarily good news," said Vermont Department of Labor Commissioner Patricia Moulton Powden.
It may also mean a significant amount of money for employers, who spend nearly $200 million a year on workers' compensation insurance premiums.
The rate recommendation will not translate directly into a 13 percent reduction in premiums. That is because other expenses, such as administration, other overhead and profits are added by insurance carriers and because the history of individual industries and companies plays a role. In addition, the Department of Banking, Insurance, Securities and Health Care Administration will weigh in on what workers' compensation rates will be.
But employers in some industries will see even larger drops.
For example, NCCI recommended the rates for dairy farmers, who have long struggled to pay compensation premiums, be reduced by nearly 17 percent while ski areas could see a 13.6 percent decline.
Insurance rates for those companies in a second, higher risk pool called the assigned risk market are also expected to go down by about 9.6 percent.
The reason for the proposed drop in rates — the greatest in New England if approved — is simply fewer claims, said Laura Backus Hall, who does the work on Vermont for NCCI. A similar trend is being seen nationwide, but Vermont's worker safety programs may deserve some of the credit for why the state's proposed rate has dropped so much, she said.
In fact the decline could have been larger still, except that health-care costs for all patients, including those hurt on the job, keep rising, Moulton Powden said.
"Medical costs keep growing," she said. "Until we can address health-care costs generally we may see some volatility in our ability to maintain these downward trends in workers' compensation costs."
Less than two decades ago health-care costs were less than half of worker compensation costs at about 46 percent. Now they make up about 59 percent, she added.
Employers are not always fond of the state's worker safety inspections, but they are one reason why rates have come down in Vermont, Moulton Powden said.
"We are fully staffed now, we are out on the street regularly," she said.
In addition the state has a variety of voluntary compliance and assistance programs for workers and companies.
In addition the department has begun working with some large farms.
"That work is too early to show up in these numbers yet," she said. But it has helped those individual employers reduce their costs for insurance, she added.
Meanwhile lawmakers and administration officials are trying to figure out how to reduce Vermont's workers' compensation rates, still relatively high. Some reasons for that — such as the fairly small pool of workers — may be impossible to address.
But there is now a task force looking at misclassification of employees as independent contractors that is scheduled to work into the fall.
"I hope there will be some interim steps we can take that will help," said Rep. Warren Kitzmiller, D-Montpelier, who is the chairman of that study committee.
Such misclassification can give companies that engage in it a significant — and unfair — leg up, particularly in a bidding process, Kitzmiller said.
"They can come in at substantially lower prices and make it impossible for the honest contractor to win a bid," he said. "There is a real temptation for a business to do that because workers' compensation is a large expense for any business."
Remedying such misclassification is important, but will not likely make a massive difference in rates, Moulton Powden said.
Lawmakers should also make sure that benefits for workers are in line, and Vermont has a reputation among employers of being generous in giving those benefits, she said.
"If someone is injured on the job they have every right to be properly cared for," she said. "I am not arguing for lower benefits so much as I am arguing for fair and equitable benefits."
Illuzzi said he does not believe it is the level of help workers get when injured that drives the cost.
"It is not the level of benefit that drives workers' compensation costs. It is the number of claims and the severity of claims," he said.
Whatever the long-term solution to Vermont's workers' compensation laws, it is great news for the state and for employers that the rate is likely to drop, Kitzmiller said.
"It is very definitely good news," Kitzmiller said. "It is significant. I am surprised and very pleased at that figure."
Contact Louis Porter at louis.porter@rutlandherald.com.
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