Injury raises workers' comp cost

Program flaws have led to inequities in the rate structure.
CLEVELAND (AP) -- Employers paying deeply discounted premiums for injured-worker insurance coverage often see those costs skyrocket after even one on-the-job injury is reported, The Plain Dealer reported Sunday.
An oil-drilling company in southern Ohio says it won't do business in Ohio anymore, a health care company in suburban Cleveland may fold, and a Cleveland baking company has had to lay off two workers -- all because of the spike in the premiums they pay for coverage under the Ohio Bureau of Workers' Compensation.
They face dramatic increases from recent employee injuries because they were kicked out of a state-sanctioned program that has allowed for-profit companies to use the bureau's premiums for their own benefit and that of their clients, The Plain Dealer reported.
It's created a disparity in which about two-thirds of the state's employers pay hundreds of millions of dollars more in premiums than they should to cover discounts for the other third, the newspaper said.
The for-profit companies, known as third-party administrators, have been allowed to sell deep premium discounts to employers that have few worker claims, usually charging employers a percentage of the amount the discounts save them.
Here's the problem
Flaws in the program have introduced substantial inequities into the system's rate structure, according to bureau documents cited by the newspaper.
The program's 99,000 participants, about 38 percent of all employers covered by the injured-worker system, pay less than their records indicate they should be paying in premiums because of the oversized discounts, The Plain Dealer said.
An outside bureau analyst estimates the underpayments at more than 870 million in the last three years alone. Other companies help to subsidize their rates.
The inequities make losing the discounts even tougher on small employers.
At Aladdin's Baking Co. in Cleveland, officials say their projected workers' comp costs rose by more than 70,000 per year after two workers claimed injuries from workplace falls. They said the injuries forced them out of the group rating.
"We don't make gold bars here," company official Connie Nahra said. "We bake bread."
In 2004, a pipe accident knocked an oil driller and two of his helpers down at Dean Decker & amp; Son Inc. in Vincent near Marietta, said company official Loretta Decker, and the machine "just kept hitting them until it could be turned off." Only one has returned to work, she said. The other two are on full disability.
"It was a one-accident thing," Decker said. "It was operator error."
However, the company lost its group coverage and its premiums have shot up. That means Ohio is off-limits, Decker said.
"If we had to come back to Ohio, we would shut our doors," she said. "We would completely shut our business down, because we could not afford to have workers' comp. Period."
Program's intent
The program was intended to help small Ohio companies compete with larger companies in the same line of work.
By banding together, the smaller companies could simulate the same risk and cost of future injuries as the big companies, which spread the risk over more employees.
The group-rating law took effect in 1991. Since then, records show, officials left the oversight of the new program almost entirely to the third-party administrators, which got bigger fees when they offered bigger discounts.
The artificially low risk could be used to generate unrealistically low premiums for group members and inappropriately high premiums for everyone else, the newspaper said.
Changing that premium distortion was among the top priorities of former workers comp administrator William Mabe. However, Mabe left the job after 15 months when Gov. Ted Strickland took office.
Many businesses would fight a change. Ohio Chamber of Commerce President Andrew Doehrel argues that group-rated employers have earned their big discounts by becoming more safety conscious and minimizing claims.