When Ohio House Bill 222 passed Nov. 3, 1989, establishing an employer pooling program, employers were able to be rewarded for a commitment to safety.
“Basically, employers were limited in the amount of discounts they could earn on their own,” says Ken Finley, a senior rate analyst with V&A Risk Services, a strategic partner with Ohio Employee Health Partnership. “A small employer could earn up to a 5 or 10 percent discount, while a larger company in the same industry could achieve a 45 to 60 percent discount on its own.”
To solve the inequity, Ohio legislature passed HB 222 to require a program that would allow companies to compete and receive the same workers comp rate for the same safety record. Employers with good claim histories could band together into groups and enjoy lower workers’ compensation premiums.
Smart Business spoke with Finley about how the group rating has changed through the years and how those changes affect employers.
Why was the group rating created?
The program was created to reward safe employers. That has remained constant through the entire life of the program.
The first year of the program, some employers were skeptical. There were about 4,000 participants out of 242,000 companies in the state. Obviously, once the program was proven to be successful, more companies joined — as many as up to 100,000 in recent years.
How does an employer know if it can qualify for the group discount?
Employers’ eligibility is based on their loss ratio, basically their safety record. The Bureau of Workers Compensation has an actuarial formula to determine an employer’s expected losses over a four-year period. So the amount of actual losses during that period is compared with the expected losses, and a positive loss ratio (meaning less claims costs than expected) results in the ability to join a group.
There are other circumstances, such as lapsed coverage issues, that could preclude an organization from being part of a group. But, generally, having less in claims than you are expected to have results in achieving a group discount or being invited to join a group.
