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States of disparity: even though employers typically look only at insurance costs when sizing up a state, the relative level of benefits awarded claimants influences the effectiveness of a workers' compensation system.


* States at the top of the distribution, with grades of A- or better, include Iowa, Arkansas, Arizona, Virginia, Nevada and Massachusetts.

* The states at the bottom of the list, with a grade of C or worse, included Alaska, California, New Jersey, New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 and Montana.

* States with the lowest costs are Arizona, Arkansas, Indiana, Massachusetts, Utah and Virginia.


Keeping workers' compensation insurance costs down is one of the best ways to lower the total cost of business in a state. This matters to employers, who want to make sure they get the biggest bang for their buck. This is especially so in a recession, when every company in the country is looking to cut costs.

So, it's no surprise that when corporate executives opine--or whine--about the rate of a particular premium tax or the health of an individual state's economy, they cite trends in workers' comp comp

See comparison.

Many employers in most states have experienced declining workers' comp premiums due to the soft market, but that can't last as loss ratios have deteriorated as well, and carriers are under pressure to increase rates.

To be sure, worker's comp accident rates are going down nationwide. In fact, they have tanked by 30 percent since 2000, but laggard employers --employers who are not doing all they can to keep workers safe--require that the workers' comp industry as a whole remain vigilant, lest lest  
For fear that: tiptoed lest the guard should hear her; anxious lest he become ill.

[Middle English, from Old English
 it lead to higher accident rates.

Employers also need to be concerned about the adequacy of benefits to injured in·jure  
tr.v. in·jured, in·jur·ing, in·jures
1. To cause physical harm to; hurt.

2. To cause damage to; impair.

 workers. Even though employers typically look only at insurance costs when sizing up a state, how effectively a workers' comp system delivers is affected by the relative level of benefits. It is in the interest of employers that injured worker benefits appear as fair, and that claims are resolved fairly, so as to dampen efforts by labor and claimant CLAIMANT. In the courts of admiralty, when the suit is in rem, the cause is entitled in the Dame of the libellant against the thing libelled, as A B v. Ten cases of calico and it preserves that title through the whole progress of the suit.  attorney associations to squeeze more money out of the system. A system that appears to be fair will lead employers and labor to collaborate in reducing accident rates and in making incremental adjustments to the system as the needs arise.

It is no fluke fluke, parasitic flatworm of the trematoda class, related to the tapeworm. Instead of the cilia, external sense organs, and epidermis of the free-living flatworms, adult flukes have sucking disks with which they cling to their hosts and an external cuticle that  that some states with the highest workers' comp insurance costs like New Jersey, New York and Montana also have very low benefits. Low benefits paid to workers do not guarantee low insurance costs. Injured workers receiving low weekly indemnity benefits do not prevent the system from being very litigious litigious adj. referring to a person who constantly brings or prolongs legal actions, particularly when the legal maneuvers are unnecessary or unfounded. Such persons often enjoy legal battles, controversy, the courtroom, the spotlight, use the courts to punish .

Nor is it an accident that Massachusetts, where collaboration between regulators and carriers has been relatively good, has very low insurance costs and very high wage replacement benefits.

Risk & Insurance[R] looked at four factors that indicate how well a state's workers' comp system may be working. Those factors were adjusted by giving additional weight to the amount of premium charged to the employer, and the benefits paid to claimants. The states are ranked by their composite score, and a listing appears on Page 28

The question for workers' comp and disability managers is which states came out on top?

States at the top of the distribution, with summary grades of A- or better, include Iowa, Arkansas, Arizona, Virginia, Nevada and Massachusetts. The states at the bottom of the list, with a summary grade of C or worse, include Alaska, California, New Jersey, New York and Montana.

Four states with the very lowest insurance costs, Arkansas, Indiana, North Dakota North Dakota, state in the N central United States. It is bordered by Minnesota, across the Red River of the North (E), South Dakota (S), Montana (W), and the Canadian provinces of Saskatchewan and Manitoba (N).  and Utah, provide relatively stingy stin·gy  
adj. stin·gi·er, stin·gi·est
1. Giving or spending reluctantly.

