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Shop Smart for a group rating plan When a Plan Advertises a
77% Discount, is it a Realistic Projection? (click)
When a Plan Advertises a
77% Discount, It depends. The maximum workers' compensation group rating discount that any plan is permitted to offer–according to Ohio's workers' compensation group rating rules–is 77% (effective July 1, 2009). And, there are plans that will actually deliver savings of 77% on your workers' compensation premiums. However, you should be aware of two things. First, these plans are not available to every employer. The fact is, only companies with virtually no workers' compensation claims can qualify for these plans. Secondly, some plans advertise this rate even though they may not actually have a track record of delivering this level of savings. Be sure to ask for a plan's track record of savings actually delivered, not what's promised.
How Reliable is the Savings Projection You're Getting? Every workers' compensation group rating plan should tell you your company's projection of savings. Be aware that this is a projection of the future. This is largely because–at the time the plan makes an offer to you–it is not yet known exactly how many or which employers will eventually join the plan. That's the nature of the business, and while a projection may be off a few percentage points, you don't want large negative surprises. When you're considering competing offers, ask how reliably the plan has delivered on projected savings year to year.
How Do You Calculate the True Bottom Line? Here is how to think about the cost of joining a workers' compensation group rating plan. Virtually all group rating plans charge what's called an administrative fee. This fee covers the costs associated with group rating and claims management activities such as:
There are many pricing models in the marketplace for the administrative fee. Make sure you understand how fees are charged, such as, are you paying an "all in one price" fee or will you be charged based on your claims activities? It is reasonable to expect to pay an administrative fee for the work the plan will do for your company. In Ohio, an employer is also required to join the organization that sponsors the group rating plan. If you're already a member of the sponsoring organization or it is an organization whose mission is beneficial for your company and industry, you probably will view membership dues differently than if your company receives little or no additional value from membership in the organization. Ask yourself which sponsoring organization is overall best for your company as a way to maximize the return on your investment.
By participating in a group, you and all the employers in the group pool your claims experiences. As a rule of thumb, it is better to be in a larger group than a smaller group. Being in a larger group will protect the group's discount should one or more of the employers experience costly claims. Because of the relatively high per-employee premium manufacturers pay, groups of approximately 30 or more manufacturers offer plenty of security.
Is There a Group That Won't 'Kick You Out'? While a group rating plan is the best way to save money on workers' compensation premiums, not every employer can qualify every year. That is because only companies with better–than–average claims experience can be accepted into a group. This is solely to protect the group's discount. This is why it is smart to look for a plan that has several tiers, and not just one pool for your industry type. Should you have claims, there is a chance to qualify for a tier with a somewhat lower discount rather than be out of the group entirely. Likewise, as your claims experience improves through time, there is the opportunity to be rewarded by moving up to a higher discount tier... without the hassle of changing plans. Each year, group rating plans evaluate four year's worth of your company's claims activity, the oldest 4 of the last 5 years. Even if you have not qualified for a group at some point, it is smart to apply each year because every year a year of experience falls off and a new year replaces it.
What is the Real Deadline for Joining a Group Rating Plan? The timeline for workers' compensation group rating has always been somewhat confusing. Whether you're happy with your current plan or not, the Ohio Bureau of Workers' Compensation (BWC) requires that each employer re-enroll every year. And there is a specific deadline after which an employer may not enter a group plan. Generally, some elements of the workers' compensation group rating timeline vary by sponsor, but all must file their final roster of employers no later than the last day of February. Before you make your decision,
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