Over the past decade, Ohio employers often enjoyed an annual discount on their workers' compensation insurance"”more than $10 billion in total savings. The Ohio Bureau of Workers' Compensation (BWC) invests insurance premiums paid by private and public employers, and justified these dividends or rebates based on investment earnings.

The dividends resulted in significant savings on premiums paid by employers, especially those in industries with higher injury risks, according to Angela M. Wright, Vice President, Sheakley UniService, Inc., in Cincinnati. For example, an employer in the construction industry with 50 employees received a $4,700 dividend on a $23,500 premium during the January-June 2004 period. One employer in the clerical business, with 58 employees, received a $577 dividend on a $2,900 premium payment for the same period.

Then scandal hit in the spring of 2005.

BWC had invested $50 million in rare coins"”and lost up to $13 million"”in a venture run by former political fundraiser Tom Noe. That disclosure by the Toledo Blade led to a discovery that the BWC lost $215 million in an offshore hedge fund. By September, a consultant concluded that mediocre investing had cost the insurance fund almost $1 billion in potential gains over the past 10 years.

The BWC fund is valued at nearly $16 billion, and has a surplus of about $850 million. But the BWC is paying out almost $1.30 in claims for every $1.00 it collects, to the tune of more than $2 billion annually in medical and indemnity costs associated with worker compensation claims.

Operating under an Oversight Commission, the BWC fired its money managers and moved its holdings into more conservative but secure, fixed-income investments. Administrator and CEO William Mabe announced in January that BWC could save $425 million this year through cost savings and increased revenue. Premium rebates could return next year, he said. But some of those savings depend on changes in law being passed by the Ohio legislature.

For now, the loss of the annual discount means higher insurance costs for Ohio employers. Industry experts say this should motivate them to re-examine their workers' comp plans.

Shari Herper, Senior Vice President at the Sheakley Group in Cincinnati, says employers should pay attention to the BWC report cards on return-to-work statistics, and check out  programs offered by approved managed care organizations (MCO) that help return people to work, which helps keep costs down. Focus on specific services the MCO or TPA (third party administrator) offers to control costs. "Everyone should always check into discount programs that are offered, especially a group rating if the company has decent [claims] experience," Herper suggests.

As for the administration of the BWC and its money management, professionals in the field are watching and waiting to see if CEO Mabe can deliver on his promises. "The BWC is stable with its funds for injured workers despite all the press, and the system works well as a whole," Herper remarks. "The new administrator needs to focus on some key areas that need attention, versus trying to restructure the entire program."