2. Scanty or meager: a stingy meal; stingy with details about the past.
 benefits, which may be good for employers but not for recipients.

How does Massachusetts come out on top with the best workers' compensation system among the 50 states? More surprising still is the state's apparent workers' comp paradox: its insurance costs are among the lowest, while benefits to claimants are among the most generous. How can that be? Particularly when the Bay State's record of reducing the frequency of lost-time injuries is, at best, average.


For Massachusetts, success didn't come overnight. The seeds were sown sown  
A past participle of sow1.

Adj. 1. sown - sprinkled with seed; "a seeded lawn"

planted - set in the soil for growth
 more than a decade ago, in the early 1990s, when Massachusetts began tackling the thorny thorn·y  
adj. thorn·i·er, thorn·i·est
1. Full of or covered with thorns.

2. Spiny.

3. Painfully controversial; vexatious: a thorny situation; thorny issues.
 problem of insurance costs. Now, more than 15 years later, the state is enjoying the fruit of its reform labors.

In addition, Massachusetts has managed to keep the labor and the employer communities focused on making sure that the system works for all parties. The state was, for example, one of the first to crack down on the abuse by employers listing employees as independent contractors, thereby avoiding employer-based workers' compensation coverage.

More recently, Massachusetts launched a program to root out fraud in which employers underreport un·der·re·port  
tr.v. un·der·re·port·ed, un·der·re·port·ing, un·der·re·ports
To report (income or crime statistics, for example) as being less than actually is the case.
 the amount of employee exposure, and thus avoid buying their fair share of workers' comp insurance.

Part of Massachusetts' success in driving down costs has also been its very low medical fee schedule, according to according to
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

 healthcare consultant Joseph Paduda, principal of Health Strategy Associates.

The Massachusetts story, having gone from one of the most expensive workers' comp states to one of the least expensive, is by most accounts a stunning success. In the end, it was the state's "proactive and analytical approach" to reform, said James Campbell

For other people named James Campbell, see James Campbell (disambiguation).

James Campbell (February 4, 1826 – April 21, 1900) is the founder of the Estate of James Campbell
, a former Massachusetts industrial accidents commissioner.

That was when former Gov. William Weld William Floyd Weld (born July 31, 1945, in Smithtown, New York) was the Republican Governor of Massachusetts from 1991 to 1997.[1] From 1981 to 1988, he was a federal prosecutor in the United States Justice Department. , the legislature and the business community, sat down to tackle head-on the problem of out-of-control Massachusetts workers' comp costs, Campbell said.

In contrast to Massachusetts, the state of Montana wallows at the bottom of the distribution. All it could muster TO MUSTER, mar. law. By this term is understood to collect together and exhibit soldiers and their arms; it also signifies to employ recruits and put their names down in a book to enroll them.  was a grade of C-. Why the ugly clouds on the horizon of the Big Sky state? Its insurance costs are among the highest, yet worker benefits are significantly inferior compared with other states.

The workers' comp system "has become a major concern," said Carl Kochman, communications director for the Montana State Fund. Premiums as well as injury rates are high, he admitted.

The high injury rate, added Kochman, can be attributed in part to what he called a "social culture in which everyone's going to get hurt," because of the risks workers there are willing to take to participate in an economy anchored in lumber lumber, term for timber that has been cut into boards for use as a building material. The major steps in producing lumber involve logging (the felling and preparation of timber for shipment to sawmills), sawing the logs into boards, grading the boards according to , agriculture and mining.

The higher injury rate trend, however, has caught the attention of lawmakers. Not content with the wounded state of workers' comp affairs, Missoula legislators have launched a study of Montana's workers' comp trends.

In addition, a coalition is preparing to launch a "Work Safe MT" partnership to reduce the rate of injuries. Kochman, who chairs the partnership, said the campaign was aimed at reducing the rate of work accidents.

Work Safe MT includes the Montana Chamber of Commerce, labor unions, state agencies, insurance executives, doctors, and, of course, the trial lawyers.

Between the extremes of Massachusetts and Montana lie the other 48 states, with grades of A to C.

Alaska, near the bottom of the heap, turned in a grade of C. It may, however, soon be joining Montana at the very bottom, as the state has been on a downward trend over the last few years.

