Ohio Workers Comp Crisis Comes To A Head
The Ohio Workers Comp crisis reached a fever pitch this month. I have not mentioned Ohio for a few months. Ohio is one of the few remaining monopolistic state funds where the state is the only insurance carrier.
Recently, a county court judge’s ruling certified the original suit as a class action which allows 100,000 small businesses statewide to seek upwards of $1.5 billion in restitution for allegedly being overcharged on their workers’ compensation premiums.
I had analyzed the Ohio situation in one of my past posts. The rumblings started when a statistically unfair advantage was generated by pulling together employer groups but not allowing all companies into these groups.
The Ohio Bureau of Workers Compensation (BWC) had overcharged small business by allowing certain employer groups to have Workers Compensation coverage at heavily discounted rates. The BWC charges below-cost rates to group members to make up for the losses by overcharging businesses that don’t qualify for a group.
The attorney for the class action group said the flawed method entices employers with unrealistically low premiums. When a work-related injury occurs and forces a business out of a group, it creates a risk-averse system that allows the group to maintain a pristine claim experience and artificially low premiums because the ejected member must now pay excessively high premiums.
The bottom line is that monopolistic state funds do not act like a true business or insurance carrier. That is why they are not sustainable in today’s current insurance market. There are now only four monopolistic funds left. If they do not adopt business models similar to the regular market insurance carriers, the remaining ones will likely not survive.
Who will eventually pay for the possible $1.5 billion from the Ohio mess? The taxpayers will end up with the tab.
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