Business owners often have innumerable decisions to make each day, which means that reviewing annual changes in workers’ compensation and benefits laws is just one more thing on their lengthy to-do list. However, this is one decision that shouldn’t quickly be checked off. In the past, choosing whether to go in-group or out-of-group for workers’ compensation services was as easy as finding out whether you qualified. Now, with Ohio’s dropping discount rates, that choice isn’t so clear.

The maximum discount rate set by the Ohio Bureau of Workers’ Compensation for this policy year (from July 1, 2009, to June 30, 2010) is 77 percent, meaning that employers with the best records only have to pay 23 percent of their total workers’ compensation costs. Last policy year, the maximum discount rate was 85 percent. Several years before that, it was as high as 95 percent — but the projected maximum discount rate for next year is just 65 percent. (These rules don’t apply to workers in Kentucky and Indiana, which have their own state policies and guidelines.)

The repercussions of shrinking discount rates often sneak up on business owners. “What we’ve seen with prior reductions is that employers don’t realize what it means until they get their bill in January the next year,” says Angie Wright, senior vice president of Sheakley.

Fortunately, Third Party Administrators — companies contracted to handle employee benefit plans such as workers’ compensation — can alleviate many of the problems that arise with complicated new laws and regulations.

“It’s very confusing right now for employers,” says Dave Kiley, executive vice president of The Matrix Companies. “There have been so many Ohio Bureau of Workers’ Compensation changes over the last year, employers are calling us and saying ‘Help me, I’m pulling my hair out.’”

The new changes make it even more important for employers to consult with a trusted TPA and get an individual assessment. “It used to be if you’d qualify for group, you’d take it,” Kiley says. “The interesting thing is that you could be group eligible now but you might not want to take it.”

Changes for 2009 include a 31 percent “group adjustment factor” for all group-enrolled employers. The adjustment factor, which adds 31 percent of the group’s assessed discount to the final rate, decreases the savings of in-group plans significantly. “In fact, most employers that qualified for group discounts of 30 percent or lower saw their group-rating discounts completely erased,” Kiley says.

Another new change is that employers may no longer “stack” discounts earned from various programs onto their group discount rate. That means that participating in programs such as the Drug-Free Workplace Program (established by Ohio Bureau of Workers’ Compensation to help employers reduce the frequency of claims by reducing drug and alcohol abuse in the workplace) and the Safety Council program (in which employees attend meetings, events and training that promote safety) no longer amount to additional discounts.

“Employers can still participate in the program(s), but they can’t get a discount if they’re in group rating,” Wright explains. But you can get discounts for those programs if you’re not in group rating. “I think for some employers that will be a consideration for them, as far as how much it costs. … Primarily, the incentive was to participate because of the discount.”

However, Connie Matchett, director of group rating at Employers Choice Plus, reminds employers to think carefully before discontinuing such programs. Many government jobs still require their contractors to have a drug-use prevention program in place, so if your company bids on city, state or county jobs, you may want to consider continuing yours.

It’s possible that many recent changes make it more profitable for your business to stay out-of-group. However, Kiley emphasizes, out-of-group employers need Third Party Aadministrators just as much as in-group employers. Often, they need “a trusted adviser and consultant who can offer programs and strategies to get you back into group,” Kiley says. “Sometimes it’s actually tougher if you’re not in-group, because typically you have more claims and more losses.”

Another recent change applies in particular to Ohio companies that do business in Kentucky. Recent legislation in Kentucky requires employees working in that state to have Kentucky coverage — your Ohio insurance no longer covers you there.

“It’s even more important for Ohio employers to have a Third Party Administrator … to be up to date on these changes so they don’t get hit with fines from other states,” Matchett says. “Employers are just starting to get hit. They’re really cracking down on auditing.” In fact, Matchett says, companies in industries such as construction that frequently go out of Ohio for jobs may be even more likely to be audited.

“The costs of third party services are minimal compared to just one day of fines for not having the right certification,” she says.

Signs of a Poor Third Party Administrator

Is your TPA always reactive instead of proactive when it comes to claims administration?

Does your claim manager/representative never seem to be available at your convenience or does he or she change on a regular basis?

Has your TPA missed appeal periods, either through negligence on their part or because they did not follow up with you?

Does your TPA recommend costly settlements on each claim?

Do they consistently recommend retrospective rating as the only way to control your increasing premiums?

Does your TPA explain the potential consequences in full detail?

Has the TPA met all the service promises made in the beginning?

Are you the one who is suggesting IMEs, settlements, surveillance, etc. to your claims manager?
Source: Employers Choice Plus (www.echoiceplus.com)

Things to Consider When Choosing A TPA

Longevity
How long has the company been in business?

Accolades
How many have they received over the last couple of years?

Affiliations
Is it partnered with reputable organizations?

Community roots
Talk to business owners you know and get feedback on their relationships with their TPAs.

Bang for your Buck
Many TPAs offer other services, such as unemployment and 401K.

— Angie Wright, Sheakley