Workers’ compensation rates in NH are set to decrease for the sixth consecutive year in 2018. The National Council on Compensation Insurance—an organization that gathers data, analyzes industry trends, and provides NH and other states with insurance rate and loss cost recommendations— filed a rate proposal in August with the NH Insurance Department to reduce voluntary loss costs by 13.3 percent.
“The loss cost is the portion of an employer’s insurance premium that pays claims costs for work-related injuries. The loss cost is ultimately used by insurers to set rates and premiums in the voluntary market. All insurers writing voluntary workers’ compensation in New Hampshire are required to use the new loss costs,” the NH Insurance Department explains in a recent press release.
The NH Insurance Department recently held hearings on the recommendations, and the new rates will be applied to workers’ comp policies effective Jan.1, 2018. The reduction follows a 9 percent reduction in 2016 and a 5.9 percent reduction in 2015.
Such reductions are welcome relief in a state that went from being the 14th most expensive for workers’ compensation in the country in 2008 to the 9th most expensive in 2012, according to the Oregon Workers’ Compensation Rate Ranking Study. “This has been something people have been wanting in New Hampshire for a long time,” says Dwayne Davis, territory manager of HPM Insurance with offices in Amherst, Bedford, Bristol, Franconia and Laconia.
Driving those high rates is the fact that most of the money paid out in workers’ comp claims in NH go towards paying medical costs. So in 2014, then Gov. Maggie Hassan convened a commission to recommend reforms to reduce workers’ compensation medical costs.
By December 2015, the NH Insurance Department issued a report on its findings to the legislature. “Medical costs account for 73 percent of workers’ compensation benefits in New Hampshire. This is significantly higher than the national average of 59 percent. One potential driver of these high costs is the lack of standardization of payment for workers’ compensation (WC) medical services. There are currently no standards or guidelines to regulate the amount providers can bill for WC medical services, nor are there limits to the duration of care or number of services that workers receive for WC injuries–often leading to much longer and more expensive treatments,” the report states. The report had several recommendations to create more transparency about medical costs.
In 2015, the NH legislature passed Senate Bill 133, which allows workers’ compensation insurers to negotiate fees for medical services. Prior to the passage of that bill, insurers had to pay what was billed by medical providers, Davis says. He adds the legislation created an appeals mechanism that has yet to utilized. “The health care industry was able to get more for what they were doing relative to injured employees. In the past two years, that has been reined in due to legislative change,” says Marc Berube, president of Eaton & Berube Insurance in Nashua. Adds Davis, “This was a compromise to creating an actual medical fee sheet,” he says of the ability to negotiate.
As of 2016, NH ranks as the 17th most expensive state for workers’ compensation, according the Oregon Workers’ Compensation Rate Ranking Study.
What’s Behind the Decreases
Davis says there are many reasons why NH rates are decreasing. “One factor is the frequency of workers’ comp injuries have gone down 25 percent since 2011,” he says.
Another factor is companies are improving their back-to-work programs to help injured employees recover and start working again more quickly, Davis says. That includes providing light duty work programs that modify a worker’s responsibilities to accommodate their recovery, he says. “The faster you get somebody back to work, the less indemnity payments go out and claims become lower,” Davis explains.
Davis adds that the injuries for which workers’ comp claims are being filed are less severe due to employers having better safety programs. “It all goes back to being proactive in creating the safest environment.... and communicating what it means to be in the safest environment,” he says.
“Businesses have paid more attention to safety so overall results have improved as less people are getting hurt,” Berube says. He adds that insurance companies and employers are also getting better at detecting fraudulent claims.
Insuring Lower Rates
Ideally, lower voluntary loss cuts will result in lower workers’ comp premium costs for companies, but that’s not necessarily the case. There are several factors that go into setting rates, including a company’s claims history, Davis says.
After all, workers’ comp insurance is a big chunk of any company’s budget. Berube says while the cost can vary, in many instances, workmans’ comp insurance can be half the premium cost of a business’s casualty property insurance. Davis agrees, adding, “It can equal half of the total insurance they pay.” There are strategies companies can employ to take advantage of these rate cuts. Davis recommends instituting consistent safety training programs that help to reduce workplace injuries as well as developing a formal back-to-work program. “Sometimes accidents happen. The best thing to do is prevent the preventable,” he says.
Berube says it is important that companies make sure employees are properly classified by job function and whether they are an employee or contractor, as those play a role in setting rates.
National Trends
Davis notes NH’s workers’ compensation market follows national trends, as the National Council on Compensation Insurance filed for rate increases in only two states for 2018 while 39 states, including NH, will experience decreases. (Not all states use NCCI for setting rates.)
A report issued by the National Academy of Social Insurance in October shows employers’ workers’ compensation costs as a share of payroll declined nationally in 2015, reversing a four-year trend. Workers’ comp benefits as a share of payroll also fell for the fourth straight year, according to the report.
“Benefits per $100 of payroll fell from $0.91 in 2014 to $0.86 in 2015, the lowest level since 1980. Between 2011 and 2015, benefits as a share of payroll fell in all but three states, continuing a national trend of declining benefits relative to payroll that began in the 1990s,” states the report, “Workers’ Compensation: Benefits, Coverage, and Costs.”
The report also demonstrates workers’ compensation employer costs per $100 of payroll declined to $1.32 in 2015—the fourth lowest level since 1980. Between 2011 and 2015, employer costs as a share of payroll declined in 27 states.
“Part of the story behind the decline in benefits and costs as a share of payroll is that workplaces are getting safer,” says Marjorie Baldwin, professor at Arizona State University and co-author of the report. “Both the incidence and severity of work-related injuries have declined steadily since 1990. In fact, according to the Department of Labor, the proportion of workers who experienced injuries that resulted in days away from work reached a 25-year low in 2015.”
Christopher McLaren, senior researcher at the National Academy of Social Insurance and lead author of the report, says the decline in medical benefits paid between 2013 and 2015 are, in part, due to some states changing their workers’ compensation medical care delivery systems.
“Some of the changes involve, for example, implementing fee schedules that set maximum reimbursement rates for medical care or adopting treatment guidelines. Many states have also enacted new disability rating procedures and compensability requirements that impact cash benefits paid. All of these factors influence the share of medical benefits, as well as total benefits and costs,” McLaren says.
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