What is the Future of Ohio Workers' Compensation Group Rating?

Employers who have participated in BWC’s group rating discount plan have certainly noticed changes in recent years. While it’s been no secret that being removed from a group rating plan following an expensive claim could be financially devastating for an employer, only in the past several years has the BWC begun to implement changes to ease the blow in the event of a removal. TheBWC’s re-evaluation of group rating programs follows media scrutiny discussing the inequities of the current rating system.

In the past, group rating programs, implemented by third party administrators, offered as much as a 95% premium discount for employers with a squeaky clean claim history. However, an employer with enough claim costs to make the company in-eligible for group rating was often hit with an extreme increase in premiums upon removal from the group. Employers with a clean claim history were paying very little in premiums while employers not participating in group rating were making up the difference.

In an effort to even the playing field, the BWC has been gradually reducing the maximum discount that a group rated employer could obtain while providing an overall reduction in base rates to help ease the burden of employers who are not group eligible. In effect, the premium pendulum that swung wildly from deep group rating discounts to sky-high non-group penalties will moderate toward the middle.

Just when employers thought they knew the BWC’s game plan, several Ohio employers won a motion for preliminary injunction against the BWC in Cuyahoga County Court of Common Pleas that could potentially turn group rating on its head. In San Allen, Inc. et al. vs. Marsha Ryan, Administrator Ohio Bureau of Workers’ Compensation, a group of employers convinced Judge Richard McMonagle to order the BWC to stop its current implementation of group rating as an experience rated program beginning with the 2009 rate year, which starts July 1, 2009. In its place, the court ordered that the BWC implement a retrospective group rating program, meaning that group employers would pay for claims dollar for dollar once the year is over. Ohio Revised Code 4123.29 (A) states that the group rating plan should be retrospective.

On December 15, 2008, the BWC filed an appeal to this decision. While the court system processes the BWC’s appeal, some employer associations will push the Ohio legislature to remove the word “retrospective” from the relevant statute.

Where does this leave Ohio’s state funded employers, who are trying to budget expected premiums for 2009?

Because the BWC appealed the decision, the court’s preliminary injunction will be stayed pending adjudication of the appeal. If the legislature did not intend for group rating plans to be retrospective, as the BWC argues, then prompt legislative action is needed to settle the debate. Most third party administrators are proceeding with their 2009 group rating application process in a business-as-usual fashion. Employers should apply for group rating just as they have done for years.

In this uncertain economic climate, it is unfortunate that Ohio’s employers cannot predict with certainty the future of workers’ compensation group rating discounts. Undoubtedly, the most prudent plan for any employer is to budget for ever shrinking group rating discounts.

Posted by: Noel C. Shepard