Ore. Gov. Kulongoski: Average ‘Pure’ Premium Rate for Workers’ Comp to Remain Flat in 2005

Oregon Gov. Theodore Kulongoski on Tuesday announced that the average “pure” premium rate for Oregon workers’ compensation insurance will remain flat in 2005, marking three years of stable rates after 12 consecutive years of rate reductions – a national record reportedly worth billions in cumulative cost-savings to Oregon employers.

The governor also announced that one of the state business fees that pays for workers’ comp and workplace safety programs will be reduced next year, reportedly saving Oregon businesses $2.6 million.

“Oregon’s ability to compete for business in the national and global marketplace is critical to our economic future – and the record-breaking success and continued strength of our workers’ compensation system is one of our key competitive advantages,” the Governor said. “Businesses that relocate to Oregon from neighboring states often tell us that our low workers’ comp rates are one of the primary reasons they choose to come here. I’m proud to stand here in partnership with business and labor to affirm that we are not going to let up on our commitment to keeping our workers’ compensation system strong.”

Oregon’s worker’s comp rates are released each fall for the following year. The 2005 workers’ comp rates announced Tuesday mean that Oregon will reportedly continue to stand out from neighboring states California and Washington, both of which have proposed increased premiums of more than 3 percent.

Washington officials recently proposed an average premium increase of 3.7 percent for next year. Although California announced rate decreases after enacting workers’ comp reforms earlier this year, California officials now propose a 3.5 percent average increase for 2005.

On average, employers in Oregon can expect to pay about the same amount for their workers’ comp insurance premiums in 2005 as they did in 2004. Because of the fee reduction, businesses and other employers will reportedly pay $2.6 million less to the state in actual workers’ comp fee dollars than they did in 2004.

The governor said that Oregon’s State-Owned Accident Insurance Fund (SAIF) plays an important role in keeping Oregon’s workers’ comp rates low.

“SAIF helps provide an economic advantage to Oregon by keeping workers’ compensation insurance costs affordable and widely available,” the Governor said.

He also cited Oregon’s ongoing business, labor and government partnership as a key element of the workers’ comp system’s 15-year track record of success. Currently, the state’s Management-Labor Advisory Committee is reviewing several aspects of the workers’ comp system that bear on improved fairness and benefits for workers, including standards for permanent total disability benefits, use of independent medical examinations, and various programs that help injured workers get back on the job.

“In the end, the workers’ compensation system is all about keeping workers safe on the job so that they can be productive for their employers, support themselves and their families, and come home to their loved ones at night as healthy as they were in the morning,” the Governor noted. “And when accidents do happen, this is about making sure workers and their families get the medical and financial benefits they need.”

He also pointed out that the state continues to search for ways to improve efficiency and reduce the cost of the system.

Cory Streisinger, the director of the Department of Consumer & Business Services, oversees the state’s workers’ comp programs and also heads the governor’s regulatory streamlining initiative.

“Over the past year we’ve cut administrative costs,” Streisinger said, “and we’ve also taken on streamlining projects that aim to make it simpler and less time-consuming for businesses and insurers to work with us, ranging from outright elimination of certain reports to development of simpler forms and easier-to-understand workplace safety standards.”

Streisinger also noted workers’ comp system savings from a new fee schedule for pharmaceutical costs, saying that the state continues to look for ways to deliver benefits more economically.

Workers’ comp premiums
The workers’ comp “pure” premium rate is the base rate employers pay to their insurance company for workers’ comp coverage. It reflects the actual cost of workplace injury and illness claims, before insurer administrative expenses and profit are added.

The cumulative cut in workers’ comp insurance premium costs since 1990 totals 57.4 percent, with resulting savings to employers of approximately $10.1 billion.

Although the state sets the pure premium rate, premiums do not fund state programs or services. The unchanged pure premium rate for 2005 represents an average across all types of businesses. Rates for specific businesses and industry groups may be higher or lower depending on group and individual claims experience.

Workers’ compensation premium assessment
State analysts have recommended that the workers’ comp premium assessment rate be reduced from 7.0 percent to 6.8 percent for 2005, a reduction of nearly 3 percent on the total assessment that brings it to its lowest level in eight years. The reduction is made possible in part by administrative cost savings and efficiencies implemented by the Department of Consumer & Business Services. The assessment was reduced last year as well.

The premium assessment is dedicated to the state’s administration of the workers’ comp system, plus workplace safety and health programs. Employers pay the assessment based on the total premium charged to them by their insurer. Insurers collect the assessment and then transfer it to the state. Self-insured employers and employer groups will pay 7.0 percent if the staff recommendation is adopted.

Workers’ Benefit Fund assessment
The Workers’ Benefit Fund assessment rate for 2005 will remain at 3.4 cents. This applies to each hour or partial hour worked by each paid employee covered by an employer’s workers’ comp policy. This is unchanged from 2004.

Formerly known as the “cents-per-hour” assessment, the assessment supports certain direct benefits to injured workers. Employers pay at least one-half the assessment and deduct no more than one-half from their employees´ wages. Most employers must then submit the complete amount to the state on a quarterly basis.

Employers who fail to provide workers’ comp coverage required by law are still subject to the assessment, which is collected retroactively along with other penalties.

Results
Because of the cumulative premium reductions, Oregon’s national ranking in workers’ comp costs moved from sixth most expensive in the nation in 1986 to 35th by 2002. During this time, maximum benefits for permanently disabled workers in Oregon have increased dramatically to a compensation level close to the national median, while temporary total disability benefits have increased to 133 percent of the state’s average weekly wage.

Meanwhile, increased emphasis on workplace safety has driven Oregon injury and illness rates down by more than 50 percent in the private sector and moret han 31 percent in the public sector since 1988. This includes all work-related injuries and illnesses recordable under OSHA standards, regardless of whether they later resulted in accepted claims for workers’ comp benefits.

The new premium and assessment rates will go into effect Jan. 1, 2005.