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Workers' comp premiums face changes

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Changes may be coming to the premiums paid by employers for workers' compensation insurance in Pennsylvania.

The impact is not yet clear, but “for some employers it certainly will mean lower costs,” said Ron Ruman, a spokesman for the Pennsylvania Insurance Department.

The changes originated with the Pennsylvania Compensation Rating Bureau, a Philadelphia-based independent nonprofit that helps set workers’ comp premiums in the commonwealth.

The bureau this fall made two workers’ compensation loss cost filings. Loss costs are one of many factors that determine premiums for workers’ comp insurance.

The filings reflect an error discovered in a previous filing and the impact of a new law designed to reverse a decision last year by the Pennsylvania Supreme Court. In what is known as the Protz decision, the court struck down the use of impairment rating evaluations, or IREs, which allowed employers to cap benefits to injured workers.

The two filings propose an effective overall 14.74 percent reduction from the current loss costs, which became effective April 1. The lower costs would become effective Jan. 1 but must be approved by the Insurance Department.

“To the extent these filings may impact the premiums businesses pay for workers compensation insurance, I am committing my department to give these filings our immediate attention so any effect is in place as soon as possible in Pennsylvania,” Insurance Commissioner Jessica Altman said in a statement.

Bill Taylor, president of the PRCB, said when the agency did its last loss cost review for April 1, it noticed a carrier had overstated its 2016 claims.

“It was a data reporting error… that threw all the numbers off and as a result of the significant amount that it was, a determination was made we should do an interim filing,” Taylor said.

He declined to name the carrier.

“The use of the incorrect data in the April 1, 2018 filing results in average overall loss costs being approximately 8.9 percent higher than they would have been had this data not been used,” according to the PRCB’s website.

Altman said the department began working with the PCRB as soon as it learned of the error so it could get a new filing and begin its review and approval process as soon as possible.

“Workers compensation insurance is vital to protect workers hurt on the job and make sure they get the medical care they need,” Altman said. “At the same time, this is a cost for businesses, and that cost must be calculated with accurate information.”

The filing contains a decrease in overall loss costs of 10.02 percent.

In the other interim filing, related to the Protz case, the PRCB is proposing a 5.24 percent reduction in overall loss costs. The reduction stems from Act 111, a law Gov. Wolf signed this year restoring the use of IREs.

Although the annual loss cost filing usually has an April 1 effective date, the agency proposed a Jan. 1 effective date with the new filings because of the size of the adjustment and the fact that a large number of policies begin on Jan. 1, Taylor said.

“The marketplace should be receiving this adjustment as soon as possible,” Taylor said.

Taylor said the PCRB will issue another set of adjusted loss cost filings sometime in December with an April 1, 2019 effective date.

Loss cost is one component of the final rate that a carrier uses and does not determine whether rates go up or down.

But since the baseline is being reduced, Taylor said, “it should result in the reduction in the marketplace, but again, each carrier will determine the final pricing.”

The insurance department said changes in the loss cost impact insurers and employers in different ways, “so it is not possible to say how this issue may have impacted the rates paid by employers since April 1, 2018. “

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