Workers-Compensation-FormThe state of Massachusetts has decided to buck recent trends and have settled on an impending decrease in workers’ compensation insurance rates. This change will go into effect on July 1, 2018. The decrease will result in an average rate rollback of 12.9% on workers’ compensation insurance rates. Most industries will see a decrease in their rates and some class codes related to Steel Erection work will see a classification adjustment. USL&H (United States Longshore & Harborworkers) codes—for those that work over navigable waters—show an overall decrease of 13.3%.

Workers’ compensation rates are periodically set via administrative rate hearings before the Division of Insurance. The initial rate filing is handled by the WCRIB on behalf on the insurance industry, and is supported by actuarial data from the previous two years.

This should prove beneficial for most companies in the Commonwealth as a matter of rate itself in the short term. According to a statement from Attorney General, Maura Healey, this decrease could save Massachusetts employers about $150 million in workers comp costs. That being said, it is important to consider a few factors related to these new rates.

  • Massachusetts was already one of the cheapest states for WC in the nation. While the rate decrease should help reduce costs for a significant portion of companies in the Commonwealth, we should not be surprised if we see carriers start to shy away from writing voluntary workers’ comp. If this happens, the State Pool population will increase and those policies will miss out on the discount received for being written voluntarily. This will , in turn, negate some of the benefit of the reduction.
  • Potential reductions in deviations. The recent minor increases meant more carriers entered the marketplace. We were just starting to see the re-emergence of deviations as well, which were a way for carriers to reward those who perform well. We will expect to see some reduction in these deviations, which may offset the benefits to some.
  • The impact on experience mods. It will be more difficult for companies that perform well to drive their mod down. Those that have losses will potentially see a more significant spike in their mod. Remember, at its most basic form, your mod is the ratio of expected loss vs. actual losses and when the premiums go down, mods relative to the same losses will go up. For more on experience modifiers, check out this post – Experience Mods – The Key to Managing Workers Comp Costs.
  • Some class codes have increased. Keep in mind that this -12.9% decrease in workers’ compensation insurance rates was an average… this means that there are some class codes that have increased as a part of this filing.
  • For those in the construction industry that receive the construction credit, also remember your mod is now in the denominator of the calculation. This means an increase in your mod will also result in a potential decrease in your credit there as well.

While most people will experience the short term benefit of the rate reduction, we do have some long range marketplace concerns as carriers shy away from offering workers’ comp or use the other lines to make up the difference.

To see what your new workers compensation insurance rates will be, take a look here –
Changes in Manual Rates by Class and Effects of July 1, 2018 Rate Change.

Make sure you discuss the impacts to your particular situation with your agent. Have them run a ModMaster® to help forecast what your experience mod impact will be in the coming years as soon as you can, rather than waiting for the state to release it. Never seen a ModMaster®? Give me a call and I can help show you how all these factors play out with similar tools to those you will see from the state when they calculate your’s for your rating date.

Want to learn how to develop a workers’ compensation cost containment program from one of the region’s top experts on the subject? Join us for our April RogersGray University Seminar – Worker’s Compensation – What you need to know!’.