R&R Insurance Blog

On October 1, 2019 Wisconsin continued its trend entering a fourth consecutive year of reduced workers’ compensation insurance rates.  Rates in 2019 fell an average of 8.84% compared to 2018, which is the most dramatic reduction in over a decade.  This rate reduction will affect work comp policies with renewal dates between 10/01/19 to 09/30/20.

Workers’ compensation rates are state mandated in Wisconsin, meaning all insurance carriers must use the same rates resulting in premiums from one carrier to another are basically the same. 

While at first glance, this appears a “boon” to the bottom line for Wisconsin contractors as work comp premium makes up the lion’s share of insurance costs.

When it comes to the 4^th consecutive year of reduced work comp rates there’s “the Good, the Bad, and the Ugly…”

... the Good …

In general, a reduction of work comp rates result in reduced premium costs to contractors.  It’s estimated that Wisconsin businesses will save over $170 million in reduced work comp premiums.

In 2019, the Wisconsin construction industry will see the greatest reduction in work comp premium compared to other industries:

Overall 2019 Wisconsin work comp rate reduction:  -8.84%

Within the various Construction industry class codes, the 2019 WC rate reduction ranges from:

... the Bad …

To understand the downside of falling work comp rates, a snapshot of the last 4-years is needed.  Overall the new 10/1/19 rates are 24.1% lower than the rates that were in effect on 9/30/16. In the last four years there has been nearly a ¼ reduction in the potential work comp premium dollars available to the insurance market (Construction is over 30%).

The effect of four consecutive years of work comp rate reductions is a continued deterioration of insurance carrier profitability in writing this line of insurance, which will eventually lead to:

• Insurance carriers scaling back % of Dividend Offerings (an action that insurance carriers have historically been reluctant to take for fear of a loss of market share)
• Potential of reduced insurance carrier interest in writing WC coverage (especially standalone WC markets)
• Potential of rate increases in non-work comp coverage lines to support the overall account profitability
• Hardening of the insurance market, that already has been seen rate increases over the past few years in Business Auto and capacity limitations on Umbrella/Excess  

... and the Ugly …

Construction companies may be surprised to learn that significant WC rate reductions have an inflationary impact on the Experience Modification Rate (EMR).

It should be noted that this inflationary impact to the EMR will offset to some degree the premium reduction created by reduced WC rates.

Of the many variables that affect the EMR, the below example illustrates the inflationary pressure created by reducing WC rates:

• “Expected Losses” are the amount of losses that the State of Wisconsin expects to result from the state mandated work comp rate.
• As the state mandated work comp rates have reduced over the past 4 years (example: -33% in Sewer Construction), the “Expected Losses” that will result from the reduced WC rates also reduce.
• “Expected Losses” are compared to each construction company’s “Actual Losses” in the calculation of the EMR.
• The lowering of the “Expected Losses” through reduced WC rates when compared to the “Actual Losses” results in inflationary pressure to the EMR.

The only way to offset this inflationary pressure on the EMR is for contractors to reduce their “Actual Losses”.

Contractors familiar with competitively bidding on large projects know all-too-well the importance of having an Experience Modification Rate below 1.00. Most contractors have seen their EMR increase over the past several years, due in part to the last 4 years of WC rate reductions.

What can Contractors do?

Competitive pressure on insurance carriers

• Start the renewal process early (120 days prior to renewal)
• Evaluate insurance carriers:
  • WC Dividends Plans
  • Analysis of carriers coverage enhancements and/or restrictions
  • Evaluation of Carrier Support Functions (Loss Control / Safety Services & Claims Service)
  • Carrier dedication to the construction industry (Most national carriers have construction dedicated Underwriting / Loss Control / Claims functions)

Pre-Loss – Safety:

• Identify who is accountable at each job site for administering safety?
• Involve the insurance carrier and insurance broker to create an annual service plan addressing:
  • Training (employees / supervisors & foremen / safety director)
  • Jobsite inspections (Are we following our policies and documenting all inspections and corrective action?)

Post-Loss – Controlling Costs:

• Claims should be reported immediately
  • Statistics confirm a direct correlation between immediate reporting of a WC claim and minimizing the cost of that WC claim
• Keeping WC claims “Medical Only”
  • “Medical Only” claims (without Loss of Wages and or Disability) are discounted by 70% for the purpose of the impact on the EMF
• Partnering with an Occupational Medical Provider
  • By having a medical provider familiar with your business, there tend to be fewer hang ups in getting employees to return to work as fast as possible
• Regularly scheduled mid-term and year-end claim reviews with broker and insurance carrier

Applying for available work comp credit programs:

• Wisconsin Contractors Premium Credit program (up to a 10% Premium Reduction that has no impact on the EMR)
• Wisconsin Apprentice Credit Program (up to $ 2,500)

NOTE:  Some insurance brokers (including R&R Insurance) have dedicated Construction divisions to serve the needs of Wisconsin’s construction industry.

