Steep drop in state workers’ comp rates to save $35M

  • Crew with Davis Constructors and Engineers Inc. install a lid for a storm drain during a project at Covenant House in Anchorage. Fewer claims and cost reductions have led to another year of rate decreases for workers’ compensation insur- ance. (Photo/Courtesy/Davis Constructors and Engineers Inc.)

Come 2019, Alaska workers’ compensation insurance rates are expected to fall the most in 40 years, according to state managers.

Gov. Bill Walker’s office announced Oct. 4 that workers’ compensation insurance premiums should decrease an average of 17.5 percent statewide starting in January and worker’s compensation voluntary loss costs similarly could drop 14.8 percent.

The proposed rate decreases for 2019 follow a 5.4 percent average rate decrease this year from 2017 and workers’ compensation premiums are down roughly 25 percent since 2015, according to the governor’s office.

Workers’ Compensation Director Marie Marx said the reductions should save employers an estimated $35 million or so statewide.

State officials are attributing the favorable trend to fewer claims and medical cost reductions.

“These proposed rate reductions are welcome news for Alaska businesses — lower workers’ compensation costs reduce the burden on the small businesses that strengthen our economy,” Walker said in a formal statement. “Thank you to the Alaska state Legislature and the Department of Labor and Workforce Development for their work on payment reform, contributing to significant rate reductions for 2019.”

The rates are proposed by the National Council on Compensation Insurance and subsequently reviewed and approved by the state Division of Insurance.

Marx said employers of oil and gas pipeline workers would see some of the most significant reductions at more than 26 percent versus current rates, while rates could drop for clerical workers — typically with fewer on-the-job dangers — in the 9 percent range if the proposals are approved. Automobile technicians should see rate reductions of about 13 percent, for example, she added.

Following approval by the Legislature in 2014, the Alaska Workers’ Compensation Board approved new practices and fee structures for paying medical providers for procedures paid for through workers’ compensation insurance in October 2015.

The fee structure changes put provider reimbursement rates more in-line with general group health insurance rates, according to Marx. It replaced a system of paying medical service providers at the 90th percentile of “usual and customary” fees in a given region.

Alaska was the 33rd state to adopt the new payment system, Marx said at the time. At the time, Alaska also had the highest workers’ compensation rates in the nation, state officials said.

“Alaska has some of the highest medical, if not the highest, medical costs in the country and workers’ compensation was right at the top and we’re bringing it down with the reform over a number of years,” Marx said in an interview.

Alaska Chamber CEO Curtis Thayer noted that the reimbursement rate revisions were based on Medicaid guidelines. He said that it’s correct rates are going down — a very good thing — but stressed the credit should go to employers and their workers for not needing to file as many claims as in years past.

“It’s just the fact that our employers are providing a safer working environment,” Thayer said.

Reforming the state’s workers’ compensation program has been a major policy initiative of the Alaska Chamber for several years.

Last session the Legislature also took on other aspects of the workers’ compensation system when it passed the governor’s House Bill 79, which Walker signed in August. Among other things, the legislation clarified who is an independent contractor and who needs to be covered by workers’ compensation insurance and eased the process for obtaining workers’ compensation exemptions, reporting data and making payments.

Thayer said HB 79 “brought Alaska into the 21st century” but did nothing to address premiums.

He said the Chamber will continue advocating for caps on legal fees for workers’ compensation cases and other changes, such as treatment guidelines.

“There’s a lot of work that’s been done but a lot of work that still needs to be done,” Thayer said.

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Elwood Brehmer can be reached at [email protected].

Updated: 
10/10/2018 - 11:22am

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