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Workers comp rates to decline Largest insurer in state proposed 12.8% reduction


In a move that could mean millions of dollars in savings for some 90,000 Maryland businesses, the state is set to approve a 12.8 percent decrease in workers compensation premiums.

Donald E. Brandenberg, the state's chief actuary, said yesterday that he had reviewed the decrease proposal from the largest group of insurance companies writing workers compensation policies in Maryland and that he "didn't have a problem with it."

He said he expects the insurance administration will issue an approval order for the decrease by the end of the week. The rate reduction will take effect Jan. 1.

The drop is significant because it continues a 10-year [Insurance, from that turned Maryland from one of the most expensive states for workers compensation insurance to the fourth cheapest.

Employers said they were thrilled with the news.

"I think decreases are great," said Marcia Harris, executive vice president of the Maryland Restaurant Association.

She said many of her 2,500 members complain about workers compensation, which state law requires all employers to purchase to insure their workers against on-the-job injuries, because it amounts to a payroll tax ranging from 1 percent to 20 percent, depending upon the employer's claims history.

"It hurts to pay it," Ms. Harris said.

And Charles F. Porcari, spokesman for the state Department of Business and Economic Development, said the decrease should help Maryland attract new businesses.

"This is good news," he said, calling the development "one of the things that should make people stand up and notice Maryland for what it is. And what it is is a good place to do business."

Some exceptions

But Marie Kinietz, director of the National Council on Compensation Insurance, which made the filing, warned that not every employer will see a decrease in rates.

The proposed decrease is an average for the entire state, translating into a reduction of about $28 million on the approximately $250 million worth of "pure" premiums collected to cover medical and wage costs among the council's members.

Each employer's rates will depend on its accident history, she said. And each insurer multiplies its "pure" premiums by a factor ranging from 20 percent to 50 percent to cover administration and profits.

In addition, the decrease will only apply to employers who are covered by the commercial insurance companies that make up the council.

Among those who won't be affected: most major employers, since they tend to be self-insured.

About 30,000 small and risky companies also won't be affected by the filing, since they are covered by the Injured Workers Insurance Fund, which was set up by the state to be the insurer of last resort.

But those small employers probably will get similar good news soon.

Officials at IWIF, which covers about one-fourth of all Maryland employees, said yesterday that they also plan to propose a rate decrease for 1996. Paul Rose, IWIF's president, declined yesterday to say how much his firm would reduce rates, saying only that the drop probably would be "significant."

Ms. Kinietz and Mr. Rose said that the rate decreases are coming because the insurers are receiving fewer claims of injuries, and are paying out less to doctors and workers.

For example, the council found that the number of serious on-the-job injuries reported by Maryland asphalt workers fell from seven in 1988 to just one in 1992 (the last year for which statistics are available). And that drop in claims translated to a dramatic savings in dollars: from $470,000 in 1988 to $190,000 in 1992.

Successful cost management

Ms. Kinietz said the claims have dropped because insurers have "really became aggressive in cost management" and increasingly insist that employers improve safety and bring injured workers back for light-duty assignments.

The new aggressiveness is paying off nationwide, she said.

The NCCI has filed for decreases in at least eight other states, including a 13.6 percent decrease in Virginia for 1996.

But Maryland's decrease is not just part of a national trend, she said. Maryland was one of the few states in which the workers compensation rates were reduced in 1995, she noted.

Maryland's workers compensation rates have bounced up and down -- dropping from 1988 to 1991, then rising for three years until the state approved a 5.6 percent decrease for 1995.

But overall, Ms. Kinietz said, Maryland's costs have declined. Currently, she said, the regulated premium rates are 22 percent lower than they were in 1988.

Earlier this year, the NCCI and another research group published separate reports attributing the decline in Maryland's costs to legislative reforms that reduced payments to workers with dTC comparatively minor injuries, increased competition among insurers, and economic troubles that have reduced employment in the most dangerous industries.

In December 1994, the NCCI found that because of bureaucratic snarls in Maryland's workers compensation system, half of the injured workers waited more than 50 days for their first check.

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