Focus on Workers’ Comp: Ranking the New England States
Every two years the state of Oregon's Department of Business and Consumer Services issues national rankings for the cost of workers’ comp. The study compares rates for 50 widely used classifications. It is by no means a perfect measure, but the rankings do provide a reasonably accurate picture of state to state costs. In 2016 California holds onto its (dubious) number one ranking, with New Jersey and New York in the next two slots.
Here are the 2016 rankings for the New England states:
State │ 2016 Rank │2014 Rank
Connecticut: 5│ 2
Rhode Island: 9 │ 20
Vermont: 14 │ 8
Maine: 14 │ 13
New Hampshire: 17│ 12
Massachusetts: 44 │ 48
As CT agents are surely aware, the cost of comp remains very high. For insureds in the CT pool, the costs are truly catastrophic. Rhode Island has risen - slipped - from #20 to #9 and now finds itself as the second highest cost state in the region. Massachusetts slipped a bit from its lofty perch of #48, but not enough to cause any alarm; in fact, the rates are still too low, even with the modest increase effective on July 1 of this year.
High Mod, Lower Cost
Here is one dramatic indication of rate variability. One of our agents has a large account with restaurant operations in Rhode Island and Massachusetts. The interstate mod is 1.09 with an ARAP of 1.25. When you separate the losses by state, RI generates a mod of 1.04 with no ARAP and MA a mod of 1.39 with an ARAP of 1.25. Sure sounds as if MA is driving the cost of comp, right?
The class rate in RI is $3.45 per $100 of payroll. The same class in MA is $1.09 per $100. Here are the actual costs by state:
RI: $3.45 times 1.04 = $3.59 per $100 of payroll
MA: $1.09 times 1.39 times 1.25 = $1.89 per $100 of payroll
Even though MA has a much higher mod and a maximum ARAP, the actual cost of insurance is substantially lower than in RI. Insureds with relatively high mods in MA often pay less for insurance compared to companies with low mods in the other New England states. When it comes to costs, workers comp in the Bay State remains a remarkable bargain.