Workers’ Comp Costs Could Rise for Missouri Businesses

Missouri businesses could face significantly higher costs for workers’ compensation insurance next year, due partly to a new law that seeks to shore up a financially troubled state fund for disabled workers.

Workers’ compensation insurers in Missouri are likely to see an 11.6 percent increase in their “loss costs” for expected claims in 2014, according to a recent report from National Council on Compensation Insurance, which analyzes workers’ compensation data for states and insurers.

Those loss projections typically are used by insurers when setting their rates. So it’s possible that businesses could see a double-digest increase in their premiums costs when they renew their workers’ compensation policies.

“I would call that a significant increase,” Brent Butler, the government affairs director for the Missouri Insurance Coalition, said Wednesday. “If I was an employer doing work comp premiums, I would expect my bill to be a little higher next year.”

Ray McCarty, president of the Associated Industries of Missouri, called the potential rate increase “shocking.”

The projected cost increase in Missouri is larger than in most states and is the biggest increase since a 2005 law tightened workers’ compensation laws and sent the insurance premiums on a downward trend.

One reason for the spike is a law enacted this year that is meant to shore up the financially strapped Second Injury Fund, which makes payments to disabled workers who suffer additional job-related injuries. The new law shifts some types of injury claims from the Second Injury Fund to the workers’ compensation system, meaning insurers will bear more costs.

The changes included in the law account for about one-third of the projected cost increase for workers’ compensation insurers.

But even without the new law, Missouri’s cost increase would be sizable.

That’s partly because Missouri’s insurers have been paying out more work-injury claims of over $500,000, and more that are significantly over that amount.

Workers’ compensation claims sometimes take several years to be resolved and paid. For injuries that occurred in 2009, there were 32 claims of over $500,000 each, for a total of $27 million as of two years later, according to NCCI data.

For injuries that occurred in 2011, NCCI data show that there were 51 claims of over $500,000 each, for a total of $69 million within the subsequent two years.

“The losses in Missouri have increased pretty dramatically,” said Roy Wood, a Midwestern state relations executive for NCCI.

The average medical cost per claim also has been rising, with little sign of slowing down, Wood said.

The projections by NCCI don’t include another factor, which will boost costs to businesses even higher. The new Missouri law allows state officials to impose an additional 3 percent surcharge on workers’ compensation premiums in 2014 to help replenish the Second Injury Fund.

That means that a business could face a nearly 15 percent increase in costs related to workers’ compensation insurance, if their individual rates follow the general NCCI cost projections. The actual premium costs will vary both by categories of businesses and by a particular business’ claims history.