Gain or Loss: Business Insurance Broker on Workers Comp Rate Drop

In a bid to attract more investors to Michigan, the state began pulling its workers compensation rates down in 2011. According to the Workers’ Compensation Agency (WCA), as of 2014, the rates have dropped by 22.7 percent over a three-year period, and are still expected to drop further next year, bringing them to 27.7 percent over a four-year period.

WCA data also shows that the drop in workers comp rates took off in 2012, when it dropped by 7.4 percent. By this time, House Bill 5002, which WCA director Kevin Elsenheimer credited with the enormous drop, had already taken effect. Under the law, a worker can receive 80 percent of his net weekly salary if his injury caused total disability and wage loss.

This was one of Gov. Rick Snyder’s many projects in reforming Michigan’s antiquated workers comp system. Before the passage of the Workers’ Disability Compensation Act in 1987, workers comp was limited to loss of enjoyment of life, pain and suffering, and other damages awarded by the jury. After 1987, the criteria were changed to wage loss, treatment, and rehabilitation.

However, critics have little trust in Snyder’s workers comp reforms, with the most vocal being Rep. Jim Townsend (D-Royal Oak). He believes that the drop in workers comp rates comes at the expense of the workers’ well-being. A blue-collar worker recovering from his injuries, other critics say, may be relegated to a desk job at a different company—an assignment not in line with his job skill.

Perhaps the middle ground can be found at what makes a place investor-friendly. Is workers comp a major factor in attracting businesses? Won’t a drop in workers comp rates mean less premiums for insurance carriers to collect, leading to reduced limits?

Incentives, as tempting as they are, can be detrimental to a business locality by waging a war among competitors for investments. According to Cynthia L. Rogers, an associate professor of economics at the University of Oklahoma, an escalation of this incentive war doesn’t usually gain anything economically. States, therefore, have to be careful when using incentives as bait.

Michigan businesses that employ at least three part-time workers, or one full-time employee, are required to provide workers comp. The solution would be to secure this from a reputable business insurance agent like Allied Insurance Managers, Inc.

The state won’t pay for workers comp, which is why business owners must be responsible in managing their respective programs. Flexible plans from a reputable business insurance broker enable business owners to make informed decisions regarding the extent of coverage necessary.

(Source: Workers’ compensation rates drop again in Michigan, Crain’s Detroit Business, October 14, 2014)