Reversing direction

Workers compensation rates are going up in Nevada in 2006 after two years in which they generally drifted downward.

The size of the rate increases will vary widely across industry groups and from one carrier to another.

But the key element in determining workers comp rates in the state the loss experience would require an average 2.5 percent rate increase.

The National Council on Compensation Insurance, a Florida-based organization, each year calculates the loss experience for Nevada employers.

All the companies that write workers comp coverage in the state use the NCCI figures as the basis for their rates, although they add their own figures for administration and profit.

The NCCI figures called for the biggest increases 10.2 percent for coverage of office and clerical workers.

But reduced losses among contractors led NCCI to call for a 6.1 percent reduction in those rates.

The average of a 2.5 percent increase proposed by NCCI comes in what's known as voluntary coverage companies which don't have problems getting workers comp coverage.

In the assigned -risk pool, companies that otherwise couldn't get coverage,NCCI proposed an average increase of 0.2 percent.

The NCCI proposal also includes another 1.1 increase in premiums to adjust the state's rating formulas.

That would bring the total increase for voluntary coverage to 3.6 percent, and the average for assigned-risk coverage to 1.3 percent.

Driving the increases are higher medical expenses, particularly for prescription drugs, said Alice A.Molasky-Arman, the state's insurance commissioner.

Martin Welch, senior vice president and chief underwriting officer of Reno-based Employers Insurance Group, noted that more than half of each workers compensation claim is attributable to medical costs.

Employers Insurance Group is the largest workers comp carrier in Nevada.

"The general public already is aware of significant increases in the cost of physician care and prescription drugs,"Welch said."It is these same increased medical costs that drive up workers compensation claims costs."

Because rates vary among workers comp insurers,Molasky-Arman said employers should shop carefully.

Welch said Employers Insurance Group will work to keep tight control of its operating expenses to remain competitive.

And he said the company will continue to emphasize health and safety programs among its customers to keep a rein on the loss experience.

Even with the uptick in the loss experience, Welch said his company views Nevada as "a healthy workers compensation environment." The increase in rates is likely to deflate, if even slightly, one of Nevada's strongest selling points in industrial development:Workers comp costs that are lower here than they are in California and some other states.

Chuck Alvey, the president and chief executive officer of the Economic Development Agency ofWestern Nevada, said economic development agencies in other states might use the uptick in Nevada's rates to discourage companies from moving to the Silver State.

Savvy companies, however,will take the time to look at their specific rates in Nevada and other states when they're thinking about sites for offices and industrial facilities.

"It will have a marginal and a minimal effect, depending on the perceptions,"Alvey said."It's going to hurt us in perceptions."

But Molasky-Arman moved quickly to provide a talking point for folks selling Nevada as a location.

Workers comp rates, she said, typically are calculated as a certain amount per $100 of payroll.

In Nevada, however, the charges are levied only against the first $36,000 of payroll, unlike most other states,where they're calculated against the entire payroll.