Outside General Counsel + Risk Management

It has been a year since Administrator Stephen Buehrer was appointed by Governor John Kasich to lead one of the most highly criticized state agencies in Ohio, the Bureau of Workers’ Compensation (BWC). Under Adm. Buehrer’s leadership, the BWC’s Board of Directors has made many positive changes to the system with the goals of lowering costs for employers and improving the health of Ohio’s workforce. BWC identified specific problems in the current system, including a decline in the average number of injured workers getting back to work within a year falling from 75% to below 69%. In addition, Ohio’s medical and indemnity costs are rising faster than the national average.

Of significant concern is the cost of Ohio’s long term claims being among the worst in the nation. BWC still has more than 45% of total claim costs left to pay out at eight years from the date of injury compared to the nationwide average of 17%. These challenges prompted Adm. Buehrer’s Administration to make significant changes in 2011 and for 2012, to help refocus Ohio’s Workers’ Compensation System on its primary stakeholders: employers and injured workers.

Significant Administrative Changes in 2011

In 2011, BWC lowered overall base rates by 4% (estimated savings of $65 million in premiums) and implemented several cost savings programs for employers focused on workplace safety and
administrative efficiencies. In addition, BWC lowered rates for public employer taxing districts (PEC) by 5% overall beginning January 1, 2012, resulting in lower premiums estimated at $13.6 million for Ohio’s 3,900 cities, counties, townships, villages, schools and special districts. The reduced premium cost for public employers is important in helping local governments better manage scarce resources without turning to employers for additional tax revenue.

As part of Lt. Governor Mary Taylor’s Common Sense Initiative, BWC established a one-time forgiveness program that waives penalties and interests for first-time offenders of lapsed premiums. This program is great for employers who are trying to work with BWC to make a premium payment, but for some reason could not do so. However, BWC has made it clear that, as the name of the program denotes, it can only be used once to forgive penalties and interest.

Two industries received specific attention in 2011. Employers operating in the marine industry noticed an overall premium rate decrease of 20% effective July 1, 2011. This is important for Ohio’s competitiveness since the state ranks 7th among the 50 states in longshore and harborworker activity based on total tons of waterborne domestic cargo handled through the state’s ports. BWC created a targeted grant program for employers in the wholesale/retail trade sector or those that perform delivery operations of large items (e.g., appliances, furniture, vending machines, furnaces, water heaters, etc.) to reduce or eliminate occupational injuries and illnesses. This new grant program is part of BWC’s ongoing research partnership with the National Institute for Occupational Safety and Health (NIOSH), which focuses on enhancing safety practices for Ohio’s workforce. Participating employers receive a 2-to-1 match of funds, up to $40,000, through BWC’s SafetyGRANT$ Program to purchase equipment that can reduce workplace injuries and illnesses. Employers are then required to participate in a study to help guide future safety programs and establish best practices for accident and injury prevention.

BWC also created a significant economic development tool to attract new businesses to Ohio and/or encourage current residents to form start-up companies within the state. The program, called the GROW Ohio Incentive Program, permits a new company, as of July 1, 2011, to qualify immediately for the maximum group rating discount in 2011 of 51%. The new company could alternatively elect to receive a flat 25% discount if it chose not to participate in the group rating program. The lower premium will be reflected in the premiums paid by those employers in February, 2012. The GROW Ohio Incentive Program is a valuable tool in helping to defray some of the start-up costs associated with new businesses, and in moving Ohio toward becoming recognized as an incubator for entrepreneurial activity.

New Changes Affecting Employers and Employees in 2012

Additional recent employer program changes take effect July 1, 2012 and are part of BWC’s Destination: Excellence program. BWC, along with support from its actuarial consultants at Deloitte, created the Destination: Excellence program to provide new discount opportunities for employers as well as open up existing programs to employers previously ineligible. One major change made by BWC was increasing the maximum group discount available to qualified employers from a 51% maximum to a 53% maximum discount. Under the new and revised programs, qualified employers are eligible for premium savings of over 59% (see Chart 1).

The total estimated benefit to Ohio’s private and public employers is between $28 and $46 million. This amount equates to savings of between 2 and 3% of total private employer premiums if employers take advantage of the new and expanded programs.

BWC has also significantly improved its focus on preventing injuries from occurring and helping injured workers return to work safely and in good health. BWC established a Workplace Wellness Grant Program to help employers meet the challenges of obesity, rising incidence of chronic diseases, and an aging workforce. The program allocates $4 million over four years. This amount permits up to 625 employers to participate over the four year period, capping the eligible amount at $15,000 per employer for 50 employee participants at $300 each.

In order to help claimants return or remain at work, BWC will now be requesting that physicians provide an opinion as to what an injured worker can do if released to return to work, in lieu of what they cannot do on the job. This information will assist employers in determining whether a claimant can return to his or her normal work, or whether a light-duty job would be more appropriate during recovery.

General Cost Containment and Operations Management

The BWC Administration continues to make sound management decisions and cost containment priorities in operating the system as efficiently as possible for Ohio employers and injured workers. Through attrition and retirements, BWC staffing levels are at around 2,000 full-time employees. BWC’s efficiencies have enabled it to operate 7% below (or $21 million less) the amount appropriated by the Ohio General Assembly. In addition, BWC is undergoing a significant analysis of updating current data management systems in order to provide faster and more reliable information to BWC and external stakeholders.

A significant cost control mechanism of Adm. Buehrer’s administration has been focusing on fraud detection, prevention and prosecution, among businesses, providers and injured workers. In 2011, there were millions of dollars identified as savings to the system and more than 50 indictments and convictions related to fraudulent activities. The Administrator has made it clear that BWC will continue with the same vigor in reducing incidences of fraud in the system.

2012 Outlook and Important Dates for Human Resource/Benefit Managers

Every state-funded employer needs to be aware of some important dates in 2012, and be prepared to contact their respective trade association, Third-Party Administrator (TPA) or Managed Care Organization (MCO) for more information. By February 29, 2012, all employers must be signed up with a group rating sponsor to be eligible for the group rating program – no exceptions. In addition, the BWC Safety Congress and Expo will be held on March 27-29, 2012 and is free to all employers. Most other safety discount program applications must be in by the last business day of April 2012 for private employers and the last business day of October 2012 for public employers. Finally, every employer in Ohio will have the option of remaining with its existing Managed Care Organization (MCO) or selecting a new one. This open enrollment period will take place during May 2012.

One final note is that the debate on whether or not to privatize the workers’ compensation system in Ohio remains a lingering thought among lawmakers, but there continues to be a lack of substantive data that concludes employers will pay less in premiums under such a system. This is particularly true in privatized states where employers are experiencing rate increases even with the presence of competition. Other states turning to the private sector to “fix” the workers’ comp system in the last fifteen years, including Nevada and West Virginia were faced with deficits of up to $3 billion. Today, Ohio’s BWC holds a surplus of around $6 billion and little information points to a lower cost system under a privatized model. Therefore, the financial strength of BWC and administrative reforms promoted under Adm. Buehrer’s leadership make the need for an alternate system less appealing. But, that’s not to say that Ohio’s workers’ compensation system is perfect. In fact, Ohio’s system could benefit from a legislative package of reforms to go beyond the administrative changes and further improve the system for both employers and injured workers...but that’s for the next article.