The Ohio Bureau of Workers’ Compensation (BWC) calculates an employer’s annual premium based on three factors: the employer’s industry, claim costs and payroll.
In some cases, employers can reduce their workers’ compensation annual premiums by qualifying for any of the several alternative rating programs available, including Group Retrospective Rating, Deductible, Safety Council and One Claim Program, among others.
“It is important for employers to participate in the program that makes the most sense to their organization and to have studies completed that show the best savings options,” says Randy Jones, the senior vice president of TPA Operations for CompManagement, Inc.
Smart Business spoke with Jones about how to determine which of these options is right for your business.
What are some ways employers can reduce workers’ compensation annual premiums?
Again, there are three factors the Ohio BWC uses to calculate an employer’s annual premium: the employer’s industry, claim costs and payroll. To reduce annual premium, an employer may qualify for an alternative rating program. Employers can also control costs by ensuring timely reporting and investigation of their claims and then also working with their third-party administrator to utilize cost-containment strategies such as a transitional duty program, salary continuation, aggressive claims management and possibly settlement.
How can alternative rating programs help?
The BWC has several alternative rating programs that offer discounts toward annual premiums, whether up front or retrospectively. The programs available to employers are Group Rating, Group Retrospective Rating, Individual Retrospective Rating, Small and Large Deductible Programs, Drug Free Safety Program, Safety Council, One Claim Program and Self Insurance.
Some programs are also compatible with each other to allow an employer to ‘stack’ the discounts together up to the maximum discount allowed, which is determined annually by BWC. There are different eligibility requirements for each program as well as expectations that must be met in order to participate and maintain eligibility. However, each program has the goal of rewarding an employer for its focus on safety in the workplace and controlling claim frequency and severity.
What are the pros and cons of these alternative programs?
The main advantage tied to participating in any alternative rating program is the ability to potentially reduce your spend on workers’ compensation and thus impact your company’s bottom line. These programs all provide a mechanism that can result in cost savings if implemented properly. As mentioned, some programs offer an up front discount, while others are capable of being stacked together to maximize savings.
The amount of potential savings associated with each of these programs must always be weighed against the amount of time (and potential other costs) you may be required to invest in order to participate in these programs.
You also need to be aware of ‘stacking’ limitations that are associated with some of the programs. In some cases there is no up front discount, but rather the potential to receive deferred savings based on program performance. Your third-party administrator should be able to review these different programs and assist in identifying which ones are the best fit for your organization.
What kind of results can an employer expect from using one of these programs?
Each program has its own maximum discount determined annually by the BWC Board of Directors. Discounts vary by the amount of risk an employer wishes to take in a given year. For example, if an employer participates in the Deductible Program, it may choose from nine different levels ranging from $500 to $200,000. Available discounts go as high as 77 percent, dependent upon industry and the deductible level chosen.
An employer should pick the program that is best suited for its organization. With the addition of new alternative rating programs by the BWC in 2009, employers now have more options in order to make a selection based on risk tolerance, the size of their business and their overall payroll/premium.
How can employers determine which program makes the most sense for them?
Employers should contact their workers’ compensation third-party administrator to request a ‘feasibility study.’ A feasibility study is a tremendous tool for employers to evaluate the many different rating/discount programs in order to see how they can impact the costs associated with their workers’ compensation program. In addition, a ‘feasibility study’ should include which rating programs can be ‘stacked’ together for greater discount potential if qualifications are met.
When should an employer begin researching these programs to ensure it meets the filing deadline?
For a private employer, the deadline to enroll in a group rating discount program is the last business day of February each year. All other programs have an enrollment deadline of the last business day in April. For a public employer, the enrollment deadline for participation in group rating is the last business day of August. The deadline for all other programs for public employers is the last business day of October.
The one exception to these deadlines is for the Safety Council program. The deadline to enroll for both private and public employers is July 31.
Randy Jones is the senior vice president of TPA Operations for CompManagement, Inc. Reach him at (800) 825-6755, x2466, or Randy.Jones@sedgwickcms.com.