The Michigan Department of Licensing & Regulatory Affairs (LARA) today announced the pure premium advisory rate for workers’ compensation insurance will drop by an average of 6.5 percent in 2015 and will decrease 6.3 percent annually from 2011-15. The pure premium rate will decrease 27.7 percent since 2011, saving Michigan employers an estimated $277 million.[1]
The most recent comparison data shows that Michigan’s cumulative pure premium decrease of 22.7 percent from 2011-14 is best in the Midwest and second best in the nation. While Michigan’s rate plummeted, the national average went up 10.8 percent.[2]
“Michigan’s considerable reduction in workers’ comp costs is great news for our employers, employees, job seekers and any company looking to move here,” said Gov. Rick Snyder. “These significant savings are a real asset in terms of growing and retaining jobs, and give us an advantage over competitor states in attracting new businesses.”
The pure premium is a key factor in determining a job provider’s overall expenses for workers’ compensation and is the portion of an employer’s insurance premium that pays for the anticipated claims costs for work-related injuries. These rates are developed by comparing the losses (or claims) for a particular industry to the payroll for that industry.
“The state’s big drop in workers’ compensation rates gives our businesses more resources to start and expand their operations,” said Chuck Hadden, president and CEO of the Michigan Manufacturers Association. “Our companies invest this additional money into new equipment and facilities, and put it directly into the pockets of their employees. My counterparts around the country are envious of the work that Governor Snyder and the Workers’ Compensation Agency have done to reduce costs for our job providers.”
Greg Baise, president and CEO of the Illinois Manufacturers Association, recently told Watchdog.org that high workers’ compensation rates are one reason Illinois employers are taking their businesses and the jobs they provide to other states. “Indiana and Michigan have more business-friendly worker’s comp policies and the employment situations there reflect that.”[3]
In late 2011, Gov. Snyder signed sweeping legislation reforming the state’s workers’ compensation system. These improvements included defining disability and post-injury earning capacity, and have played an underlying role in the reduction of costs for our employers. The changes stabilized the 100-year-old system, ensuring the promise of compensation for injured Michigan employees.
“The 2011 reforms have served as an important foundation in our agency’s cost containment efforts for businesses and have allowed us to continue to protect Michiganders injured on the job,” said Michigan Workers’ Compensation (WCA) Director Kevin Elsenheimer. “The WCA is focused on continuing to improve our regulatory processes to protect Michigan workers and lower costs for employers.”
The WCA’s emphasis on reducing costs for job providers has included the administering of a well-developed fee schedule which controls medical costs for work-related injuries. A recent study shows Michigan’s cost per claim (CPC) and medical CPC are the lowest in the region and among the lowest in the country.[4]
The effective cost containment is in conjunction with the Reinventing Performance in Michigan (RPM) initiative. Through a thorough review of all regulatory processes and extensive upgrades in technology, the WCA is focused on reducing processing times for business customers.
· Reviewed all forms, bulletins, guides and customer-facing material to ensure 100% utility.
· Started eliminating the 30-year-old COBOL system allowing businesses to receive real time data.
· Replaced obsolete microfilm system with digital imaging.
· Developed electronic mailbox and eliminated the requirement to mail or fax documents.
The independent Data Collection Agency Board develops and approves the annual rate by analyzing historical loss information combined with regulatory reforms.
Michigan’s injured workers and their employers are governed by the Workers’ Disability Compensation Act. The Act was first adopted in 1912 and provides compensation to workers who suffer an injury on the job and protects employers’ liability. The mission of the WCA is to efficiently administer the Act and provide prompt, courteous and impartial service to all customers.
[1] Compensation Advisory Organization of Michigan, Analysis of Premiums, 2014
[2] National Council on Compensation Insurance, Annual Statistical Bulletin, 2014
[3] Watchdog.org, August 4, 2014
[4] Workers Compensation Research Institute, 2014
Source: LARA
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