BWC Returning Over $1 Billion to Ohio Employers

Kegler Brown E-mployment Alert

There is good news on the horizon for most Ohio employers – lower workers’ compensation costs. The Ohio Bureau of Workers’ Compensation (BWC) Board of Directors (Board) voted this morning to approve two significant steps to this end – the third step rests with the Ohio General Assembly that will likely act before the end of June.

In early May, BWC Administrator/CEO Stephen Buehrer and Governor John Kasich announced a three part plan to reduce workers’ compensation costs for Ohio employers that pay into the State Insurance Fund (SIF). The ability of the administration to put forth such a proposal is due to the strong financial position of Ohio BWC’s combined funds, including the State Insurance Fund, a result of prudent management and a careful, conserva¬tive investment strategy. As of April 30, 2013, BWC holds an $8.8 billion surplus in combined net assets – well above the reserve and funding levels established by the Board to pay its obligations to injured workers.

The proposal asked:

1) the BWC Board of Directors to:

  • authorize a one-time dividend of $1 billion for private employers and public-taxing districts; and
  • expand BWC’s successful Safety Grant Program from $5 million to $15 million to support expanded statewide efforts to promote workplace safety and encourage further investment in protecting Ohio’s workers; and

2) the Legislature to:

  • modernize the premium collection model by authorizing BWC to move toward a prospective-payment system and subsequently requesting the board issue an additional $900 million to mitigate transition costs – resulting in rate reductions of 2 percent for private employers and 4 percent for public employers.

What does all this mean for Ohio employers?

$1 Billion Dividend

BWC’s proposed $1 billion dividend will affect more than 210,000 Ohio private em¬ployers or public-taxing districts that pay premiums into the SIF and have active, up-to-date policies. Private employers must have been in an active, reinstated or debtor in possession status as of April 1, 2013, and public-taxing districts must have been in an active or reinstated status as of March 31, 2013. These employers would receive approximately 56% of their annual premium from the July 1, 2011, to June 30, 2012, policy period. Employers that have an outstanding balance with BWC will have their dividend payment reduced by the amount of the outstanding balance or offset by the amount of the dividend. The dividend checks could be mailed as early as June due to the BWC Board’s approval today.

Increased Funding for Safety Programs

BWC is expanding the Safety Grants Program budget from $5 million to $15 million for the July 1, 2013, policy year. This program provides matching funds up to $40,000 for employers to purchase equipment that will substantially reduce or eliminate injuries and illnesses or improve the overall health and wellbeing of their employees. Under the new proposal, BWC will now match every dollar spent by an employer with three dollars, up to $40,000, and will make modifications to the program that will allow prior recipients to apply for additional grants.

In order to be eligible for the Safety Grant Program, an applicant must:

  • be an employer that pays into the State Insurance Fund;
  • be current on monies owed to BWC;
  • maintain active coverage; and
  • not have previously purchased the equipment proposed in the application or otherwise have started a program similar to what’s requested in the grant application.

Paying Premiums Forward

Currently, Ohio employers pay their workers’ compensation premium for the previous six months of coverage. This has been referred to as paying premiums in “arrears” or “retrospectively.” By way of example, private employers paid in February 2013 for the July 1, 2012, to December 31, 2012, coverage period. As with other insurance policies where premiums are collected before the coverage period begins, prospective billing is an industry standard and would further modernize BWC’s operation. Under this scenario, employers could report estimated payroll and pay their premium in April for the coverage period that begins July 1.

BWC has stated that a prospective billing system could provide several benefits to Ohio employers, including: (1) opportunities for more flexible payment options (e.g., monthly, quarterly, yearly) with possible discounts for those who pay a year in advance, for example; (2) the ability for BWC to better anticipate budgetary impacts of workers’ compensation coverage, especially for public-taxing districts; (3) better opportunities for BWC to provide quotes online or via phone; (4) fewer costs from employers who either don’t pay premiums timely or have workers injured without coverage being mutualized among employers in good standing; and (5) the ability for BWC to detect employer non-compliance and fraud.

While the dividend and increased funding for safety grants were approved by the BWC Board today, the move to prospective billing will require a statutory change by the Ohio General Assembly. BWC submitted its legislative proposal to the Ohio Senate and a provision was amended into the Senate version of the state operating budget, HB 59, this week. Although BWC may gain legislative approval as early as June, it would not begin implementation of prospective billing until mid-2014 at the earliest. If approved, BWC will also request that the BWC Board of Directors authorizes a credit for all employers equal to the full amount of their previous six months’ premium (their last payment in arrears or retrospective payment). Therefore, employers would make their first prospective payment without paying their last retrospective payment. The previous six-month premium payment credit would equate to an estimated $900 million savings to businesses. In addition, this switch would result in rate reductions of 2 percent for private employers and 4 percent for public employers.

Please contact any of the members of Kegler Brown’s Workers’ Compensation practice if you have any questions.