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The deadline to report payroll for the second six months of 2011 is Wednesday, February 29, 2012.  You also must pay all or half of the premiums due before the close of business that day.  Otherwise, your coverage may lapse.

If your coverage lapses, see the posts on June 22, 2011 and March 24, 2011 for the consequences of non-payment.

The easiest way to pay premiums is online at www.ohiobwc.com.  On the home page, click on the Quick link to Pay Premium and follow the instructions.  You can use one or more credit cards, or ACH transfer.

You must report all payroll for the second half of 2011, but you can pay 50% of the premium now, and the balance on or before May 31, 2012.

Once you pay online, the BWC will only send a postcard reminder when the next premiums are due.  It will not send a paper Payroll Report (DP-21) form.  You will have to go to the website to see your premium rates and calculate your premiums.

You can mail a check to the BWC in Columbus, but the payment must be RECEIVED by the BWC before the close of business on February 29, 2012.  There is no grace period, and no mailbox rule for the BWC.

To pay your premiums online and take full advantage of the information on the BWC website, you must create an e-account.  You will need to create an ID and a password.  There will not be any secret questions.

Normally, when I give instructions for navigating the BWC website, I walk through the steps as I write them.  But I already have an e-account and don’t want to create another, so I trust you to follow the prompts.  As I recall, however, the BWC did not tell me the protocol for my ID and password until after the first one was rejected, so be prepared to make changes.

Write down the ID and password and make sure someone else at your company can find them, in case you are unavailable in the future.  Paying premiums late is not in your company’s best interest!

FRAUD ALERT:  E-account access enables you to change the contact information, including phone numbers, email and mailing addresses, and will provide access to the medical records in the claims filed against your company.  Be sure that only responsible and trustworthy persons have access to them.

A northeast Ohio business owner stopped paying his premiums in 2006.  In the five years since then, his employees filed 25 claims for work-related injuries.  The owner now owes more than $600,000 in unpaid premiums, claims costs, penalties and interest.

The BWC worked with the owner but he continued to operate his business without paying its premiums.  The BWC paid for the medical services and compensation for the injured employees.  Those costs were billed to the business, and the owner didn’t pay them either.

The court found the owner guilty of two counts of failure to comply with workers’ comp law.  He was sentenced to 90 days in jail (suspended), one year of active probation and 80 hours of community work service.

Now the BWC is seeking an injunction to make him stop operating the business until he becomes fully compliant with Ohio workers’ comp law.  If the injunction is granted, his employees will be laid off and his customers will go elsewhere.  He won’t have any income from the business, either.  And Ohio employers who pay their premiums will continue to bear the costs of his employees’ claims.

If you know of any workers’ comp premium deadbeats, turn them in!

Make a call to the BWC fraud unit at 800-OHIOBWC or 800-644-6292, and choose option 4.  Or go to www.ohiobwc.com and click on Report Fraud at the bottom of the home page.  You can remain anonymous.

If a claim occurs during a period of time when the employer did not pay its premiums, or if a claim occurs and an employer does not have Ohio workers’ comp coverage, the claim is called a “non-compliance” claim, because the employer has not complied with the law that states all Ohio employers must have workers’ comp coverage for their employees.

The BWC pays the claim costs and then bills the employer for those costs.  If the employer does not pay the bills, the Ohio Attorney General places a lien on the business, which has to be paid before the business can be sold.  Some supplier agreements forbid a company to have liens placed against it.

When an employer has coverage, the initial five years of claim costs are spread out over four years of premiums, and any subsequent claim costs are paid out of the surplus fund. 

The costs for non-compliance claims are billed back to the employer for the life of the claim.  If the injury is severe and the claimant is awarded compensation, the employer pays those costs, too.

A press release from the Governor’s office dated April 28, 2011 was titled KASICH ANNOUNCES $65 MILLION WORKERS’ COMPENSATION RATE CUT.  “Governor John R Kasich today announced he is seeking an overall 4 percent cut in workers’ compensation base rates for a total cut in premiums of approximately $65 million annually.”  A close reading of it states that he is requesting an overall 4% reduction in workers’ comp base rates, effective 7/1/11.

 Attached to the press release is a BWC fact sheet that states rates are determined in consultation with Deloitte Consulting LLP.  “Factors in the decision to lower rates included a trend of decreasing claims frequency, as well as positive investment returns.”

Every year, the BWC recommends new base rates and all the other rates and fees (expected loss rates, administrative fees, etc.) to the Workers’ Compensation Board.  After the Board approves the new rates, the BWC publishes all the new rates and fees. 

As always, some base rates will increase and some will decrease.  And just because the base rates go down doesn’t mean premium rates will decrease.  See ELR – Dirty Little Secret posted 1/14/10.

Since all this is the normal procedure for establishing workers’ comp rates in Ohio, should an elected official take credit for “saving” Ohio employers $65 million?

RED ALERT!

Workers’ compensation premiums are due by February 28 every year. If those premiums are not paid by April 1, or a payment plan is not agreed upon between you and the BWC, your company will not be included in group rating starting July 1.

