JEFFERSON CITY, Mo. — Citing a rise in claims of over $500,000 and some changes to the Second Injury Fund, the National Council on Compensation Insurance is recommending workers’ compensation premiums should rise about 15 percent total in the coming year, according to the NCCI’s latest report to the Missouri Insurance Department.
According to the report, a large increase in the size and number of claims exceeding $500,000 and $3 million is at least partially to blame.
“We’re still exploring the causes behind some of these large losses we’re seeing,” Ray McCarty, President and CEO of Associated Industries of Missouri, says. “But right now, we want employers to be aware that some of these changes, both in the sizes of some payouts and in some of the changes made in the Second Injury Fund, are going to increase these premiums.”
When the Second Injury Fund (SIF) legislation — Senate Bill 1 — sought to repair the fund, which was insolvent at the time, it moved the financial liability of some claims from SIF to the more standard workers’ compensation funds. Many of these claims now handled by workers’ compensation instead of the SIF are claims that should have always been covered by workers’ compensation, SB 1 House handler Rep. Todd Richardson, R-Poplar Bluff, says.
“Some of this increase is simply the response to shifting some of the financial obligations from one fund to another,” Richardson says. “And we took a model similar to what other states have covered under workers’ compensation versus second injury, so I think we’ll see some of this new cost taper off as we begin to adapt to this change.”
Because the SIF was insolvent for some time, payouts could not be settled and some claims were taken to court. Court-ordered payouts often exceed settled payouts, and court and legal fees contribute to the rising cost of some SIF claims.
The NCCI report, however, credits much of the increase in premiums to higher bigger claims and higher costs across the board, and McCarty says only about 4 percent of the increase in workers’ comp premiums could be directly linked to SB 1. The bill also called for a 3 percent increase in the workers’ compensation surcharge to the SIF to help dig the fledgling program out of the proverbial hole.
The report also notes that medical costs per claim have increased “considerably” in the past few years and “does not show signs of abetment.”
While some of the increases are expected to taper off once the initial impact of SB 1 is absorbed, McCarty and Richardson, along with the NCCI and the Missouri Insurance Coalition, say they would explore the causes of the sudden increase in high-dollar claims, something largely driving up costs while coupled with the expanding cost of medical care.
“The NCCI is going to make the recommendation that we increase premiums and I’m sure the recommendation will be accepted,” McCarty says. “The question now becomes, what is driving up these costs and are they things that can be reigned in? Because the more expensive it is to operate a business, the less successful that business can be.”