The skyrocketing costs of worker's compensation
by Mark Davidson
In many states the cost of worker's compensation is increasing at an alarming rate, becoming one of the biggest expenses a brewery or brewpub will now face. You may be asking yourself: What is going on in the insurance market place and is there anything I can do about it?
First, a bit of history
Worker's compensation laws were adopted by all states between 1911 and 1940, designed to provide medical care to an injured employee and death benefits to families of those who died, as well as to protect employers from lawsuits from employees. Currently, worker's compensation is mandatory in all states, except Texas and New Jersey.
By the mid 1980's, worker's compensation insurance carriers in many states found themselves in big trouble. Medical expenses were increasing more than 10% per year, and the premiums they took in were insufficient. As a whole, the workers compensation line of insurance lost money every year from 1984 to 1992. The states' legislatures stepped in and over half of all the states passed reform laws, ranging from reducing or restricting payments to an injured employee to opening the state to a competitive bid process.
For some states this has been exactly what the doctor ordered. That is until recently. In many states, rates are continually increasing. States like Hawaii, Florida and California are seeing base rate increases of 15, 20% and higher every year.What is going on now?! The answer lies somewhere in the bottom of a murky pint glass: rising claim costs, deregulated pricing, the presence of terrorism, and over legislation.
All of today's worker's compensation insurance carriers are struggling. According to the National Council on Compensation Insurance Inc., insurers paid out an estimated $1.27 in claims in 2001 for every dollar they collected from employers. Some states have such a competitive marketplace that many insurance companies are pulling out of a state or folding altogether. In California, Superior National, the state's largest private workers compensation insurer was found to be insolvent and was liquidated, and earlier this month State Fund, insuring close to 50% of all business, has been ordered by the Department of Insurance to follow a strict guideline and effectively try to shed billions of dollars of premium in order to stay afloat.
Exacerbating the problems in the industry are the effects of 9/11. According to the National Council on Compensation Insurance, workers compensation insurers can expect to pay up to $2 billion for September 11 claims. President Bush signed into law the Terrorism Risk Insurance Act of 2002 hoping to protect insurance companies from further catastrophic losses. However, the carriers will still look to recoup some of the losses.
Great History lesson, but what can you do to control YOUR costs?
Only a few people understand that when they sit down to a Lagunitas IPA or a Kona Longboard Lager or even a Tampa Bay's Iron Rat Stout, there is more in your glass than barley hops and water!!