YOUNGSTOWN Plan to lower premiums: Pay out of pocket
The idea is similar to settling a fender-bender with cash to avoid a car insurance rate increase.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- The city is making a move that it hopes eventually will mean big cost savings on workers' compensation.
The change involves the city's paying smaller injury claims -- under $1,000 -- itself and keeping them away from its state workers' compensation insurance. The state insurance still will cover larger claims.
The idea is to shrink the number of claims against the city over a period of years.
Eventually, fewer claims should mean lower premiums.
The idea is roughly akin to settling a fender-bender with cash instead of making a claim to your insurance company. Lack of claims keeps insurance rates down.
"We believe it's a wise investment in the long-term financial future," said Mayor George M. Mc-Kelvey.
Savings won't materialize for at least three to five years. That's how long it will take before claims would be reduced enough to result in lower rates, he said.
The city can participate in the cost-savings program, offered through the state Bureau of Workers' Compensation, for up to 10 years. The city hopes premiums fall enough to get out sooner, however.
Officials couldn't give any indication how much the city could save.
High costs
Youngstown, however, pays about twice what an average city pays in workers' compensation. The city is expecting the next bill to be near $4 million.
CompManagement Inc. of Dublin, the city's new workers' compensation manager, suggested the move.
There is some risk, said Steven Cochran, a vice president at CompManagement. For example, the city won't save money if it's hit with an unusual spate of small claims, he said.
Nonetheless, he said the program is a way to drop the city's high insurance costs.
"The numbers clearly show this is a gamble worth taking," he said.
The program works like this:
The city will make its regular payments to the state, but the money is divided.
About 28 percent of the money will go right to BWC. The other 72 percent of the annual payment will go into escrow. That money will be used to pay claims under $1,000.
After a few years, the city will evaluate its position. The city could opt out of the program if claims fall enough to drop the rates substantially.
The city also could get back some of the money it put in escrow over that time. That would happen if claims are down and there is enough cash available to cover future claims.
rgsmith@vindy.com