Does RI Have a Workers Comp Problem?
(An Interview with Stephen Hickey, owner of Hickey Insurance)
Workers’ comp for RI state employees soars 54%, alarming officials -
Target 12 Headline from Sept. 16
A recent headline story by one of Rhode Island's local news outlets has created quite a buzz in some circles. For perspective, I turned to Stephen Hickey, a Rhode Island Insurance agency who has been involved in the issue for over 35 years. His knowledge and experience is useful to understand the history of Workers Comp in Rhode Island, where we started and where we are now, and whether or not this latest headline sheds light on a serious, growing problem, or not.
Pretty much every company in the state who was impacted by the need for Workers Comp were simply put into what was called an "assigned risk pool". Every company in the pool was assigned an insurance company by the state. The intention was to spread the "risk" evenly among the insurance companies. Each business would pay their premium to their assigned insurance provider and each provider, in turn, would pay into the pool. Any insurance company which "lost money" in any particular year would be compensated from the pool to bring them back to even. Any company that "made money" would put those "profits" back into the pool to offset the losses of the other companies.
The biggest problem with this system was that workers comp rates remained high because there was no incentive to lower them.
Rhode Island businesses were suffering from high workers comp rates and having a difficult time staying competitive with businesses outside of the state. Because of this, the state of Rhode created Beacon Mutual Insurance under legislative charter. As such, Beacon can not operate outside of Rhode Island. Although not classified specifically as a non-profit, any profit that Beacon realizes is funneled back into the company to reduce rates.
The creation of Beacon ended the assigned risk pool and assigned all workers comp insurance to Beacon. This does not preclude other insurance companies from writing workers comp policies in the state. If they can beat Beacons' rates, companies are free to purchase insurance from them.
Although the overhaul of workers comp insurance did away with the assigned risk pool, there is still a "high risk pool". This is for companies that, for whatever reason, have injury/illness rates that are higher than normal. The cost of insuring these high risk companies is shared by all the insurance companies operating in Rhode Island, based on their percentage of the Rhode Island market.
Several important changes emerged from the 1990 overhaul that have a lowering effect on workers comp rates include:
- Training and retraining requirements
- Mandated correction of unsafe work environments
- Light duty opportunities (more about this in a moment), and
- Physical therapy opportunities
This is the history that has brought us to where we are. But what about that local headlines??
Target 12 Report
Although the headline seems discouraging, the reasons for this jump in claims is not solely due to people being careless, or some sudden flaw in the workers comp system.