Insurers and employers in Mississippi now have greater latitude to conduct alcohol and drug tests on employees following a workplace accident and reduce benefits for workers with pre-existing conditions.
Those changes are among those under updated workers’ compensation laws that recently took effect.
The law changes come a few months after regulators increased the state’s loss cost rates by an average 9.9 percent.
Mississippi Governor Phil Bryant said the changes will help vitalize the state’s economy, which is still struggling to rebound from the economic downturn.
“Today is a great day for Mississippi and our ongoing effort to make this the most job friendly state in the nation,” said Bryant in a statement. “The cooperation of private sector leaders and Mississippi’s elected officials is producing great opportunities for this state.”
Employers succeeded in gaining the ability to offset benefit payments based on an injured worker’s pre-existing condition. In 1989, the Mississippi Supreme Court ruled in a case [Stuart’s Inc. v. Brown] that “not all pre-existing conditions generate a duty to apportion, only those which have produced in the claimant a pre-existing occupational disability.”
Under the new law, all benefits can be off-set regardless of whether the pre-existing condition is related to the occupational injury. As a result, conditions such as obesity, arthritis or diabetes could be used to offset benefit payments for unrelated injuries such as carpel tunnel syndrome or a knee injury.
David Peak, underwriter for the Stone Trust Insurance, said the provision is fair given that workers’ compensation insurance is specifically there for on-the-job injuries.
“If you’re already injured, you shouldn’t have to pay for it again,” said Peak. “This helps lower claims costs.”
But attorney Rogen Chhabra, who represents injured workers, said there is a danger that employers and insurers may use the provision to reduce benefits even though the pre-existing condition has nothing to do with an injury.
“In every back injury the insurer can argue there is a degenerative disc regardless of the work assignment,” said Chhabra. “Everyone has a degenerative disc; it’s called getting old.”
Lawmakers also sought to strengthen the state’s alcohol and drug testing law.
Under the prior law, an employer had to prove that drugs or alcohol were the cause of the accident if an injured worker tested positive. The new law shifts that burden of proof so that it is presumed that the misuse of alcohol, illegal drugs or prescription drugs is the cause of the accident unless otherwise proven by the injured worker.
Stone noted that Mississippi allows insurers to give employers a five percent premium discount if they have a drug-free program in place. He said with the new changes will likely lead to more employers receiving the credit.
“The old law was frustrating for employers who tried to do everything right,” he said. “Now the burden is in the employees’ court.”
But Chhabra is worried employers may become too aggressive in testing employees even when it is clear that the nature of the injury could not be precipitated by alcohol or drug use.
“If employers start testing in every case it could put the constitutionality of the act itself into question,” he said.
Other changes clarify that once injured workers are treated by a doctor for six months they no longer have the right to change doctors and that workers who decide to challenge a case in court have 60 days to produce all their medical records.
The new law also includes some changes in benefits. The maximum benefit for serious facial and head injuries that result in permanent disfigurement is increased from $2,000 to $5,000. The lump-sum death benefit paid to the family of a fatally injured worker is increased from $250 to $500 and the amount set aside for funeral benefits has been raised from $2,000 to $5,000. An additional compensation payable to an injured worker during vocational rehabilitation is increased from $10 to $25 weekly.
Mississippi Insurance Commissioner Mike Chaney in March signed off on a 9.9 percent loss costs increase sought by the National Council on Compensation Insurance. That change cold cost employers up to $25 million more in premiums than the paid last year.
The rate filing marked the first increase after over six years of decreases. Between 2007 and 2011, the state’s loss cost rates had fallen by 38.2 percent.
NCCI State Relations Executive Cathy Booth said there were a number of reasons for the rate increase, which is based on data from 2007, 2008 and 2009. One is that in 2009 there were a number of large losses not seen in prior years.
In 2007, there were 17 large losses, valued at a paid-plus-case amount of $500,000 for a total of $18 million.
There was also an uptick in claims frequency after years of declines. In 2009, the latest year data is available, claims frequency increased by 5.3 percent or 949 claims per 100,000 workers.
Booth said that due to the rise in claims frequency changes in medical costs and indemnity costs had a greater impact on rates.
“In past years, the decline in claims offset severity,” said Booth.
The state’s indemnity cost per claim has held steady at around $18,000 per claim. The medical cost per claim, however, is a different story. With the exception of 2008, the state’s average medical cost per claim has increased for eight years, topping out at over $30,000 in 2009.
As is the case in most states around the country, Mississippi’s direct written premium also declined since the beginning of the recession in 2008. In 2008, the state’s premium volume has dropped from $331 million to $250 million in 2010.
Booth said the reduction is due to several factors including the reduction in employers’ payrolls and the years of declining rates. But those are not the only things driving the market.
“Mississippi has had a competitive market,” said Booth.
Liberty Mutual Group has the state’s largest individual market share at 23.1 percent. They are followed by Companion P&C Group at 9.8 percent, Travelers Group at 8.7 percent, and Zurich Insurance Group at 6.5 percent.
The loss cost increases will affect all five major classifications fairly evenly across the board. Manufacturing classes will increase by an average 11.3 percent, contracting classes by 7.8 percent, and miscellaneous classes by 12.4 percent. Office and clerical classes will see an average 8.8 percent increase and goods and services 9.8 percent. The impact on the specific class codes includes both increases and decreases. The highest increase per class code is a maximum of 37 percent and the lowest decrease is 17 percent.
Mississippi employers now await the latest NCCI rate filing that is due sometime in October and will apply to all new and renewal policies starting in 2013.
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