Health-care costs affect workers' comp rates
Workers' compensation insurance rates increased an average 3.7 percent in 2012 to cover rising medical costs and an increased number of claims, according to Marianne Goodland, a spokeswoman at the state Division of Insurance, which regulates the insurance industry in Colorado.
Workers' compensation insurance rates previously were flat for about a decade as many companies across the state focused on safety and cost containment, Goodland said.
In 2012, some industries experienced higher percent increases than others, according to the Division of Insurance. Goods and services companies saw an average 4.8 percent increase in workers' compensation insurance rates, according to the division. Contractors in construction-related industries saw an average 4.5 percent increase. Manufacturing companies saw an average 1.9 percent increase; office and clerical companies saw a 1.2 percent increase.
To calculate rates for each profession, insurance brokers use a job-classification table with rates set by the state. Those rates — as well as rate increases — are approved by the Division of Insurance after annual hearings with groups such as the National Council on Compensation Insurance Inc., a private industry group, and consultants.
Since workers' compensation insurance rates for small businesses are calculated per $100 worth of payroll, the rate increases add up as payroll rises, said Tony Gagliardi, the state director of the National Federation of Independent Business, an industry trade group. That may keep companies from hiring new employees as quickly as they need to, Gagliardi said.
"It is an impediment," Gagliardi said. "When you raise the cost of employment on anything like workers' comp or unemployment taxes go up, companies are affected."
In Boulder County, some industry classifications have seen workers' compensation insurance rates increase from 5 percent to 10 percent so far this year, said Doug Bollman, vice president for business development at Taggart Insurance in Boulder.
As an example, a restaurant without any workers' compensation claims the previous year with $350,000 in annual payroll would pay about $150 more per year with the state-mandated rate increase, Bollman said.
Numerous variables come into play for each business, he said. New companies can't take advantage of "experience" discounts approved by the state, for example, and pay higher rates, Bollman said.
Also, rates rise dramatically for companies that have workers' compensation claims, Bollman said. When a company deals with a workers' compensation claim, for every $1 that's paid out, a business will pay $2 to $3 in increased premium costs over the next three or four years, a process and cost mandated by the state Division of Insurance, Bollman said.
That certainly is the case at the Boulder recycling nonprofit Eco-Cycle Inc., where a higher number of claims has led to two years of "big increases" in insurance rates, said Eric Lombardi, executive director. Lombardi did not give dollar amounts.
Anecdotally, the Boulder Chamber has heard that local restaurateurs are struggling with higher workers' compensation insurance rates as well, said Angelique Espinoza, a Boulder Chamber spokeswoman.
On the other side of the spectrum is Western Disposal Services Inc., which incurred a "negligible" increase in workers' compensation insurance rates, said Laura Alberts, human resources manager for the trash hauling and recycling company. Western Disposal receives a variety of discounts for its low claim history and a cost-containment program, among other things, Alberts said. "There's no way anything like that affected us."
In the region and across the state, workers' compensation insurance rates increased an average of 3.4 percent in 2011, Goodland said.
All in all, the rate increases take into account factors such as the number of claims per number of workers, the length of claims, the number of treatments for each claim, the severity of injuries, increasing medical costs and the overall costs of covering workers' compensation claims, the Division of Insurance said.
Hard economic times mean there are fewer employers to pay in, which also causes rates to go up, Gagliardi said.
Many companies across the state put an increased focus on safety during the past several years, which lowered rates, Bollman said. Insurance companies such as Pinnacol Assurance in Denver, the largest workers' compensation insurance provider in the state, has paid back big dividends to policyholders in recent years, Bollman said. Pinnacol paid $41 million back to 85 percent of its policyholders in 2011, according to the company's annual report.
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