"The state struggles with a medical cost crisis in which 72 cents for every dollar spent in workers' comp is going to the provider," said Phil Lefevre, senior account executive of the Work Loss Data Institute, an independent database development company focused on workplace health and productivity.


Alaska, Lefevre also said, is on a "negative slope indicative of more problems on the horizon, which we are actually seeing play out right now." A committee has been launched to look at potential reforms in the medical area.


The disparities in the state-based workers' comp system are eye-opening. The data shows Hawaii, for example, posting 2.6 lost-time injuries per 100 workers, far above the state median rate of 1.5 lost-time injuries per 100 workers.

Median duration of disability for lost-time injuries, compiled from Bureau of Labor Statistics Bureau of Labor Statistics (BLS)

A research agency of the U.S. Department of Labor; it compiles statistics on hours of work, average hourly earnings, employment and unemployment, consumer prices and many other variables.
 and Occupational Safety and Health Administration logs, ranged from four days in some better-performing states to as many as 12 days for the state of New York.

Employers throughout the country are well aware of variances among states.

"When we track our dollar losses by state, we see wide workers' comp cost variances," said Bob Steggert, vice president of casualty claims for Marriot International. For example, California represents 16 percent of corporate revenue, he said, but amounts to about 33 percent of workers' comp losses.

Conversely con·verse 1  
intr.v. con·versed, con·vers·ing, con·vers·es
1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak.

, Florida represents 14 percent of Marriott's corporate revenue, yet just 10 percent of workers' comp losses, he said.

"These cost variances depict de·pict  
tr.v. de·pict·ed, de·pict·ing, de·picts
1. To represent in a picture or sculpture.

2. To represent in words; describe. See Synonyms at represent.
 both workers' comp systems' efficiency and, following our analysis, opportunities to improve workers' comp programs, in the best sense of the word," said Steggert.

Pennsylvania, which turned in a score of B+, and Vermont, which turned in a grade of C+, are both examples of states sporting high wage replacement rates along with high insurance costs. Pennsylvania's very high benefits counterbalances its high insurance costs to produce a relatively good composite score.

Arkansas, Indiana, North Dakota and Utah all have relatively low benefits and low insurance costs. States with the highest insurance costs are Alaska, Delaware, California, Illinois, Montana, Ohio and Vermont.

The situation to avoid at all costs is for a state to find itself dispensing low benefits to workers, yet charging high insurance costs to employers. This is where we find the state of New York.

Its wage replacement rates for claimants are low and its workers' comp premiums levied on employers are high. No surprise, then, that the state is in the throes throe  
1. A severe pang or spasm of pain, as in childbirth. See Synonyms at pain.

2. throes A condition of agonizing struggle or trouble: a country in the throes of economic collapse.
 of reform for its workers' comp program because nobody is satisfied with the status quo [Latin, The existing state of things at any given date.] Status quo ante bellum means the state of things before the war. The status quo to be preserved by a preliminary injunction is the last actual, peaceable, uncontested status which preceded the pending controversy. .

New York state's grade of C does not take into account a gigantic gi·gan·tic  
1. Relating to or suggestive of a giant.

a. Exceedingly large of its kind: a gigantic toadstool.

, $18 billion actuarial ac·tu·ar·y  
n. pl. ac·tu·ar·ies
A statistician who computes insurance risks and premiums.

 deficit in its Second Injury Fund, which developed after insurers went on a binge of filing for reimbursement Reimbursement

Payment made to someone for out-of-pocket expenses has incurred.
 from the fund in the early years of this decade.

The deficit ballooned after the state failed to keep assessments on insurers, which provide the funding, in line with rising costs. As lawmakers struggle to reduce the deficit, employers can expect to be slapped with extra assessments.

Were the deficit taken into account the Empire State's grade might even have dipped to as low as C-, joining Montana.

The forces battering New York also affect other states as higher medical costs mean higher insurance. Medical costs, said consultant Joe Paduda, are "out of control," and the National Council on Compensation Insurance Inc. reports that medical payments when spread over every worker, range from under $200 in some states to more than $800 in others.

