Workers' comp rates decline

A key part of the formula used to calculate workers' compensation costs in Nevada points to a decrease in rates next year.

The National Council on Compensation Insurance says workers' comp losses in the state are down by an average of 6.5 percent.

That, the state insurance commissioner says, should result in lower workers' comp costs for many companies beginning in January.

But don't spend the money just yet.

In the fiendishly complicated world of workers compensation, a reduction in insurors' losses may bring lower rates for an individual company.

Or maybe not.

For starters, the losses tracked by the National Council on Compensation Insurance are only half the equation that determines workers' comp rates.

The other half is the expenses and profit that insurance companies build into their rates.

In some instances, insurers' expenses and profits have been rising rapidly enough to wipe out any gains from lower losses, says Janice Moskowitz, a lead actuary with the Nevada Division of Insurance.

That's why Insurance Commissioner Alice A.Molasky-Arman says it's important to shop among insurance companies for the best price.

(Also check to see if they're authorized to do business in the state by logging on to www.nvinsurancealert.com.) Then, too, the 6.5 percent decrease in losses reported in the filing by the National Council on Compensation Insurance is only an average.While companies in some industries would see even bigger declines, some would see rate increases on the basis of higher losses.

In fact,Molasky-Arman says, some employers could face increases of as much as 20 percent.

The increases could be even higher in the assigned-risk pool, which provides coverage to companies that can't get workers' compensation insurance through traditional carriers.

For companies in the assigned-risk pool, the average decrease related to losses is 1.9 percent.

Some categories in the assigned-risk pool, however,may face loss-related increases of 24 percent.

And the number of employers who get their workers' comp coverage through the assigned-risk pool is growing.

In some cases, employers find that the rates in the assigned-risk pool are actually less expensive than voluntary coverage, says Cliff King, the chief insurance assistance in the Division of Insurance.

King says that many small employers, meanwhile, are forced to the assigned-risk pool not because they're a bad risk but because they don't generate enough premium income to get the attention of workers' comp carriers.

Unable to find a traditional company that will deal with them, they turn instead to the assigned-risk program.

Although changes in workers' compensation rates will vary widely from company to company next year, the general trend heartens public and private officials.

Molasky-Arman notes that this is the second consecutive year that the National Council on Compensation Insurance has filed for lower rates.

Last year, average rates fell 12.3 percent in the voluntary market and 15.6 percent in the assigned-risk pool.

Economic development officials will make sure that companies in other states particularly California know about the trend in Nevada.

"It helps a lot," says Chuck Alvey, president and chief executive officer of the Economic Development Authority of Western Nevada.

In California, Alvey says, some employers have seen workers' comp increases of 300 percent to 500 percent, and the issue is on the minds of business owners who are considering a move to Nevada.

Lower rates help, too, with maintaining the strength of companies already located in the state.

"Lower workers' comp is always good news," says Ray Bacon, executive director of the Nevada Manufacturers Association.

If nothing else, lower workers' comp rates might provide breathing room

for companies struggling to pay rapidly rising premiums for health care, says James Nelson, executive director of the Nevada Association of Employers.

"It's an offset for the cost of group health care," he says."Perhaps it will ease the burden a bit."

Big employers to feel change in experience rating Major employers in Nevada won't see all of the 6.5 percent decline in the workers' compensation filing from the National Council on Compensation Insurance.

The council proposes adjusting the experience-rating formula used for major employers, and the adjustment would mean an increase of 1.8 percent for experience-rated risks.

If the adjustment wins the OK of Insurance Commissioner Alice Molasky-Arman, the average experience modification would be closer to 1.0.

Who's affected? Companies that have paid a premium of at least $6,000 over the past two years or an average annual premium of at least $3,000 for longer than two years.

In most cases, state insurance officials say, this 1.8 percent increase will be more than offset by the 6.5 percent decline in loss costs.