To sum it up, while at first glance the continued workers’ compensation rate reduction that took effect on 10/01/19 may create the appearance of saving “A Fist Full of Dollars” on reduced WC premiums, in reality an objective evaluation would indicated that there is “The Good, the Bad & the Ugly..”.

Many people say they have a safe work environment - but how safe is it really?  Or often we hear "yes, we have a safety plan in place so we're fine." 

We challenge you:

• How often do supervisors get together to review protocols? 
• Can you show us your post-accident forms?  And who reviews post-accident reports? 
• Who is responsible for formal inspections?  And how often are they performed?

Vendors are increasingly looking for formal, documented processes to prove steps towards a safe culture.  And, ultimately, this can have an impact on insurance premiums. 

R&R's Professional Services staff have created trainings to address the three most critical points for manufacturers:

1. Work Comp 101
   • The most effective 1st training, intended for Supervisors, this eye opening session takes a high level approach to explaining the financial impact safety plays in a risk management program
   • EX: a trip to the Emergency Room is generally 2x-3x more expensive than a walk-in clinic - do you have a relationship with a clinic that understands Workers Compensation and your Return-to-Work program?
2. Accident Investigation
   • About as real as it gets in safety!  This session emphasizes the importance of a documented process: the POTENTIAL, learn from the ACTUAL, and lose the THEORETICAL
3. Performing your own Safety Audits
   • More than the daily walk-through on the floor, this shows the value of a team of auditors ("the more eyes, the better!") and provides assistance with creating custom checklists specific to your organization

As with any successful safety program, it is important to have management involved in the process and to review protocols annually.

Our Professional Services team make these a regular part of our client's risk management program.  Looking to attend a general session? Check out our full seminar & webinar schedule.

OSHA started a new initiative this year: if the OSHA 300A data an employer submits to the Injury Tracking Application (ITA) shows the rates are above their industry averages, then that employer will receive an email. The email is informational only and obligates an employer to do nothing. As with every employer, regardless of their rates, OSHA encourages frequent review of safety and health efforts.

As always, we are here to answer any of your OSHA questions - please reach out to your KnowledgeBroker or view one of our OSHA webinars.

For your information, below is an excerpt of the email: 

Dear Employer:

OSHA recognizes that the DART rate does not necessarily indicate a lack of interest in workplace safety and health. If you are one of the many employers who would welcome help from experts in workplace safety and health, OSHA has many compliance assistance resources, several of which are at no cost and confidential.

If you are a small employer with fewer than 250 workers on-site and no more than 500 workers corporate-wide, OSHA’s On-Site Consultation Program is available to you. This program is administered by state governments completely separate from OSHA’s enforcement program. The program assists employers to identify and eliminate or control hazards effectively and economically. More information on this program, including contact information for the local office in your state is available at https://www.osha.gov/consultation.

OSHA has resources to assist a company to develop and implement a safety and health program. Such a program to find and fix workplace hazards before they cause injury or illness can proactively reduce injuries, illnesses, and fatalities. Not only do employers experience dramatic decreases in workplace injuries, but they also often report a transformed workplace that can lead to higher productivity and quality, reduced turnover, reduced costs, and greater employee satisfaction. If you use the On-Site Consultation Program, the state consultant can help you develop an injury and illness prevention program. More information can be found on the OSHA webpage at www.osha.gov.

Other avenues to address this issue include hiring an outside safety and health consultant, working with your insurance carrier, or contacting your state’s workers’ compensation agency for advice to address a high DART rate. In addition, engaging your workers to identify hazards and find solutions is a proactive method to resolving safety and health hazards.

Thank you for your attention to this matter.

Sincerely,
Occupational Safety and Health Administration

Governor Evers has signed an Executive Order 20 to create the Joint Task Force on Worker Misclassification.  

It means that there will be additional resources allocated to enforcing worker classification.  It impacts all employers in the area of workers compensation, unemployment insurance, and civil rights.  In fact, we had a visit to one of our customers within the first week of the task force being in place!