(If premiums are not paid on time, the coverage for the employer will lapse. See the post titled Lapsed Coverage: Who Cares? for an explanation of the consequences.)

This is the BWC’s carrot-and-stick technique to get employers to pay their premiums on time: group rating discounts are the carrot, and elimination from group rating is the stick.

True story: A company owner did not pay the premiums due by the end of February. He got an invoice dated March 15 from the BWC which gave him 30 days to pay. He paid the premiums 20 days later. He was unpleasantly surprised when he was eliminated from group rating on July 1 because he hadn’t paid by April 1. The invoice did not mention that consequence.

Paying premiums later than the August 31 due date does not impact group rating participation, as long as your coverage has not lapsed for more than 40 days in the 12 months prior to the February 28 payment deadline.

If you have already paid a fee to join a group but the BWC kicks you out of group rating due to late premium payment, you may be able to get some of the fee refunded.

Bonnie R Fraser

Effective 9/1/06, an Ohio company is required to tell the BWC that it has acquired all or part of the assets of another company. The BWC will transfer all or part of the sold company’s experience (claims costs & payroll history) to the new owner.

Why? The BWC needs to accurately calculate the risk of injury to the workers. If you have hired all or most of the employees, bought the equipment those employees have worked with and the customers they may call on, you should also acquire the prior workers’ compensation history (the experience).

This can be good for the purchaser: if the acquisition is merged into a pre-existing company, the combined experience modifier (EM) could be lower and therefore the premium rates should be lower. The combined company may also be eligible for better group rating discounts.

Here’s an example: An instrument repair company purchased the equipment and customer list, and hired most of the employees. By itself, the repair company had an EM of 79. By adding the acquired company’s payroll history to its experience, the combined company has an EM of 76.

The general rule is you want to report as much payroll as possible so the claims cost to payroll ratio is as large as possible. In the example, there were no claims in the manufacturing company’s experience, so adding its payroll improved the purchasing company’s EM.

In last weeks’ post, I criticized the BWC for not warning us that it would add reserves to medical-only clams. What I did not observe was that the medical reserves were applied to claims with dates of injury in 2010, which is the green year. (It’s called the green year because it’s not ripe yet.)

Green year claims are not included in premium rate calculations, so those reserves WILL NOT increase the premium rates that take effect 7/1/11.

I stand behind my criticism of MIRA II reserves.

The BWC did not ask me to make this correction.

I must have missed the BWC press release announcing it will increase employers’ premium rates by including reserves on medical-only claims.

Yes, that was sarcasm.

I know I’m not the only one who has noticed that the BWC only announces good news. For example, the BWC bragged that base rates have decreased overall because of reducing the excessive group rating discounts. But the BWC does not announce when it lowers the expected loss rates which result in more employers being eligible for smaller group rating discounts or not being welcome in group rating at all. (See the January 2010 post Dirty Little Secret.)

There was no notice to the TPA or employer community that the end of the year claims costs would include reserves in medical-only claims. Yes, in the past the BWC has said that it might add reserves in med-onlys, but wouldn’t it have been courteous to warn employers that their premium rates would go up?

And lest anyone think that the reserves calculated by MIRA II are appropriate, consider this claim for hearing loss. Actual claims costs were $6,000 for hearing aids and $6,000 compensation for permanent partial disability (PPD). MIRA II assessed reserves of $8,600 for medical and $9,700 for compensation. Really? MIRA II thinks that the claimant will be absent from work due to hearing loss, or get an increase in PPD bigger than the initial award? And that the claimant will get medical treatment or new hearing aids that are more expensive than his initial ones?

Does the BWC really want the new Governor and Ohio employers to be so fed up that they will choose to have the system go private?

With the BWC touting “safety” in every program it offers, it’s easy to be confused about which program provides which benefit is to employers.
Safety Council Rebate Program: Employers get a rebate of their premiums when they join the local Safety Council, attend monthly meetings and provide injury statistics to the Council every six months. Rebates are good.
Drug Free Safety Program: This program replaces the Drug Free Workplace Program. Employers get a 3%, 4% or 7% discount stacked on top of their experience modifier (EM). There is paperwork that costs time & money to prepare and implement, although “DFSP employers may apply for reimbursement for specified start-up costs for the first two years of DFSP program operation.” Go to http://www.ohiobwc.com/employer/programs/dfspinfo/dfspdescription.asp for more information. The real downside is that employers will be prohibited from paying salary continuation for claims with dates of injury 1/1/2011 and later. See previous blog post RED FLAG Drug Free Safety Program for examples of how much the premiums are reduced by the discounts.
Group experience rating: This is still the best way to reduce premiums, but each employer has to meet various criteria and deadlines. The BWC now requires 2 hours of safety training on-line or in person for companies participating in group rating.
Group retrospective rating: The 7/1/09-6/30/10 policy year is the first for this program. Employers pay their individual premiums. At the end of 12, 24 and 36 months, the group experience is analyzed and employers either get a rebate because the group performed well, or they get a bill for more premiums due to poor group performance (too many claims). There does not appear to be a safety training requirement for employers in this program, but employers can participate in the Safety Council Rebate Program.