Many Colorado businesses could once again see a decline in their workers’ compensation insurance premiums next year, although for some the drop could be much more dramatic than in past years.
The trend reflects ongoing efforts by employers to prevent workplace injuries, as well as either declines or stable figures in frequency of claims, duration of claims, severity of injuries and medical costs.
The National Council on Compensation Insurance, which proposes rates for workers’ compensation insurers, is recommending an average premium decrease of 12.7 percent effective Jan. 1. Whether employers realize that big of a drop will depend on insurance companies’ own calculations, which could lower the NCCI’s proposed reductions.
One of the largest workers’ comp insurers in Colorado, Pinnacol Assurance, approved a 2017 decrease in workers’ compensation rates that averaged 3.2 percent for the insurer’s Colorado policyholders. That decrease exceeded the Colorado Division of Insurance’s recommendation of a 2.4 percent reduction.
The NCCI said its recommendation for 2018 rates was based on lower losses in 2015 compared to 2014. It also noted Colorado’s loss-time claim frequency has declined since 2011. And it said that insurance and medical average-cost-per-case figures decreased significantly in 2015.
While some businesses will see increases in their rates, many could see declines ranging from about 2.5% to nearly 40% — assuming insurers don’t raise their own loss-cost figures.
Under the NCCI’s recommendations, some of the biggest drops could be seen by helicopter operations, casinos, taverns and even cemetery operations. Food-service companies, real estate appraisers and warehouses will see more modest drops.
Premiums are calculated in part based on a company’s experience modification factor, or “e-mod.” If claim costs are lower than average when compared with other organizations of similar type and size, then a company’s e-mod will be lower than 1, which means lower workers’ compensation premiums. On the other hand, if a company’s claim costs are higher than average, its e-mod will be over 1, increasing their premium.
Also read: Why Workers’ Comp Isn’t for Workers Only
The e-mod takes into account three years of loss history not including the most recent policy year, so that’s how long any given claim may affect a company’s premium.
The NCCI proposal will be reviewed by the state insurance division, which can approve decreases or order changes. The new premiums would go into effect on Jan. 1, 2018.
The NCCI is an advisory organization that studies workplace injuries, collects workers’ compensation claim data, analyzes industry trends and develops loss costs used in the rate-making process.
Workers’ compensation pays for lost wages, medical bills and the cost of rehabilitation for a worker injured on the job. It also provides death benefits and funeral expenses for the dependents of someone killed in a work-related accident or disaster.
Employers in Colorado must provide workers’ compensation coverage for their employees if one or more full or part-time persons are employed.
While rates might be dropping, companies will want to keep a close eye on their own e-mods. A few tips to help keep your workers’ compensation costs down:
- Make sure your risk management and safety and training programs are up-to-speed. Remember, an ounce of prevention truly is worth a pound of cure. Studies have shown that every $1 invested in injury prevention results in a $2 to $6 return for businesses.
- Employers should also take care when hiring, even during a time of labor shortages, to weed out candidates who could pose a safety risk to the company.
- Make sure your return-to-work program is designed to help injured employees return to work as soon as possible.
Steve Doss is a CCIG Vice President. Reach him at email@example.com or 720-330-7910.