Need help distinguishing an independent contractor vs an employee?  Check out our 7 min video describing the differences from a work comp perspective: https://youtu.be/NSZ61KnEym0

Following is a link to the Wisconsin Department of Workforce Development’s website regarding proper worker classification: https://dwd.wisconsin.gov/worker_classification/

In addition, here is a link to more detailed articles on this subject: https://www.wispolitics.com/2019/gov-evers-signs-executive-order-creating-joint-task-force-on-payroll-fraud-and-worker-misclassification/

Additional resources:

• Independent Contractor or Employee?  Getting it Right When Classifying Workers
  source: InsideTrack
• Executive Order #20
  source: The State of Wisconsin Executive Department
• Employee or Independent Contractor - Why it Matters
  source: WI Department of Workforce Development

This year Wisconsin contractors and manufacturers with apprenticeship programs are saving 2% on their Workers’ Compensation insurance premium.

The 2% credit (maximum $2,500) is a no-brainer for any business to claim with an active apprenticeship program, but there are few qualifications to keep in mind along with the knowledge that some insurance carriers are opting out of the savings altogether.

In an atmosphere of record low unemployment rates, and the Foxconn behemoth on the horizon, the state is incentivizing apprenticeship programs in hopes they will help fill the growing trades’ skills gap. In March of this year, Wisconsin passed Assembly Bill 508 which slashed regulations in the trades requiring ratios often higher than 4 journeymen to 1 apprentice down to 1-to-1. In September of last year, financial incentives were announced, granting a 2% Apprenticeship premium credit on Workers’ compensation insurance for Wisconsin business going into effect next month.

Who qualifies?

Claiming the 2% credit for your business is not much of a hoop to jump through, but on the other hand Wisconsin isn’t handing them out like candy. The credit only applies to insurance workers’ compensation polices with effective dates of 10/1/2018 or later. If your policy has already renewed in 2018, you’ll need to change your effective date (not always recommended) or wait until next year to claim the credit.

Your agent must notify your insurance carrier that you are eligible for the credit and provide evidence of participation in an apprentice program administered by the Wisconsin Bureau of Apprenticeship Standards for a minimum of 6 months. This means to claim the 2% credit on 10/1/2018 your apprentice program must have been approved by WBAS and running since March of 2018.

Not Every Insurance Carrier is Opting-In

If your insurance policy is in the pool, your company is automatically qualifies for the program. If your business is in the private market, which most are, there is a chance it might not…

When the Office of the Commissioner of Insurance announced the credit in 2017, they made it clear that this was a voluntary program for the private insurance market.  While all carriers were automatically enrolled into the program, it was left up to carriers if they wanted to opt-out.

At first there was a bit of waffling, but in the end a majority of carriers have decided to opt-in. That said, a large minority are opting-out, some of whom are big players in the construction and manufacturing markets. R&R Insurance keeps an updated list of carriers opting-in and out.

The Wisconsin Compensation Rating Bureau is now requiring a mandatory audit noncompliance charge (ANC). Effective January 1, 2017 any insured who does not comply with a workers compensation audit will be billed an additional two times the estimated workers compensation premium.

For Example:

$50,000 Estimated Annual Premium

+$100,000 Audit Noncompliance Charge

_______________________________________

$150,000 Total Amount Due

The intent of the charge is to provide uniformity in assessing a penalty. It is also an incentive for insureds to cooperate with the premium audit as required by the policy contract. Improved compliance with the audit process will lead to increased accuracy, as well as ensure rate accuracy and sufficiency.

• The ANC is not a premium surcharge. It is premium and is subject to premium tax.
• The ANC endorsement is not optional and is mandatory on all Wisconsin workers compensation insurance policies.
• The ANC endorsement will be treated the same as the WI Law Endorsement and the WI Cancellation and Non-renewal endorsement.
• There are no changes to the Wisconsin cancellation rate. Current term policies cannot be cancelled for nonpayment of the audit bill.

While compliance with the work comp audit has always been important, 2017 will prove to be more important than ever. For additional information on the ANC, contact a Knowledge Broker at R&R Insurance.

Once your Workers Compensation policy has expired, you can expect to be contacted by your carrier. You will be receiving either a letter or a phone call, asking for your actual payroll numbers so that they can “true up” your premium.

Despite the importance of the audit process, many policyholders simply ignore this request due to the seemingly cumbersome nature of audit paperwork. Although most carriers handle this situation differently, when this happens the carrier is then forced to arbitrarily assign a final payroll, which is generally not to the policyholders favor.

However, this process will all change on January 1, 2017 when the WCRB (Wisconsin Compensation Rating Bureau) will mandate that every carrier add an endorsement charge to your Workers Compensation policy called “Audit Noncompliance Charge” or ANC. 

