SNAGS SEEN IN NEW WORKERS' COMP BILL

The chairman of the Missouri House Insurance Committee says he is concerned about the impact of a workers' compensation bill approved by the legislature earlier this year.

Rep. Dennis Ziegenhorn, D-Sikeston, said he fears the bill is not causing the kind of interest that had been anticipated from private insurance companies to provide coverage to some companies now in the Assigned Risk Pool.

"We passed a good bill last year, but it still needs some adjusting," said Ziegenhorn. "When you make adjustments in the system, sometimes you have problems you did not think of and there are things that we may want to deal with next year."

A major goal of SB-251 was to try and encourage open competition among companies to offer workers compensation coverage. Currently the Assigned Risk Pool has just over 24,000 companies, while another 34,780 companies purchased coverage in the voluntary market.

There was hope that the new legislation would cut the number of companies in the pool in half. Companies that remain in the pool would have an opportunity to explore a new state mutual insurance company as a source of affordable workers' compensation coverage.

But Ziegenhorn says he is not seeing the kind of interest that he thought would develop. He is also unsure whether the state's use of the National Commission on Compensation Insurance (NCCI), a national company that makes recommendations to states on what rates should be, can be diminished as hoped.

"I just don't think we are seeing many companies looking into the open competition like I thought they might," said Ziegenhorn. "The bill allows more open competition, but I'm not sure there is enough of an incentive there for companies to go out and write business."

For years, Ziegenhorn has advocated open competition in workers' comp premiums and a phasing out of NCCI. The veteran lawmaker has also advocated a freeze on premiums to give new legislation a chance to work and to provide some relief to Missouri businesses that have been hammered by repeated double-digit rate hikes the last few years.

John Mehner, president of the Cape Girardeau Chamber of Commerce, said he is also concerned that SB-251 is not going to be effective and is hoping the General Assembly makes some major revisions in it next year.

NCCI has recommended to the Missouri Department of Insurance that workers' comp premiums be increased 23.2 percent next year on companies in the pool.

"We just can't afford another rate increase from the Assigned Risk Pool," argued Mehner, who testified before staff of the insurance department last week. The insurance department will decide before the end of the year how much, if any, of NCCI's rate hike recommendation to follow.

He points out that the rate hike proposed by NCCI is just an average rate increase, which means "some companies will take 50 to 60 percent hits. Talk about ways to run people out of Missouri. That will do it," he complained.

Mehner contends that without changes, the new legislation will not have the effect that workers' comp bills have had in other states that have led to double-digit rate decreases.

"Businesses have a horrible problem once they get in the pool. It is almost impossible to get out," said Mehner.

He is advocating a rate freeze for at least one year.

Said Mehner: "We need to at least give us this year, from a legislative standpoint, to see if SB-251 does any good and then address it again next year. Or, hopefully, the legislature will do additional workers' comp legislation this year and come up with a better bill. It remains to be seen whether these individual insurance companies will go out and write coverage for these companies in the pool."

While the Missouri Chamber has generally been disappointed with SB-251, another business advocate group, Associated Industries of Missouri, has been a strong supporter of the bill.

Curt Long, president of AIM, observed: "The Department of Insurance's actuaries credit that measure, along with other legislative reforms, in contributing to the possibility of a rate decrease for Missouri in 1994. The actuaries paid special attention to the bill's provisions establishing penalties and investigations and prosecution provisions for workers' compensation fraud which makes employees that commit fraud guilty of criminal conduct."

Long added, "In addition, the report credits the establishment of a Department of Insurance program for certifying managed care organizations to manage the medical treatment received by employees or workers compensation injuries as another cost saver. Missouri's establishment of incentives for strong workplace safety programs is also a plus in the eyes of the actuaries."

Another factor that may ultimately reduce rates is that the voluntary market will no longer subsidize losses in the pool.

The insurance department report also suggested that employers in the voluntary market could be in line for a 19 percent reduction in premiums in 1994, which amounts to a $113 million savings for business.

Gov. Mel Carnahan announced on Wednesday that the 3 percent surcharge for the Second Injury Fund and the 2 percent tax on workers' comp premiums earmarked for administration of the system, will be suspended for one year beginning Jan. 1.

Employers will save more than $50 million from this reduction. The governor's action is a modification to SB 251.

"This administration will continue to make every effort to minimize the cost of the workers' compensation system, while ensuring that benefits paid to injured workers are fully protected," said Carnahan. "I am especially pleased to offer this savings to Missouri businesses at a time when so many have been impacted by the devastating floods."

The governor did caution employers to view the 1994 abatement as a one-time savings. He noted that the facts leading to the abatement are unique and the new law requires an assessment be made in October of each year.