NEED SEEN TO CHANGE WORKERS' COMP

Even though the Missouri General Assembly passed legislation this year designed to bring skyrocketing costs of workers' compensation insurance under control, legislative and business leaders agree that more work needs to be done.

"I think the bill we saw this year was nothing more than a start; it still needs a lot of work," said Cape Girardeau Chamber of Commerce President Bob Hendrix. "I think it was a decent start."

Workers' compensation has become a major issue in recent years. Some business owners complain that rising costs are at the point where some employers are unable to expand, are having to cut back, and are being pushed toward bankruptcy because of the surge in rates, said Hendrix.

Over the last year, employers in Missouri who are required to provide workers' compensation coverage on employees saw rates climb about 38 percent. Another increase of 15-20 percent is anticipated later this year.

The chairmen of the House and Senate insurance committees agree with Hendrix that the legislation passed this year was only a first step. They also agree that most employers won't see a drastic drop in rates as a result of this year's legislation.

"We only scratched the surface this year," said Sen. Jeremiah Nixon, D-Hillsboro, chairman of the Senate insurance panel. "Most people will not see a drop in rates this year.

Rep. Dennis Ziegenhorn, D-Sikeston, the House chairman, said that "on a scale of 1 to 10, we got a 3.5 to start with this year. There is no reduction in premium, but we made a good first step."

Hendrix said the legislature "barely scratched the surface of the problem this year," but it is a very complex issue that involves medical costs, attorneys fees, and the kind of illnesses or injuries being allowed as workers' compensation claims.

"It will take more than one year to correct the problem," said Hendrix. "It will take some pretty major surgery to correct things."

Hendrix said the past session did make everyone aware of the seriousness of the problem. He said the stage has been set for some definitive action in 1993.

Both Ziegenhorn and Nixon have vowed to work between legislative sessions to help insure a bill next year will deal more directly with the problem of rates.

About the only thing this year's legislation does on rates is provide some incentives for employers who participate in safety programs to have minor rate reductions.

The bill that originally passed the House provided for a one-year freeze in rates, something Ziegenhorn was strongly in favor of. However, there was some opposition to the freeze. Gov. John Ashcroft feared it would drive some insurance companies from the state.

"I wanted a year's relief so we know that we absolutely have time to look at problems without things getting worse," explained Ziegenhorn. "We had a prime opportunity in the bill to do a freeze. We should have shown our concerns by having a freeze."

Hendrix said he would like to have seen a freeze to help businesses and give them a little relief while the whole issue is studied.

"Freezing rates for a year or two gives us time to make some of these other adjustments that have to be made," said Hendrix. "Businesses can't stand these kinds of increases. Workers don't pay this; employers do. When they get hit with that type of increase it just kills them - big businesses and small businesses."

Presently, the rates for workers' compensation insurance are approved by the Missouri Department of Insurance on recommendations from the National Commission on Compensation Insurance, known as NCCI.

There has been growing unrest over NCCI and its basis for recommending higher rates. In fact, both Ziegenhorn and Nixon support dropping Missouri's affiliation with NCCI and going to a system of competitive rates.

"I've been preaching competitive rates for a number of years and had introduced legislation to do that," said Nixon.

Ziegenhorn said he would be willing to discuss with the Department of Insurance having them set rates rather than relying on NCCI. "I think we can do it in-house rather than using NCCI," said Ziegenhorn.

If the market set the rates, Ziegenhorn believes overall rates would drop. Under the present system, he said there seems to be no rewards for businesses who reduce claims. Under competitive rates, claims history would likely be a factor in rates.

Nixon said making it easier for small companies to form pools might also help reduce rates.

"If we can set up small company pools where, for example, four or five dry cleaners can get together, we can get to a situation where what you do on the job and how safe your work place is has a direct effect on how much you pay," said Nixon.

He said that one foundry in his district has had rates climb from $35,000 to $85,000 a year and now to $210,000, and there has been no way for that company to do anything about the rates. Having a pool could provide some relief, he said.

Rep. Joe Driskill, D-Poplar Bluff, the chairman of the House Commerce Committee that deals with many business issues, said he likes the approach of competitive rates.

"From what I know now, NCCI has not done us any favors," said Driskill. "I have some people in my district who are saying their premiums are up 50 to 75 percent with no claims at all. Maybe we ought to try something else. NCCI has been very unresponsive to inquires I have made about problems."

Driskill said he believes most business owners are pleased that the Legislature took some action this year and he is optimistic rates can be reduced slightly by following safety standards outlined in the bill.

"We could have done more, but there are some good things in there. We made some progress," said Driskill.

Besides the safety incentives, Nixon said provisions in the new law to allow employers to have large deductibles may also reduce rates.

Another approach that has been discussed is having the state set up a workers' compensation insurance program. Ziegenhorn and Driskill say that is a possibility if rates don't come down, but both agreed they are inclined to try and keep state government from running the program.

Hendrix supports the open market approach.

"We should let the market set the rates. Giving one agency the right to set rates is like me being able to set my own pay," said Hendrix.

He said the combination of increases like workers' compensation and other government regulations are keeping businesses from expanding and discouraging people with money from investing it in new business ventures.

"We're in a position today that if a guy has a half-million dollars and has a tendency to go into business he is foolish. He can invest it and not worry about anything but interest rates," said Hendrix.

"When he invests in a business he has this awful mass of government regulations to contend with. But the bad part is, the small businessman is what builds our country, and the government is driving him right out of business."