New England Rankings for Workers Comp
Everyone strives to be Number One, but there are some rankings where you just don’t want to be at the top. Foremost among these, in the world of workers comp, is the bi-annual Workers’ Compensation Premium Rate Ranking Summary (PDF) from Oregon’s Department of Consumer Business & Services: using rates for several dozen common class codes, Oregon ranks the states for average costs. Number one – California – is once again the most expensive state for workers comp, replacing 2012 leader Alaska. New England holds two spots in the top 10 and six in the top 20, but we also have a state ranked 48th for cost. Unless you’re an insider, you might not be able to guess the region’s least expensive state.
Connecticut is most expensive New England state and the second most expensive in the country. The nutmeg state has the dubious honor of holding the number two ranking in both 2012 and 2014. Why is Connecticut so expensive? It’s a combination of high medical costs and very generous benefits. The business community seems unable to develop any traction toward meaningful reforms; the state is stuck in a cycle that hurts all business, especially manufacturing, where the costs are as much as three times higher than in other New England states. Even neighboring New York, notorious for its bureaucracy-laden system, stands two slots lower, at #4, in the rankings.
Also in the top 10 we find Vermont rising to number 8, up from its position of 14 in the prior study. The average costs in Vermont are 125 percent of the national median.
New Hampshire comes in at 12 (dropping from nine in the prior study) and Maine is currently at 13 (previously at 10). New Hampshire is struggling with medical costs, which comprise a whopping 70 percent of total comp expenditures. They have taken initial steps to develop a medical fee schedule: a necessary move, but fraught with politics, as the medical community will mobilize to keep costs right where they are. With similar resistance, it took Maine about 20 years to develop their fee schedule. Maine’s current problems stem from the combination of high-risk jobs (timber and fishing, among others) and a relatively under-educated workforce.
Rhode Island holds steady at #20: once again, a state with generous benefits bedevils employers trying to contain costs.
If you are keeping track, there is only one state left, ranked 48th for cost in the current study (44th in 2012), and that, surprisingly, is Massachusetts. Back in 1990, the Bay State was ranked third in the nation for cost. The highly successful reforms instituted at that time steadily reduced the cost of insurance: this despite the state’s highly-touted and expensive medical infrastructure, second to none in the country. How did they do it? By using a stringent and in some respects punitive fee schedule to control medical costs; mandating a modest reduction in benefits (workers receive only 60 percent of their average weekly wage while out on comp); and reducing the “friction” that led to over-use of expensive claim settlements. Perhaps most important, employers were provided financial incentives under the Qualified Loss Management Program (QLMP) to implement safety and return-to-work programs for injured workers. In terms of cost containment, the reforms are a resounding success.
But politics being what it is, Massachusetts may well snatch defeat from the jaws of victory: the state has not raised comp rates for well over a decade. Rates are so low, carriers are beginning to pull out of the state; the assigned risk pool – now the largest in the country – is approaching 20 percent. Can suppressed rates be reversed before the market implodes? Will the Massachusetts Miracle continue? We will keep you posted.