A group that represents about 12,500 small businesses in Pennsylvania said insurance companies should pay back millions of dollars to its members who were overcharged for workers' compensation premiums because of a data error.
Gordon Denlinger, state director of the National Federation of Independent Businesses, estimated the error cost Pennsylvania businesses “tens of millions.”
“It is the NFBI’s strong hope that a solution can be found which returns overpaid workers’ comp premiums to those small businesses,” Denlinger said.
“It is a matter of fairness and doing the right thing,” he added.
Dellinger’s comments came in response to two filings made this week by the Pennsylvania Compensation Rating Bureau, a Philadelphia-based independent nonprofit that helps sets workers’ comp premiums in the commonwealth.
The two loss cost filings will translate into new workers’ comp premiums starting Jan. 1. Loss costs are one of many factors that determine premiums.
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 new law restored them.
The two filings propose an effective overall reduction of 14.74 percent from current loss costs, which became effective April 1. The lower costs would become effective Jan. 1 but first must be approved by the Insurance Department.
The data error resulted in loss costs 8.9 percent higher than they would have been otherwise.
Efforts to reach the bureau were not successful. But an official there said earlier that the error stemmed from an insurance carried that had mistakenly overstated its claims for 2016.
Denlinger said because a change would not become effective until next year, businesses would continue to be overcharged.
“That drastic error wasn’t the fault of small businesses but led them to pay excessive premiums. They shouldn’t bear the significant financial burden it caused,” Denlinger said.
Ron Ruman, a spokesman for the Insurance Department, said he could not comment on NFIB’s request that its members be reimbursed for overcharges for workers’ comp rates.
Ruman said the department is reviewing the filings as quickly as it can with the goal to have new rates by Jan. 1 based on accurate information.
“Because of the complexity of compiling the rates and because each company could be impacted differently, it’s not possible to say how a compensation rate might have been impacted,” Ruman said.
“We are confident going forward the rates will be based on accurate information,” he said.
Alex Halper, director of government affairs at the Pennsylvania Chamber of Business & Industry, said the chamber is reviewing the new filings, which were submitted Tuesday.
“We’ll be working to help ensure that this error gets corrected and there is an equitable resolution,” Halper said.
“Clearly, this is a massive mistake,” he said.
The error hits the NFIB’s small-business members particularly hard, said Denlinger, a former state lawmaker from Lancaster County. “Because they don’t have the depth that the bigger companies can sustain with insurance premium impacts, there is more of a direct effect on the owners and their bottom lines,” he said.
“The NFIB hopes the Insurance Commission can right this wrong and demand businesses be made whole. If not we plan to investigate possible legal and legislative remedies,” Denlinger said.
Denlinger said the NFIB is encouraging its members to weigh in during a public comment period from Nov. 24 to Dec. 9. Interested parties are invited to submit written comments, suggestions or objections to Eric Zhou, Insurance Department, Office of Insurance Product Regulation, 1311 Strawberry Square, Harrisburg, PA 17120, firstname.lastname@example.org, within 15 days after a notice is published in the Pennsylvania Bulletin.