Recently Tom Schaffer posted an article in this space about the Kasich administrations plan to privatize the Ohio workers compensation system. Those who advocate privatization typically argue that Ohio’s workers compensation costs are too high, placing Ohio businesses at a competitive disadvantage with other states, and that the private insurance industry would be more efficient and more-cost-effective than the current state-fund system. While there has seemed to be some retreat from the call for privatization, the administration has continued to assert that workers compensation reform, including benefit reductions, is needed to fix the system and bolster the states economic outlook. Currently available information, however, shows that that without any reform legislation or radical changes in its workers compensation system, Ohio is already well on the way to achieving the improved competitive position which the administration seeks.
I would not disagree with those who point out that Ohio’s workers compensation costs were, a few years ago, higher than those in most states. According the National Council on Compensation Insurance (NCCI), as of January 1, 2008, Ohios average base premium rate was $3.32 per $100 of payroll. Only two states were higher on this measure of cost. If that were still the case, the argument for fundamental changes in the system might be more understandable. It is clear, though that Ohio no longer ranks among the most expensive states for workers compensation.
Beginning in 2007, BWC embarked on a series of strategies the reduce premium costs, and these strategies have been working. NCCI reported that by January 1, 2010, Ohios average base premium had dropped to $2.27 per $100 of payroll. The Bureau of Workers Compensation reported in its most recent annual report that the average base premium rate has continued to decline, and as of July 1, 2011, is less than $2.00 per $100 of payroll. Ohios average base premium rate, which was the third highest in the nation less than four years ago, is now near the national median. The Bureau reports that average premiums for private employers have dropped by 35% since 2007, and are currently at their lowest level in the past twenty years.
Ohio’s state fund system also offers Ohio employers advantages over private insurance systems in terms of the cost-effectiveness for their premium dollars. In Ohio, 96 cents out of every premium dollar is spent on benefits for injured workers. This is significantly better than the national overage of 69 cents per premium dollar. Stated another way, across the nation an average of 31% of employer premiums go to pay expenses unrelated to the care of inured workers, while in Ohio only 4% of premiums are spent on such expenses.
As the figures above make clear, Ohio currently has a workers compensation system which operates with a much lower overhead than is common under the private insurance model. The Bureau has also made significant progress in a short period of time in bringing premium costs for most employers in line with the national average, and there is reason to believe that further progress can be made in that area without reducing benefits and services to the working men and women of the state. The workers compensation system is designed and intended to be beneficial to both workers and employers. The history of workers compensation in Ohio provides abundant evidence that a win-win solution is achievable. Reform proposals which seek to help employers by hurting workers are neither fair nor necessary.