Medical Inflation Causing WSI Premium Increases in North Dakota

To counteract the reported steep rise in medical and prescription drug costs, North Dakota’s Workforce Safety & Insurance’s Board of Directors authorized the agency to go forward with a proposal for a slight premium increase for workers’ compensation coverage.

The net effect of the premium rate proposal with an offsetting dividend will increase statewide premiums by approximately 4 percent. Initially the indication was for a 9 percent statewide average rate increase. However, due to the improvement in the fund’s financial position in recent years, and to help mitigate the premium increase resulting from the rate indication and change
in the taxable wage cap, a performance dividend will be issued.

The estimated dividend will be approximately $5 to $6 million and will offset approximately half of the amount generated by the indicated statewide premium increase.

North Dakota employers will still reportedly be paying the lowest premiums in the country. This according to a recently published study conducted by the Oregon Department of Consumer and Business Services on state by state premium comparisons. Benefits to injured workers will remain in the top one-third of all states.

WSI Board chair Bob Indvik said, “The proposed rate increase is modest when compared to rising medical and prescription drug costs.”

The average cost for a wage-loss claim at WSI has risen approximately 33 percent since 1999. The average cost for a wage-loss claim went from approximately $30,000 in 1999 to $40,000 last year. Overall medical inflation is up 7 percent percent or $2.5 million dollars from 2002 to 2003. Prescription drug costs are up 22 percent, climbing one million dollars over the same time frame.

Nationwide, the average cost of workers’ comp insurance has risen 50 percent in the last three years, according to Robert Hartwig, the chief economist at the Insurance Information Institute, a trade group in New York.

By comparison North Dakota’s premiums have dropped 1.4 percent in three years, even taking into account the 4 percent increase being proposed this year.

Since injury prevention is the key to minimizing workers’ comp
costs, WSI is encouraging those employers not participating in one of the WSI safety programs to enroll now. Successful program participants are awarded premium discounts of an additional 8-10 percent, which would further offset the proposed premium increase.

Public Notice of the proposal will go to state newspapers beginning April 1. The informal public hearing will be held April 30 at which time oral or written comments can be provided. Written comments will be accepted through May 17. The Board will make a final rate determination at its May 26 board meeting. Rates take effect July 1, 2004.