West Virginia employers would continue to benefit from lower workers’ compensation rates if the state agrees with an industry filing that loss costs be cut by 8.1 percent.
Since the state privatized its workers’ compensation system in 2006, after operating an exclusive state fund for years, loss cost rates have declined by 43 percent. If the state’s acting Insurance Commissioner Michael Riley approves the current filing, loss cost rates will have dropped be 51.8 percent.
The industry’s National Council on Compensation Insurance recommended the latest statewide average drop in loss costs, which insurers use in establishing the rates they use.
William Kenny, the state’s deputy insurance commissioner, said the filing is under review with a decision due sometime this month.
“Obviously we are very pleased it is a decrease, especially since nationally workers’ compensation rates are starting to go up,” he said.
The loss cost portion of rates reflects only the amount of dollars actually paid out by insurers for medical and indemnity benefits. Each insurer then determines its rates by combining the loss cost factor with its own loss experience, administrative, and profit and contingency factors.
NCCI State Relations Executive Dennis Kokulak said the proposed decrease is based on 2009-2010 data shwoing losses were lower than expected. “This has been consistent pattern in West Virginia since 2006,” he said.
The state’s workers’ compensation benefit dollar is split into 53 percent for medical costs and 47 percent for indemnity benefits. Between 2009 and 2010, insurers’ indemnity cost per claim dropped from $14,815 to $13,680. During the same time period, insurers’ medical cost per claim remained fairly stable with insurers paying out $15,041 in 2010 and $15,935 in 2009
One trend that has changed is the total number of claims. For well over a decade, the number of workers’ compensation claims around the country has been dropping. In West Virginia, however, there are signs this trend might be changing as there was little change in the state’s claims’ frequency rate between 2009 and 2010.
“We don’t know if this is a one-year leveling off or the beginning of a new trend,” said Kokulak.
Employers paid $374 million in total premiums in 2010, a significant drop from the $406 million they paid in 2009.
Employers are enjoying a competitive market. More than 200 insurance companies are licensed to provide insurance and 180 are currently offering coverage.
Kokulak noted that while competition may be a factor, part of the drop in premiums may be due to the state’s economy, which continues to shed jobs, and, with them, premium dollars.
BrickStreet Mutual Insurance Co., the now privatized former state fund, has 60 percent of the market. According to NCCI, the other top insurers include Chartis Insurance Co., representing 10.7 percent of the market, Travelers Group with 5.7 percent, Liberty Mutual Insurance Group with 3.6 percent, and Zurich Insurance Group at 3.4 percent.