How do states' workers' comp systems rise to the top of the heap? They do so by improving accident rates and lowering disability duration, and turning in low insurance costs and/or providing generous benefits--ideally all at once. For states aspiring as·pire  
intr.v. as·pired, as·pir·ing, as·pires
1. To have a great ambition or ultimate goal; desire strongly: aspired to stardom.

 to protect a high grade or to move up the scale, the agenda is clear.

Their respective lawmakers need to put aside the partisan squabbling and give equal billing to labor protections and insurance cost reductions, while at the same time keeping claimant attorneys at bay.

Rather than trimming worker benefits, states need to focus on streamlining the resolution of disputed claims, and to locus on controlling medical costs through fee schedules, treatment guidelines, and provider networks.

How likely is that to happen? Not very likely, perhaps, according to the skeptics, but it has happened.

It's exactly what happened in California. The state's stratospherically high insurance costs of five years ago declined sharply because of insurance reforms adopted four years ago.

Because of this, the state's position improved. However, insurance costs in the state have recently started to increase again, and employers may well be hit with a substantial rate increase in 2010.

* National Workers' Compensation and Disability Management Conference & Expo[R]

RELATED ARTICLE: Weighing the attributes of performance: how a 50-state comparison of workers' comp systems was derived using data from multiple sources.

On Page 28 is listed a 50-state comparison of the performance of state workers' compensation systems. Most state workers' comp systems are not far off from one another in the end result, as measured by the personal and financial burden on workers and employers caused by work injuries. If the median state's burden is given a summary grade of B, then most states when graded according to a curve will score either B, or slightly higher or lower.

But a sizable siz·a·ble also size·a·ble  
Of considerable size; fairly large.

siza·ble·ness n.
 minority of states have grades which depart markedly from the median. In addition, every state has the potential of lightening lightening /light·en·ing/ (lit´en-ing) the sensation of decreased abdominal distention produced by the descent of the uterus into the pelvic cavity, two to three weeks before labor begins.  or worsening wors·en  
tr. & intr.v. wors·ened, wors·en·ing, wors·ens
To make or become worse.

Noun 1. worsening - process of changing to an inferior state
decline in quality, deterioration, declension
 its burden. One state, Massachusetts, is granted a summary grade of A+. Montana is the only state with a score of C-.

A low rate of lost-time injury, short duration of disability, and low workers' comp premiums are signs of a good workers' comp system. To these is added a fourth desirable attribute: the generosity with which a worker is compensated while on disability. Generous benefits don't preclude low insurance costs, as demonstrated by Massachusetts.

Risk & Insurance[R] assigned a grade for each of these four attributes, and calculated a summary grade. Because insurance costs and benefit provisions are very important, they are given extra weight in calculating summary grades.

Some attributes of note are missing from this grading calculation. For example, there is no satisfactory way to compare states by medical costs. Massachusetts' superior grade is due, in some measure, to its relatively low fee schedule.

Another important but missing variable is the relative success of injured workers to return to gainful gain·ful  
Providing a gain; profitable: gainful employment.

gainful·ly adv.
 employment after their claims have been resolved.

The lost-time injury and median duration of lost-time injury results were derived by Occupational Safety and Health Administration data, and compiled by the Bureau of Labor Statistics. The data was analyzed by Work Loss Data Institute.

Benefits, mainly wage replacement rates, were analyzed by Actuarial and Technical Solutions, a Ronkonkoma. N.Y.-based actuarial firm. Insurance costs grades are averages derived from studies by the state of Oregon and Actuarial and Technical Solutions.

