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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.

The deadline for enrolling in the Drug Free Safety Program is June 30, 2010. The program used to be called the Drug Free Workplace Program, but is has been renamed to alert you that the program has changed.
RED FLAG: If you enroll in the Drug Free Safety Program starting 7/1/2010, your company cannot pay salary continuation in any claim with a date of injury of January 1, 2011 or later.
The good news is that a company will be able to stay in the program longer than the current 5 years – at least until the BWC changes the program again. If your company was in drug-free and was eliminated after 5 years, it can apply again. There are 2 levels, Basic and Advanced.
Basic level: 4% discount for non-group experience rated employers. The components are similar to the current program, including written policy, testing, education, training and assistance, and the hourly education and training requirements have been reduced. A safety review, and supervisor accident analysis training and accident reporting have been added. If your company will receive a group experience rating discount, it will not get an additional discount for the Basic level.
Advanced level: 7% discount for non-group experience rated employers. Your company must meet all requirements of the Basic level plus 15% random drug testing, safety action plan and a second chance after first positive. A group experience rated employer can stack up to 3% on top of the group discount, as long as the total discount is equal to or less than the maximum discount (currently 49%).
Is a 3%, 4% or 7% discount worth the paperwork hassle and the inability to pay salary continuation?
Here’s an example. A company has yearly payroll of 3.5 million dollars. Without group rating, its EM would be 120. If it enrolled in the Advanced level, its EM would be 113 and its premiums would be $7,400 lower. With group experience rating, its EM will be 83. Enrolling in the Drug Free Safety Program would lower its EM to 80, and reduce its premiums by $3,000. Are those savings in one year worth giving up the ability to control its claims costs in lost time claims?

A company’s coverage lapses if it does not pay its premiums on time. Here are the consequences of lapsed coverage:

First, claims with dates of injury during a period of lapsed coverage will be quickly allowed by the BWC. All claim costs will be paid by the BWC. All claims costs for the life of the claim will be billed directly to the employer for reimbursement. Depending on the seriousness of the injury, you could be paying years and years of compensation and medical costs. Failure to pay the amounts billed will result in certification to the Ohio Attorney General, who will file liens against the business.

Second, the BWC will bill the employer for estimated premiums. If the employer does not report its correct payroll and then pay the premiums due, the amounts will be certified to the Ohio Attorney General. If the premiums plus interest and fees are not paid, a lien will be filed against the business.

Contractors and subcontractors may not be permitted to have liens filed against them as a condition of getting the work they bid on. Banks may charge higher interest rates or refuse to loan money or to companies with outstanding liens.

What can you do if you know you won’t be able to pay all the premiums due? Record your payroll on-line and sign up for a payment plan before the premiums are due. If the on-line options aren’t sufficient, work with the BWC to develop a payment plan and then follow it. If you get notification from the BWC that you owe money, contact the BWC immediately to find out how and when to pay. The BWC is much easier to work with, and less expensive, than the Attorney General.

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 starting 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, you may be able to get some of the fee refunded.

Here’s an update on medical reserves being included in medical-only claims.

Effective 7/1/2011, the BWC will implement a split-rating plan. Part of that plan will include medical reserves when calculating an employer’s experience modifier (EM).

However, there will be a certain dollar amount, the BWC example is $1,000, that will not be included in the employer’s experience. Your premiums will actually cover some of your losses!

Medical-only claims that go above the threshold will be subject to reserves.

The vast majority of med-only claims are less than $1,000, so this could be good for employers. There are some businesses that will always have minor injuries due to the nature of the work, even if employees wear their Kevlar gloves and eye protection. Accidents happen, and too often employers pay premiums and then are charged more when there are small claims. What do those premiums actually cover?

A new option for employers for the 2010 rating year is group retrospective rating. Here’s how it works: each employer in the group pays premiums at its individual premium rates. At the end of the each of the next three rating years (the rating year for private employers is July 1 to Jun 30), the BWC will analyze the claims experience of the group, and if certain benchmarks are met, the BWC will refund a percentage of the premium to each employer in the group.

If the group overall doesn’t perform well, all employers in that retro group will be assessed additional premium at the end of the rating year.

Do you want to gamble on the safety practices or luck of other employers?

If so, read the group retro TPA contract carefully. You may see that you must agree that the group TPA may take actions it deems best “for the group” when appealing or settling your claims. You may see that there is no guarantee that your company will be included in the group for any subsequent years. You may see that the yearly group TPA fee is large compared to the rebate you “may” realize at the end of the rating year, and you have to pay the fee upfront each year to be included in the group. What if you don’t like the way the group TPA handles your claims?

You will see that the discount number, which is in the biggest type, is possible savings at the end of three years. You may see that the net individual premium for the first year has the entire three year projected rebate subtracted from the first year projected premium.

Let’s say that the total rebate at the end of the 3rd year is projected to be $30,000, with $11,000 the first year, $13,000 the second year and $5,500 the third year. The TPA fee is $2,500 the first year. To sign up, you will pay the TPA about one-fourth of the possible first year rebate and then pay your individual premiums. By the third year, the projected yearly rebate has dropped to $5,000, so you will have already paid one-half of that to the TPA to continue to be included in the group, assuming that the fee hasn’t increased.

There was an error on the most recent payroll report sent out from the BWC. The minimum and maximum weekly payroll amounts the officers in a corporation and partners must report when paying premiums was incorrect.

The correct minimum payroll that must be reported by an officer or partner is $384 per week or $9,984 per six month period.

The maximum payroll to be reported by an officer or partner is $1,151 per week or $29,926 per six months.

You must report actual payroll for each officer, if it is between the maximum and minimum.

If the total premium for the company is less than $50, you must pay $50 to keep your policy active.

All premiums must be received by the BWC by February 26, 2010. The normal due date is February 28, but in 2010 that is a Sunday. Unlike the IRS, the BWC does not recognize the “mailbox rule”. The BWC recognizes the date it receives the payment, not the postmark on the envelope.

If you are concerned about meeting that date, pay your premiums on line. Go to ohiowbwc.com and click on “pay premium” under the orange Ohio Employers heading.