The intent of this endorsement is to create uniformity in how carriers arbitrarily assign payroll in the absence of actual payroll data. As of January 1, 2017 the charge will be 2 times your estimated premium. This will be very costly for those policyholders who choose not to return the audit paperwork. Therefore, while it has always been important to complete the audit paperwork, starting January 1^st it will now be even more critical.   

For more information on the changes to Workers Compensation policies coming in 2017, contact a Knowledge Broker.

No one has ever accused me of being a clairvoyant. Heck, if I had the ability to predict the future, I never would have traveled out to Denver to watch the Packers get pushed around by the Broncos. But every so often, I accumulate enough information to make an educated guess on future events. That includes events that could change the worker’s compensation landscape in Wisconsin.

Proposed changes to the work comp act are coming in from all directions but there are definitely some common themes that have emerged. From the Governor's budget bill, to the Worker's Compensation Advisory Council's agreed bill, to a potential bill from State Representative John Spiros, it doesn't take an omniscient soothsayer like Carnac the Magnificent to figure out that change is on the horizon. Here's a summary of most of the changes that I anticipate you will see take effect in 2016. These changes will have an impact on your workers compensation premiums going forward.

• The rate paid for permanency due to injuries and surgeries is going up. Look for increases averaging about 6% each year over the next two years. That bodes well for injured workers and the attorneys who represent them.

• Injured workers who are permanently and totally disabled with an injury date of 1/1/2003 and earlier are going to get a raise in the disability benefits they receive.

• Injured workers who are going to school for retraining will be able to work a part-time job up to 24 hours without having an offset on their disability payments. They now have the potential of making more money on worker’s compensation than they were making at the time they were injured.

• Medical providers will now have limitations on what they can charge for medicines dispensed at their offices.

• Medical providers will also have limitations on what they can charge payers for electronic medical records. That limit will most likely be $10 per request.

• An injured worker will have less time to file a claim against their employer. The statute of limitations will move from 12 years to at least 6 years. Maybe even 2 years.

• Permanency ratings for injuries, provided by physicians, will now be offset by pre-existing permanent disabilities and physical impairments.

• Injured workers on light duty who are terminated for good cause based on UI standards will no longer be able to collect Temporary Total Disability (TTD) payments.

• Administrative Law Judges will have the ability to force you to pay for retraining your injured workers when you are unable to accommodate permanent restrictions, even before they have stepped foot in a classroom. This will increase the settlement value of future claims.

So let’s be clear; this is just my speculation. If I truly had the ability to predict the future, I would be sipping pina coladas on a warm beach somewhere right now. But here I am living in Wisconsin and the only thing I know for sure is that it’s going to get much colder very soon. At least I think it will.

If you would like to discuss how these potential changes could impact the cost of your worker’s comp, or better yet, if you would like some advice on how to best position yourself to make the most of these changes, please contact me so that we can discuss further.

Large Rate Increase for Landscapers Effective 10/1/15

Over the past 9 years or so, worker’s compensation rates for Wisconsin landscapers have remained relatively flat. Business owners have benefited from predictability in costs for their most expensive line of casualty insurance. With the new rates effective for 10/1/15 – 9/30/16, owners should be prepared for an invasion on their bottom line similar to the effect the Emerald ash borer has had on unprotected ash trees.

With rates averaging about $9.72 for every $100 of landscape payroll from 2006 – 2013, the industry saw a 3% rate increase in 2014. This year, with a new rate of $11.35, you are facing a 12.8% increase compared to last year.

Unfortunately, you have no control over the landscape rate that is calculated by the Wisconsin Compensation Rating Bureau. You do, however, have control over many other aspects of your business that will have a direct impact on what you pay for your worker’s compensation insurance. But like every great landscaping project, it requires a vision and a plan. Do you have a plan in place to prepare yourself for substantial worker’s comp premium increases next year?

Quite often, I’ll get questions from employers wondering what impact the ACA will have on worker’s compensation. A recent study by the Worker’s Compensation Research Institute (WCRI) helps shed some light on what employers can expect. It’s not encouraging news.

According to the recent WCRI study, hundreds of millions of dollars in insurance claims nationally could shift from health insurers to worker’s compensation carriers.

The concept is simple. The Affordable Care Act encourages health providers to form Accountable Care Organizations that shift payment from a traditional fee-for-service model to capitated or pre-paid health insurance. As you know through experience, most worker’s compensation treatment is based on fee-for-service.

The study suggests that providers may, in some cases, have a financial incentive to categorize an injury as being work-related. In States like Wisconsin and Pennsylvania where a large percentage of workers are enrolled in capitated health plans, this case shifting could be significant.

For more information on the report, click here.

If you would like assistance with evaluating your current worker’s compensation policies and procedures to see if there are ways to strength your program, please contact me.