--By Peter Rousmaniere

PETER ROUSMANIERE is an expert on the workers' compensation industry. He can be reached at
State Workers' Compensation Ranking

                         LOW         SHORT         HIGH
                      LOST TIME   DURATION OF    BENEFIT
                      FREQUENCY   DISABILITY    GENEROSITY

Massachusetts (MA)        C            B            A+
Nevada (NV)               B            A            A+
Virginia (VA)             A            B            B
Arizona (AZ)              B            B            B
Arkansas (AR)             A            B            C
Iowa (IA)                 B            B            A
Idaho (ID)                B            B            B
Indiana (IN)              B            B            C
Michigan (MI)             B            B            B
Pennsylvania (PA)         B            B            A+
South Dakota (SD)         B            B            B
Washington (WA)          C-            B            A
Colorado (CO)             C            B            B
Connecticut (CT)          C            B            A
Kansas (KS)               B            B            C
Maryland (MD)             C            B            B
Minnesota (MN)            B            A            C
Missouri (MO)             B            B            B
Nebraska (NE)             B            B            B
North Carolina (NC)       B            B            B
North Dakota (ND)         B            B            C-
Oregon (OR)               C            B            B
Rhode Island (RI)        C-           C-            A+
South Carolina (SC)       B            B            B
Utah (UT)                 A            B            C-
West Virginia (WV)       C-            B            B
Wisconsin (WI)            C            B            B
Florida (FL)              B            B            C
Georgia (GA)              A            C            C
Louisiana (LA)            A            C            B
Mississippi (MS)          B            B            C
New Hampshire (NH)        B            B            B
New Mexico (NM)           B            B            C
Texas (TX)                A            C            B
Alabama (AL)              B            A            C
Delaware (DE)             B            B            B
Hawaii (HI)              C-            C            B
Illinois (IL)             B           C-            A
Kentucky (KY)             C            C            B
Maine (ME)                C            B            B
Ohio (OH)                 B            B            B
Oklahoma (OK)             B            C            B
Tennessee (TN)            B           C-            B
Vermont (VT)              C            B            A
Wyoming (WY)              C            C            C
Alaska (AK)              C-            B            B
California (CA)           B            C            B
New Jersey (NJ)           C            C            C
New York (NY)             B           C-            C
Montana (MT)             C-            B            C

                         LOW         Final
                      INSURANCE    Composite       Rank
                        COSTS        Score

Massachusetts (MA)       A+           A+            1
Nevada (NV)               B            A            2
Virginia (VA)            A+            A            2
Arizona (AZ)             A+           A-            3
Arkansas (AR)            A+           A-            3
Iowa (IA)                 A           A-            3
Idaho (ID)                A           B+            4
Indiana (IN)             A+           B+            4
Michigan (MI)             A           B+            4
Pennsylvania (PA)         C           B+            4
South Dakota (SD)         A           B+            4
Washington (WA)           A           B+            4
Colorado (CO)             A            B            5
Connecticut (CT)          C            B            5
Kansas (KS)               A            B            5
Maryland (MD)             A            B            5
Minnesota (MN)            B            B            5
Missouri (MO)             B            B            5
Nebraska (NE)             B            B            5
North Carolina (NC)       B            B            5
North Dakota (ND)        A+            B            5
Oregon (OR)               A            B            5
Rhode Island (RI)         B            B            5
South Carolina (SC)       B            B            5
Utah (UT)                A+            B            5
West Virginia (WV)        A            B            5
Wisconsin (WI)            B            B            5
Florida (FL)              B           B-            6
Georgia (GA)              B           B-            6
Louisiana (LA)            C           B-            6
Mississippi (MS)          B           B-            6
New Hampshire (NH)        C           B-            6
New Mexico (NM)           B           B-            6
Texas (TX)                C           B-            6
Alabama (AL)              C           C+            7
Delaware (DE)            C-           C+            7
Hawaii (HI)               B           C+            7
Illinois (IL)            C-           C+            7
Kentucky (KY)             C           C+            7
Maine (ME)                C           C+            7
Ohio (OH)                C-           C+            7
Oklahoma (OK)             C           C+            7
Tennessee (TN)            C           C+            7
Vermont (VT)             C-           C+            7
Wyoming (WY)              B           C+            7
Alaska (AK)              C-            C            8
California (CA)          C-            C            8
New Jersey (NJ)           C            C            8
New York (NY)             C            C            8
Montana (MT)             C-           C-            9

Source: OSHA, BLS, state of Oregon, Actuarial and Technical Solutions,
Peter Rousmaniere.
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Author:Rousmaniere, Peter
Publication:Risk & Insurance
Article Type:Cover story
Date:Nov 1, 2009
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