Lower Workers’ Insurance Premiums for West Virginia
Jane Cline, West Virginia Insurance Commissioner
Given the current financial turmoil, policymakers are asking important questions. With autumn upon us and the winter seasons right around the corner, most West Virginia employers will soon see a drop in something other than the temperature. On August 6, 2009, I approved the National Council on Compensation Insurance, Inc. (NCCI), West Virginia’s rating and statistical agent, loss cost filing—a component used to determine workers’ compensation premiums—which will result in an overall decrease of 6.0%. The new loss cost will become effective on November 1. The aggregate 6% decrease includes the costs associated with the increases in medical fee schedules, travel reimbursement and average weekly wage.
Loss costs are the estimated amount necessary to pay all medical and indemnity costs associated with workers’ compensation claims and are developed for each job classification. They do not include administrative expenses and are used by all carriers to calculate rates. It is important to use a statistical agent because of their ability to gather the necessary data from the entire market. Because loss costs are developed by our statistical agent from the data supplied by all carriers writing workers’ compensation coverage in West Virginia, each insurance carrier starts with that rate when determining the appropriate premium.
Companies will add marketing and other administrative expenses, plus an expected profit, to the approved loss cost when determining the appropriate rate per job classification. This adjusted rate is then used to calculate an employer’s premium. In addition, some employers qualify for an experience modification which is based on their past loss experience. The final premium is adjusted by the experience modifier.
Based on the NCCI’s recent filing, some employers will see their loss cost go up while others will see varying decreases. Out of 583 classifications, 346 will decrease, 208 will increase and 29 will not change. The largest decrease came to “Building Material Yard, Local Managers and Drivers” whose loss cost plummeted 20.2%. Notable other decreases were in the mining industry, where surface mining loss cost decreased 16.1% and underground mining lost cost decreased 15.7%. Of the classifications that increased, the largest occurred to “Salespersons and/or Collectors.” That classification rating rose 21.4%, resulting in a $.09 per $100 of payroll increase. The good news is that approximately 80% of West Virginia employers’ payroll is in loss cost classifications that are decreasing or not changing.
Including these newly approved decreases, workers’ compensation loss costs in West Virginia have decreased over 40% since the privatization of the workers’ compensation market on January 1, 2006. Loss costs first declined in 2006 when a 15% decrease occurred in January, followed by a 10.5% decrease in July. In 2007, another decrease occurred when loss costs decreased 8.1%. In July of 2008, loss cost declined an additional 1.2%, and the approved 6% decrease effective on November 1, 2009, will continue the loss costs decrease that West Virginia employers have experienced since the workers’ compensation market was privatized. Since then, injured workers are receiving better care, and most employers are seeing their premiums decrease.
The loss cost reductions mentioned do not include experience modification or loss cost multiplier changes. Loss cost was not used prior to the privatization of the workers’ compensation market; instead, WV rates were calculated using three components: administrative costs, pure premium and deficit reduction.
The loss cost filing made by the NCCI is based on actuarial analysis. A recent analysis prepared by NCCI indicates that the West Virginia average loss cost ranks 13th lowest when compared to the other NCCI loss cost states. NCCI provides services to 37 states.
