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Ohio Legislature Plans to Act on Workers’ Comp Ruling

December 16, 2008
Related Topics: Workers' Compensation, Benefit Design and Communication, Policies and Procedures, Compensation, Latest News
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A group of local small-business owners who won a court victory in November that could have lowered the cost of their workers’ compensation insurance are likely to have their win tempered by the Ohio General Assembly.

State Rep. William Batchelder of Medina, chairman of the House insurance committee, told Crain’s Cleveland Business on Thursday, December 11, that he expects to pass during the current lame-duck session of the General Assembly legislation that would give the Ohio Bureau of Workers’ Compensation breathing room to make the changes directed by the Cuyahoga County Common Pleas Court decision.

“Legislatively, we may have to do something to provide more time,” Batchelder said. But he added that he basically supports the idea of changing the system to reduce the rate shock some employers have seen.

Judge Richard McMonagle on November 18 ordered the bureau to change the way it sets rates for worker injury insurance by July 1, 2009. His decision said the current rate-setting policy violates the intent of the Legislature.

The ruling in a class-action lawsuit was on a request for a preliminary injunction to force the Bureau of Workers’ Compensation to change immediately the way it sets rates and to recover past overcharges.
 
Regardless of what the Legislature does, the small-business owners expect to continue their class-action suit to trial. Attorney James DeRoche said small businesses statewide might be entitled to as much as $1.5 billion from the bureau because of past overpayments.

The issue pits two factions of small businesses against each other. One set of employers, which brought the lawsuit, saw their workers’ comp premiums rise—in some cases astronomically—after they made claims. It is this group that has brought the class-action suit.

The others have been able to keep premiums low by joining groups composed largely of employers with unblemished claims records. The groups, managed by organizations such as the National Federation of Independent Businesses and chambers of commerce, have been getting discounts from the Bureau of Workers’ Compensation of as much as 90 percent below base rates.

Because the bureau must balance what it brings in from premiums against what it pays out in claims, if it gives some employers a discount, it must offset that with higher rates to other employers. And it is usually employers that are kicked out of a group after having a claim that see the steepest increases in rates.

Aladdin Baking Co. of Cleveland saw its premiums rise to $55,000 a year from $12,000 after it was dropped from its group in 2006 because two of its 48 employees were injured on the job, according to executive vice president Connie Nahra.

McMonagle said in his ruling, “The discounts given to group employers are unlawful, and should not be relied upon as to what employers should actually be paying in premiums.”

Batchelder acknowledged that the system in place for nearly two decades is unfair and needs to be fixed as soon as possible.

“I share their pain,” he said of the plight of the business owners who filed the suit.

He said the Bureau of Workers’ Compensation has told him it may need 2½ years to bring rates back into balance. “I don’t think so,” he said.

Filed by Jay Miller of Crain’s Cleveland Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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