Workers' comp costs going up

Insurers want 5.9% rate increase

Insurers are seeking an average increase of 5.9 percent in the workers' compensation insurance rates that businesses pay.

The requested rate increase filed Friday by the N.C. Rate Bureau, while significant, is the lowest increase the bureau has sought since 2002. The Rate Bureau represents more than 150 insurance companies that offer workers' comp policies in the state.

Last year, a 12.1 percent rate increase was requested, but the bureau eventually settled for a 7.3 percent rate increase.

The state Department of Insurance has negotiated a lower rate increase than the industry requested in each of the past five years. The rate increases ultimately must be approved by Insurance Commissioner Jim Long.

This year's rate request hasn't yet been analyzed by the Insurance Department. But spokeswoman Kristin Milam said the department is encouraged that the increase being sought already is lower than the rate increases that were negotiated in 2005 and 2006.

The rate increase is needed because medical costs, higher wages -- since workers' comp provides reimbursement for lost wages -- and injuries and illnesses are sidelining workers for longer periods of time, said Ray Evans, general manager of the Rate Bureau.

Workers' comp insurance is paid for by employers. The rate increase ultimately approved will be an average figure; individual employer rates can vary significantly, both higher and lower, on the basis of claim experience and the type of workers employed.

For example, the requested rate increase for construction workers is 9.6 percent. For office and clerical workers, it's 1.9 percent. There are hundreds of job classifications that apply to workers' comp insurance.

The request is for insurance rates that take effect beginning April 1 and is based on 2004 and 2005 claims data.

Virtually all government employers and about one-fourth of nongovernmental employers are self-insured and therefore aren't affected by the workers' comp rates approved by the Insurance Department, said department spokeswoman Chrissy Pearson.

Jim Lore, a plaintiff's attorney who also has worked as an unpaid lobbyist on workers' comp issues for the N.C. Academy of Trial Lawyers and labor groups, called the rate request "good news" for the state because it's lower than recent requests.

With medical costs, wages and overall inflation on the rise, it's unreasonable to expect rates to be static every year, Lore said.

But Sherry Melton, spokeswoman for the N.C. Chamber, said that while higher wages and medical costs can't be helped, there are some "systemic cost drivers" that the chamber would like state lawmakers to address. One is that the state allows workers to collect workers' comp checks indefinitely. "Other states have time limits," she said.

Workers' comp insurance compensates employees for lost wages and medical expenses triggered by work-related injuries and illnesses. Employees are eligible to receive two-thirds of their weekly pay, up to a maximum currently set at $754, according to the N.C. Industrial Commission, which oversees workers' comp claims.

North Carolina is out of synch with workers' compensation trends nationwide, said Kevin Conley, chief actuary at the Insurance Department.

Prior to the last two years, rate increases in North Carolina were "quite low" compared to the rest of the nation, Conley said.

But in the last couple of years, rate increases have been at the high end relative to the rest of the country.

Evans said that North Carolina is at a disadvantage in national comparisons because it hasn't overhauled its workers' compensation system since the early 1990s.

Many other states have instituted reforms in recent years that are reining in costs, he said.

He added that in 2005 and 2006, insurers found that their initial projections of claim costs were too low, based on actual claims experience. That contributed to the much higher rate requests.

This year, that trend has moderated, enabling the Rate Bureau to seek a lesser price increase.

Evans said he's not sure what triggered the change. "We see the results. We're not sure what the underlying causes are," he said.

Employers who buy workers' comp insurance currently pay premiums that amount to about 2.5 percent of their payroll, said Insurance Department spokeswoman Chrissy Pearson.

At the outset of 2006, North Carolina's workers' comp rates ranked 37th in the nation, Pearson said. She said she wasn't aware of a more recent ranking.