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Stimulus Package and Workers Compensation – Any Effect?


The Stimulus Package – Will It Affect Workers Compensation

The stimulus package from the Federal Government caused a few changes in the financial markets.  I wanted to cover the bullet points from my previous blog post.  In looking at the bullet points, some of these have been covered by me in detail over the past few weeks. 

Vector Graphic of Dollar Sign Stimulus Package Financial Concept

The continued bailouts of the insurance companies will distort the market as this will allow them to be more competitive than they should be in quite a few areas.  Some insurance carriers have already been accused of low-balling on bids to win the business.  There are numerous articles in the insurance press covering this point.

The GAO has launched an investigation into one specific insurance company’s practices on bidding.  What this investigation uncovers remains to be seen.   A “smoking gun” may never appear to the investigators.

I disagreed with the federal government allowing insurance companies to become quasi-banks/holding companies as this will distort the insurance markets even further.  The slow repeal of the Glass-Stegall Act since the 1970s contributed to this situation.  This is just another method to obtain more bailout funds.

  • Having a Federal Insurance Watchdog Agency – in essence, to federalize the insurance markets along with Workers Compensation
  • The shrinking employer market as the need for Workers Comp coverage will be reduced in proportion to the employers’ reduction in size
  • The increase in claims filed as employees lose their jobs – this is statistically true.

I do not think that federalizing the insurance administration and especially Workers Compensation would be a positive development.   As we have seen (Digital TV Conversion, Bank Bailouts, etc.) when anything is federalized the costs increase dramatically and the level of service diminishes.

Picture Businessman and Businesswoman Looking Into a Glowing Stimulus Package Box

Would it not be a nightmarish situation if your agent not only had to keep up with state regulations but also federal?   For instance, if you were renewing your Workers Comp policy, your agent would possibly have an extra set of federal forms to fill out. Of course, there would be a tax on the premiums to keep a watchdog agency in place.  You, as the employer would pay that extra tax.  State regulation is still the way to go because Workers Comp and other lines of insurance vary so much between states.

The shrinking employer market is a fact.  When more employees are taken off the payroll, then the amount of risk with that employer would decrease.  However, there is another side to this discussion.  The larger the payroll, the more an employer can spread the risk of a few bad claims.   There are ratios in your E-Mod calculation that try to act as a balancing act between payroll,  class codes, and claims.  As with most costs, the smaller employer pays a higher per-dollar premium for the same Workers Comp coverage.  It is not that fair, but it is the system put in place by NCCI and the State Rating Boards.

Graphic Arrow Stimulus Package Three Ways

For many years, there have been numerous studies that show when employers lay off a large number of their staff, the number of  Workers Comp claims spikes.  Is this due to the employees worrying about future benefits and wanting to make sure they will receive an income after unemployment runs out or is it that employees may have been working with injuries that were tolerated as a part of work and now they want to file a claim that they are unemployed?  I think it is a combination of both.  As I said in the previous paragraph, if an employer has a lower payroll with many claims being filed, the E-Mod will increase dramatically costing an employer more for their Workers Comp in the coming years.

Overall,  I think the only very negative development coming out of the current stimulus package is the federal watchdog agency possibly being created to administer insurance.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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