In today's competitive world, workers' compensation costs and awards are becoming more important for manufacturers. Here's how a state official in Arizona, the top finisher in the 2008 IndustryWeek Workers' Compensation State Ranking, explained it: "In a globally competitive environment, low operating costs are a key site selection criterion. Arizona's low workers' compensation costs are just one primary example of the structural incentives the state offers to business," said Jan Lesher, who is director of the Arizona Department of Commerce.
Lesher continued: "In Arizona, we enjoy a dynamic business climate and overall low costs that not many other regions can match. The State's unemployment insurance and workers' compensation rates are among the lowest in the nation."
Comments like the above were reason enough for IndustryWeek to examine workers' compensation costs, benefits and awards in order to determine whether they varied substantially from state to state.
The data we uncovered proves that the answer is a resounding Yes.
| See the Data |
This year's top-ranked state in the 2008 IndustryWeek Workers' Compensation State Ranking is Arizona, followed by Arkansas, Indiana, Virginia, North Dakota, and South Dakota. Among the top 10 finishers, the Midwest took top honors with five states.
Seven western states, meanwhile, finished in the top 20, while the southern region had four states. Only one New England state, Massachusetts, finished in the top 20.
The Major Categories
Data for the 2008 IndustryWeek Workers' Compensation State Ranking came from a variety of sources. Here are the data elements, along with the source for each:
- WC premium per worker, Insurance Information Institute
- WC premium ranking of all states, Oregon Dept. of Consumer & Business Services
- WC benefit payment per covered worker, CQ Press, a division of Congressional Quarterly Inc.
- WC average benefit payment per capita-total state workforce, CQ Press, a division of Congressional Quarterly Inc.
- Ranking of states on comparative workers' compensation costs, Actuarial & Technical Solutions, an actuarial consulting firm
WC premiums and comparative costs were given greater value in our weightings than the WC benefit payment per covered worker and WC benefit payment per capita. Cost-related factors were given the greatest weight in our rankings, given the fact that the study looks at WC costs and benefits from the employer's perspective.
IndustryWeek found wide variance in WC costs and benefits across the country; those findings mirror what experts see out in the field. "WC rates, benefits and awards vary by state," said Deborah Talbot, who is president and CEO of Health Resources Corporation (Woburn, Mass.). Talbot's company does occupational health consulting for 1,000 manufacturers, businesses and other organizations.
Asked what she sees for 2009, Talbot explained: "The trend we are seeing overall, is employers are looking much more closely at every possible way to save money, and with the economic slowdown, it has made employers more conscientious about where they can create some savings. So I do think that WC will continue to be an area that gets a lot of attention. More and more businesses are developing more of a safety culture and looking to reduce not just work-related lost-time injuries, but work-related first aid injuries. It's higher up on their agenda list to pay attention to enforcing good safety practices."
Yes, key WC numbers vary across the 50 states. "Sometimes a state provides high benefits and the costs are high, or the costs are low and the benefits are low, or the costs are high-it's all over the place," said Jon Coppelman, who is vice president of Lynch Ryan & Associates, Inc., and a writer for the Workers Comp Insider blog.
"So I think what your readers and executives need to know is, if you are in a high-cost WC state, then there's a little more money on the table in terms of what the cost of injury will be coming back to the employer in the form of premiums, or if they are self-insured, then obviously, they are spending their own money from dollar one," explained Coppelman. "Even if you are in the lowest-cost state, you still have to pay attention to the details and prevent every injury you can."
Copplelman's firm, Lynch, Ryan, is a management consulting operation that specializes in WC cost controls. The company is based in Wellesley, Mass.
Manufacturers need to take steps to rein in WC costs, no matter what state they are in. Worthington Industries, a Columbus, Ohio-based steel processor with 8,000 employees, relies on its Safe Works safety management program to help reduce its WC claims by 63 percent.
Safe Works is a centrally governed, locally managed initiative that involves each employee in the safety process. The program provides standardization and sharing of company-wide best practices, while allowing facilities to address localized needs and concerns.
Employee involvement is crucial, David Leff told IndustryWeek. Leff, who is Worthington's corporate manager of environmental, health and safety, explained: "By making sure employees have a voice through a safety committee in each facility, the program has a more uniform approach though all plants and allows the employees to have more of a voice to share their concerns while also gaining knowledge on how injuries affect the facility on the operational and financial side."
In 2008, a fair number of WC systems and players remain healthy. "There have been relatively few states that have had their costs go up over the last few years, and there are a couple of reasons for that-the primary one is claims frequency has been dropping fairly significantly for a long period of time. And that has allowed state systems to either remain in balance or enjoy reductions in premiums, even though their costs continue to go up," said Barry Llewellyn, who is senior divisional executive, regulatory services, at the National Council on Compensation Insurance, Inc. (NCCI, Boca Raton, Fla.).The NCCI manages the largest database of WC insurance information in the U.S.
Added Greg Krohm, who is executive director of the International Association of Industrial Accident Boards and Commissions (IAIABC, Madison, Wis.), "WC insurers are enjoying very profitable times, so underwriting standards should remain relaxed and rates charged relatively stable." The International Association of Industrial Accident Boards and Commissions (IAIABC) is an association of workers' compensation administrators.
One strong-finishing state in the 2008 IndustryWeek Workers' Compensation State Ranking is North Dakota, which came in at the number five spot. "We knew we were in good shape on the premiums side-we've always been very low on the premiums side, but we are happy to see how strong we showed up on the benefits side of the IndustryWeek ranking," said Bruce Furness, who is interim executive director-CEO for Workforce Safety & Insurance (WSI), which is the sole WC system in the state.
Things are looking up, added Furness: "Our organization just returned a 62 percent dividend back to the policy owners and premium payers based on our investment and fund balance-so that was also quite encouraging."
Another leading state in the 2008 IndustryWeek Workers' Compensation State Ranking is Virginia, which finished number 4. "We continuously strive to improve the efficiency and effectiveness of our agency and its programs," said Jim Szablewicz, who is Chief Deputy Commissioner for the Virginia Workers' Compensation Commission.
"For example," said Szablewicz, "efforts currently are underway to modernize our computer system and business processes to allow for the electronic filing of many items that now must be completed on paper forms and ultimately to move to an entirely paperless system."
What are some reasons for South Dakota's success in workers' compensation-yet another top-finishing state? "In South Dakota, our workers' compensation system does well because businesses are especially committed to workplace safety," said Pam Roberts, South Dakota Department of Labor Secretary. "Our workers have a great work ethic and try to get back to work as quickly as possible. In addition, the government is very receptive of creative solutions to continuously improve the system."
Whether in a high- or low-cost WC state, manufacturers need to make themselves look like a winning operation to WC insurance carriers, said Scott Simmonds, CPCU, ARM, CMC, who is an insurance and risk mitigation consultant and blogger at the following blog: http://www.InsuranceBuzzer.com.
"When you are bidding your insurance coverage to try to get the best combination of coverage and price, your operation should be attractive to the insurance companies; safety equipment, loss control, and claims management are all part of that effort," said Simmonds.
Michael Keating is research editor for EHS Today (formerly Occupational Hazards) and other Penton national magazines. He has compiled a health care costs ranking of the states at the Research section of his www.mikekeat.net site.
