Comp rates give state fresh advantage

The groups that spearhead efforts to draw new jobs to Nevada are working hard to nudge into a spotlight a little-noticed notice from Nevada Insurance Commissioner Brett Barratt last month that workers compensation rates in the state will decline.

Workers compensation rates, industrial recruiters say, are among the most important factors examined by companies that are considering a move to Nevada.

And the decline in Nevada's rates is all the more important this time around, they say, because workers comp rates have been rising in neighboring states.

The insurance commissioner last month approved a filing that calls for an average decrease of 3.9 percent in the loss-cost portion of workers compensation rates for companies that buy coverage in the voluntary market. The decrease will be 2.2 percent for companies in assigned-risk pools.

(Once they have the loss-cost figures, workers compensation companies add their own figures for administrative costs and profits to determine the rates they offer to customers.)

The Nevada Commission on Economic Development was quick to trumpet the decline, launching a press release across the country in which Lt. Gov. Brian Krolicki spelled out the benefits of the state's workers compensation rates.

Mike Skaggs, executive director of the Commission on Economic Development, says one important audience for the media push is just across the state line.

"It's a very big deal in California," he says.

In fact, the commission is telling its story through two California companies that decided to relocate.

Pixel2Canvas, a fine art printer that moved from Lake Forest, Calif., to North Las Vegas, estimates that Nevada's workers compensation rates will save it $1,000 a year per employee.

And in the north part of the state, Joe Dutra, president of Kimmie Candy Co., says that the lower workers comp rates in Nevada played a major role in the growth of his company since it moved to Reno in 2004.

Companies that were pushed to the wall by the recession now are a good audience for messages about cost savings.

"Costs and regulations are the most important thing when companies are thinking of making a move," says Kris Holt, executive director of Nevada Business Connections, a private business recruitment group in Carson City. "Workers comp is right up there."

The state's lower rates seldom come as a surprise, especially to California companies.

"Nine out of 10 companies already know that we're lower. That's why they're calling," says Stan Thomas, vice president of business development for the Economic Development Authority of Western Nevada.

Skaggs says the lower rates in Nevada also tell another more subtle story:

Because loss rates are based on the claims filed by workers, employers can tell a lot about the work ethic of the state's residents by comparing rates.

Larry Henkes, co-owner of The Henkes Welsh Agency, an insurance brokerage in Reno, says a simple dollar-for-dollar comparison of workers compensation rates in Nevada and other states may miss an important aspect of Nevada's system.

Employers in Nevada pay workers compensation premiums only on the first $36,000 of an employee's pay. Other states usually compute premiums on the worker's full pay.

For manufacturers with an experienced, highly skilled and well-paid workforce, that can make a significant difference in the total bill for workers comp coverage, Henkes says.

While California companies are getting much of the attention, the lower rates help Nevada in competition with other parts of the West as well.

Washington State has seen rate increases that average 12 percent, and the increase would have been even larger if the state hadn't decided to draw $117 million from its trust fund to pay down workers' compensation premiums.

Using the differential in workers compensation rates as a tool to woo California companies is nothing new for economic development specialists in northern Nevada.

Ten years ago, Holt recalls, rates in California were 40 percent higher, and manufacturers poured across the border to set up shop in Carson City and Reno.

"Back then," he says, "I didn't even have to talk about the beauty of Lake Tahoe."