Kentucky regulators have approved the sixth straight reduction in workers’ compensation loss cost rates.
Kentucky Insurance Commissioner Sharon Clark has approved a statewide average 7.5 percent decrease in loss costs rates. The new rates mean that the state’s loss cost rates have dropped by 40 percent in the last six years.
“Even as we face economic challenges as a nation, this is a bit of good news for Kentucky employers and workers,” Clark said.
The new rates will take effect October 1.
The loss cost portion of the rates reflect the amount of dollars actually paid out by insurers for medical and wage loss benefits. Each insurer then sets its own rates based on the loss cost rate, adding its own administrative, profit and contingency, state assessments, and other expenses.
The industry’s National Council on Compensation Insurance reported that the change in Kentucky’s rates is due to a number of factors including a stabilization in claims frequency and some improvement in indemnity costs.
After years of falling claims frequency, there is increasing evidence that this trend is leveling off. In 2010, the state had 5,063 claims per 100,000 workers with 950 of those claims being eligible for both medical and wage loss benefits. The NCCI also reported that the state’s average cost per indemnity claim equaled $18,000, while its medical cost per claim reached $34,000.
The state’s premium volume has dropped dramatically as unemployment has continued. After reaching a volume of $689 million in 2007, it has dropped by roughly 20 percent to $475 million in 2010. In the construction field alone, the industry has shed more than 12 percent in the last few years, while the financial sector and coal mining businesses have dropped four percent of their workforces.
The change in loss cost rates applies fairly evenly across the board to the five major industry classifications. Manufacturing classes will decline by an average 6.6 percent; contracting by an average 7.6 percent; office and clerical classes by an average nine percent; goods and services by an average seven percent; and miscellaneous classes by 8.3 percent.
The only employer groups seeing an increase are the coal classifications that are set to increase by an average 1.8 for underground classes and 1.1 percent for surface operations.
“Although the coal classes saw a slight increase, the overall picture continues to be very positive,” Clark said.
The Kentucky Legislature this year did consider a set of reforms. Among other things, the bill would have created temporary partial disability benefits and increased the maximum weekly benefits for workers suffering permanent injuries. It would have also allowed for the settlement of future medical expenses and increased claimant attorney fees.
Topics Workers' Compensation Talent Kentucky
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