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Focus on Workers Comp: Profiling the New England States

Among the New England states, Massachusetts was the first to offer workers compensation insurance, in 1902. One hundred years later, all states have comp. The benefits are similar but by no means identical and the cost to employers - ever a sensitive point - vary greatly from state to state. So what's happening across New England? Which states are the most expensive and which the least? If you have not been tracking this critical issue, be prepared for some surprises.

 

Every two years the state of Oregon issues national rankings on the cost of workers comp, from highest cost (Alaska is #1) to lowest cost states (North Dakota). The rankings are based on individual state rates for 50 common classifications, ranging from clerical through carpentry, trucking, hospitals etc. Oregon averages the cost among these classes in each state and then compares them. To no one's surprise, all but one of the New England states rank in the top half for cost of comp.

 

The median rate per $100 of payroll for 2012 is $1.88. Here are the rankings and average cost across New England:

 

National Rank Average rate per $100 of payroll

  • Connecticut #2 $2.99
  • New Hampshire #9 $2.40
  • Maine #10 $2.24
  • Vermont #14 $2.07
  • Rhode Island #20 $1.99
  • Massachusetts #44 $1.37
  •  

    Given the competition for the highest cost states - California, Florida and New York come to mind - it is surprising to find Connecticut so high on the list. But even more surprising, shocking really, is Massachusetts residing so far down on the list, by far the lowest cost among all the major industrial states while boasting one of the best medical infrastructures in the country.

     

    So what's the problem in Connecticut? In a word, a very generous benefit structure, combined with very high medical costs. It's time for lawmakers to pay attention to workers comp: in terms of business development, it's a deal breaker. And why is Massachusetts so inexpensive? A very stingy fee schedule (doctors hate it), combined with a relatively generous benefit structure that is nonetheless kept under control. The MA success story goes back over 20 years (when the state was ranked 3rd highest for cost). The state implemented a number of reforms, including the Qualified Loss Management Program, which educated employers and helped them get out of the huge assigned risk pool (then 60% of the market).

     

    However, and this is a big however, the low rates are no longer a reflection of low losses; instead, rates have been suppressed politically, without a single raise in over 15 years. MA employers are paying about the same as they paid in the early 1980s. Rate suppression is doing great harm to the market. Once again, the pool is growing and carriers are abandoning the state. If you are looking for an example of the adage "too much of a good thing can be harmful," MA is it.

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