While Rhode Island’s workers’ compensation system may be vastly improved from the decaying system of a decade ago, a report by New York-based Actuarial Solutions suggests it still has a way to go. But those close to the Rhode Island system point to a dramatic decrease in costs and an increase in rebates – countering that indeed, the system is moving in the right direction.
The Actuarial Solutions’ report documents significant improvements in the Rhode Island system – noting the average workers’ compensation cost decreased approximately 16 percent from 1998 to 1999. That decrease is better than the national average, of 9 percent.
But 10 other states experienced even greater decreases over the same period. As a result, Rhode Island’s cost ranking – third highest among 44 states ranked – remains unchanged for the third consecutive year.
“Rhode Island has experienced a pretty big decrease in costs, and those costs are the lowest they have been since we started doing this study in 1992,” said Amy Hicks, a consulting actuary with Actuarial Solutions. “They are going in the right direction. The problem is that they had so far to go. But they’re getting closer to the pack.”
Besides cost rankings, Actuarial Solutions’ “Workers Compensation State Rankings” report provides rankings of workers’ compensation benefits for all 50 states. Rhode Island’s benefits are the sixth most generous, contributing to its high cost.
For the second year in a row, Utah ranks as the lowest cost state, according to the report. Arizona — ranked eighth last year — is now the second lowest cost state.
Both Virginia and Indiana have been among the five lowest cost states each year from 1992 through 1999. Louisiana, the highest cost state this year, has been among the five highest cost states for six years. Florida, Rhode Island and Oklahoma have been among the five highest cost states previously.
For the manufacturing industry, the national average comparative cost of workers’ compensation insurance as of Jan. 1, 1999 is $3.50 per $100 of payroll, a decrease of approximately 9 percent when compared to the Jan. 1, 1998 national average cost.
Rhode Island’s workers’ compensation costs, according to Jeff Johnson, vice president of underwriting at The Beacon Mutual Insurance Company, have declined steadily in recent years. And while different kinds of manufacturers pay different rates – depending mostly on the level of hazard on the job – the cost declines have occurred across-the-board, Johnson said.
“Our customers in 1993 were paying 4 percent of their payroll toward workers’ compensation,” he said. “In 1998, they were paying 1.8 percent of their payroll toward workers’ compensation. That is a dramatic drop in expenses.”
Efforts to revamp Rhode Island’s workers’ compensation system in recent years – on the part of both labor and business forces – have been widely applauded.
Those efforts began in the mid-1980s, but more often than not, failed to take hold. In 1985, for example, a hearing officer system was established – only to add further chaos to a chaotic system.
Throughout the rest of the 1980s, workers’ compensation rates in Rhode Island climbed – and climbed.
Finally, in 1990 a series of significant reforms began to take shape. Radical changes to the system were adopted between 1990 and 1992.
The entire system was overhauled. The Beacon Mutual Insurance Company was established to handle much of the workers’ compensation market. Rates dropped significantly. Insurers that had left the Rhode island market because of the high cost of workers’ compensation–like travelers and Liberty Mutual–returned.
Carl I. Hayes, president of C.I. Hayes, a Cranston manufacturer and a member of The Beacon Mutual Insurance Company’s Board of Directors, said Rhode Island is basically insuring the same amount of payroll as years past, but paying about half the costs. Today, he said the system is marked by discounts and rebates being returned to policyholders.
“It is incredibly better than it was,” Hayes said. “The issue has been diligence. When you pay attention to something”
Workers’ compensation grants
In other workers’ compensation developments, the Rhode Island Department of Labor and Training has received a two-year, $267,500 grant from the Workers’ Compensation Health Initiative, a national program of the Robert Wood Johnson Foundation in Princeton, New Jersey.
Grant monies will be used to support the development of a model “Technical Resource Center” that will obtain and provide information about medical care and the delivery of health services for employees who suffer from a work injury or illness. The Robert Wood Johnson Foundation is the nation’s largest philanthropy devoted exclusively to health and health care.
In a prepared statement, Gov. Lincoln Almond said he was delighted that Rhode Island has been chosen as “the state to break new ground.”
Collaboration with the Rhode Island Workers’ Compensation Advisory Council, which is composed of representatives from major stakeholders in the workers’ compensation system, will be an important factor in the success of the system.”
E. Jean Severance, an associate director at the Department of Labor and Training, echoed the governor’s comments and credited all of those who have worked to improve Rhode Island’s workers’ compensation system.
This is a natural progression for workers’ compensation in Rhode Island,” she said. “Through the dedication of many individuals, tremendous gains have been made in driving the cost down while maintaining integrity within the system.”
