WORKERS' COMP RATES DROP; 20 PERCENT DECLINE SINCE 1994

Workers' compensation premiums dropped 9.8 percent in 1998, continuing a trend sparked by the end of state regulation in 1994.

According to Missouri Department of Insurance, employers in the state paid $470 million in workers' compensation premiums last year, a decrease of $51 million from 1997.

In 1993, the General Assembly enacted legislation -- later signed by Gov. Mel Carnahan -- to reform the workers' compensation system.

"Missouri businesses still are reaping the financial benefits of 1993's landmark workers' compensation reforms, which relied on market competition and increased safety to end several years of double-digit rate increases," said A.W. McPherson, acting director of the insurance department.

"These savings continue to make more money available for Missouri employers to expand their operations, reward their workers and enjoy higher profits," said McPherson.

In the five years since the legislation took effect, premiums have dropped nearly 20 percent.

Before that time, Missouri businesses experienced an explosion in the cost of workers' compensation coverage.

"Once upon a time, workers' compensation was the longest four-letter word in the business community," said Randy McConnell, an insurance department spokesman.

Of 307 workers' compensation insurers operating in the state, 267 are charging average rates that are lower than what they offered before the reforms were enacted.

Prior to Jan. 1, 1994, the insurance department set the rates for workers' compensation premiums, McConnell said.

Rates are now set by companies on the competitive market.

According to department statistics, 76 percent of the workers' compensation providers in the state lowered rates last year. Those reductions averaged 15.3 percent as compared to 1997 premiums.

Only three companies increased rates, while the rest held prices steady.

The insurance department predicts workers' compensation rates will stabilize in coming years.

"We are still in an era when rates will continue to go down slightly or hold steady," McConnell said.

Sen. Jerry Howard, D-Dexter, served on the Senate Judiciary Committee in 1994 when it helped shape the reforms.

"I think what we did at that time in the General Assembly is a credit to the state in working out a solution to a serious problem," Howard said.

"We had employers whose premiums were going up by leaps and bounds. Now I think we've found that some of those increases were unfounded and that a lot of providers seized upon what was happening to make a profit."

He said the creation of Missouri Employers Mutual helped stabilize the industry. Established under the legislation using $5 million in state money, the company competed directly with other providers.

While controversial at the time, Howard said it forced other providers to use Missouri-specific data when setting rates, something he said was not common practice at the time.

Though most companies get workers' compensation coverage on the open market, some must go through a state-regulated pool.

Those companies can't get coverage from private companies because they are either too small, have poor safety records or are inherently dangerous businesses, McConnell said.

About 10,000 companies are in the pool, down from 32,000 in 1994.