Ohio Workers Compensation Overview

Ohio Workers’ Compensation Overview Presented by: Occupational Risk Management

History In the 19th century, the Industrial Revolution brought about major changes in manufacturing, transportation, and agriculture throughout the world. Innovation followed innovation, and soon factories, industrial inventions, and new sources of energy drastically changed the manner in which jobs were completed. With the resulting rapid industrial expansion, workplaces became more populated, and often included potentially dangerous procedures and equipment with little emphasis placed on safety. Work-related injuries and deaths became common. The only recourse for employees or their families to recover any related benefits was to file a civil lawsuit against their employer. Employers were largely successful in court, citing one of three common defenses: 1. Contributory Negligence - The employee was at fault and caused injury to him/herself. 2. Assumption of Risk - The employee was aware of the danger and agreed to do the job anyway. 3. Fellow Servant Rule – A fellow employee was at fault and caused the injury. Meanwhile, if employers were not successful in court, there was great fear that large monetary settlements for workplace injuries could literally shut businesses down, increasing unemployment and damaging the economy. As a result, in 1912, the current Ohio workers' compensation insurance system was initiated to help employers and employees cope with workplace injuries by providing medical and compensation benefits for work-related injuries, diseases, and deaths, regardless of fault.

Ohio Workers' Compensation Insurance Ohio is one of very few states in which the state is the sole provider of workers' compensation coverage. The Ohio Bureau of Workers' Compensation is the largest exclusive state fund system and the second largest underwriter of workers' compensation insurance in the United States. The system is comprised of two major entities: •

Bureau of Workers' Compensation (BWC) The BWC is the administrative and insurance branch responsible for setting premium rates, collecting insurance premiums, collecting and maintaining cost records, establishing new coverage, and administering state fund workers' compensation claims. The BWC also monitors self-insured employers, including adjudicating complaints and conducting compliance audits. Additionally, the BWC houses the Division of Safety & Hygiene, which provides safety services to employers throughout Ohio at no additional cost.

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Industrial Commission of Ohio (IC) The IC is the adjudicative branch responsible for resolution of contested workers' compensation claims or issues. The IC employs hearing officers (who are usually attorneys) who decide these matters at regional offices located throughout the state.

Additional parties involved in the workers' compensation process include: •

Employer (EOR) Certainly the employer will be an involved party in matters related to its workers' compensation coverage, including the opportunity to certify or reject claims filed against its policy. The employer will be copied on all BWC/IC correspondence and decisions related to its policy, and is encouraged to actively participate in the process in order to help maintain premium costs. The employer may utilize a third party administrator (TPA) at the employer's cost to assist in program management and cost reduction strategies, such as claims management, hearing administration, and rating plan assessment. The employer also has the right to retain legal counsel if desired, and it is sometimes recommended in more complex claim issues with potential litigation concerns.

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Injured Worker (IW) The injured worker will be involved in matters specifically related to his/her claim, regardless of employment status with the employer of injury. The injured worker has the right to retain legal counsel to represent his/her interests. If an injured worker has retained counsel, any requests for information (such as a medical release) or settlement negotiations must be conducted through the attorney.

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Managed Care Organization (MCO) The MCO is a private company with whom an employer contracts to medically manage workers' compensation claims. State fund employers have two opportunities to select a MCO---first, shortly after applying for initial coverage, and second, during periodic Open Enrollment time frames. The MCO receives reimbursement for managing the claims from the BWC out of employer premiums, so no direct out-of-pocket expense is incurred by the employer. The MCO authorizes and monitors treatment plans, maintains claim medical records, and processes provider fee bills. Employers and ORM representatives are encouraged to interact with the assigned MCO on all medical management related issues. Open communication between the parties ensures the best possible outcome, particularly in cases of ongoing disability.

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Physician of Record (POR) The injured worker's physician is a critical component to the workers' compensation process. He/she can determine the injury's relationship to employment, the injured worker's capacity to return to work, or if the injured worker's condition has reached a level of permanency.

Premium Cost Considerations The amount of premium an employer must pay to the BWC for workers' compensation coverage is determined by four major factors: •

Type of Industry One of the factors the BWC bases cost of employer premiums on is the type of work performed at the company. Usually, the more hazardous the work, the higher the rate imposed. The BWC utilizes NCCI (National Council on Compensation Insurance) manual classifications, which categorize the type of business operation, in order to set rates. The base rate for each manual number is determined annually based upon the cost of claims within that specific industry classification statewide.

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Reported Payroll Payroll reported to the BWC is also a direct factor in determining an employer's premium. As the number of employees increase, payroll will increase, thereby increasing the amount of premium due. Conversely, assuming all other factors remain the same, if the number of employees decrease, payroll will likely decrease, thereby potentially decreasing the amount of premium due.

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Frequency and Severity of Claims Many larger employers and all group rated employers receive either a credit or penalty assessment on the base manual rate, depending upon volume and cost of claims incurred within a specific period of time. This time frame is referred to as the employer's “experience”, and includes the oldest four of the last five years of claims history. Those employers who maintain lower than average claims costs will receive a reduction in premium, while those with higher than average claims costs will pay at an increased rate over the base rate.

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Rating Program Participation A qualifying employer may participate in one of several different rating options which will best meet its needs. Any alternative rating program should be carefully reviewed as financial impact and risk involved in each may vary. The ORM Rate Consultant can periodically review alternative rating program options and can prepare studies to assist in determining the employer's best financial option.

BWC Rating Programs As mentioned previously, the BWC offers several rating programs to qualifying employers in Ohio. Any potential change in an employer's current rating option should be carefully reviewed by the ORM Rate Consultant to determine feasibility, risk, and financial impact.

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Base Rating The employer pays premiums based on the BWC-established annual base rates for each assigned manual classification. Base rates are determined by the average rate for all employers within the same industry type throughout the state. New employers just starting coverage and employers with less than $8,000 in expected losses may be base rated.

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Individual Experience (or Merit) Rating The employer pays premium based on rates determined by the individual historical claim losses. High claims losses may result in a penalty rating, causing the employer to pay rates higher than the base rates. Low claims losses will result in a credit rating, allowing the employer to pay a discounted rate lower than the base rates. The same percentage of either penalty or credit is applied to all manual classifications assigned to that employer.

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Group-Experience Rating Employers in a like industry may join together through a sponsoring organization, and rates are determined by overall claims loss history of the group in total. The participating employers have low claim losses on their own, and by banding together they are able to pay a much lower premium than would be paid on an individual basis.

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Individual Retrospective Rating The employer agrees to assume a portion of the risk for claims costs in exchange for a reduction in premium. There are various levels of risk, and the greater the risk the employer accepts, the larger the potential reduction in premiums. The employer pays a discounted premium initially, and then reimburses the BWC for all claim payments (medical and compensation) made over the next 10 years for those claims occurring within the original policy year. At the end of the 10-year period, the employer also pays any remaining reserve on open claims.

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Group Retrospective Rating Employers in a like industry may join together through a sponsoring organization and earn refunds (or be charged assessments) based on performance. Employers enrolled in this rating plan will continue to pay their individual premium; however, they will have the opportunity to receive periodic retrospective premium adjustments. The BWC will review claim losses incurred by the entire group in the retrospective policy year at 12 months, 24 months, and 36 months after the end of the policy year. The individual employer’s refund or assessment will be based on its premium percentage relative to that of the entire group.

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Self-Insurance Employers who are large and wish to take on the responsibility of administering their own workers' compensation program, including payment of all compensation and medical

for their injured workers, may opt to be self-insured. When administered properly, potential savings can be significant in comparison with state fund premiums.