Michigan's Work Comp Rate Decreases 28% Since 2011; Pure premium

reduction has saved state job providers $277 million

Contact: Jason Moon 517-373-9280
Agency: Licensing and Regulatory Affairs


October 14, 2014 The Michigan Department of Licensing & Regulatory Affairs (LARA) today
announced the pure premium advisory rate for workers' compensation insurance will drop by an
average of 6.5 percent in 2015 and will decrease 6.3 percent annually from 2011-15. The pure
premium rate will decrease 27.7 percent since 2011, saving Michigan employers an estimated $277
million.[1]
The most recent comparison data shows that Michigans cumulative pure premium decrease of 22.7
percent from 2011-14 is best in the Midwest and second best in the nation. While Michigans rate
plummeted, the national average went up 10.8 percent.[2]
Michigans considerable reduction in workers comp costs is great news for our employers,
employees, job seekers and any company looking to move here, said Gov. Rick Snyder. These
significant savings are a real asset in terms of growing and retaining jobs, and give us an advantage
over competitor states in attracting new businesses.
The pure premium is a key factor in determining a job providers overall expenses for workers
compensation and is the portion of an employers insurance premium that pays for the anticipated
claims costs for work-related injuries. These rates are developed by comparing the losses (or
claims) for a particular industry to the payroll for that industry.
The states big drop in workers compensation rates gives our businesses more resources to start
and expand their operations, said Chuck Hadden, president and CEO of the Michigan
Manufacturers Association. Our companies invest this additional money into new equipment and
facilities, and put it directly into the pockets of their employees. My counterparts around the country
are envious of the work that Governor Snyder and the Workers Compensation Agency have done to
reduce costs for our job providers.
Greg Baise, president and CEO of the Illinois Manufacturers Association, recently told Watchdog.org
that high workers compensation rates are one reason Illinois employers are taking their businesses
and the jobs they provide to other states. Indiana and Michigan have more business-friendly
workers comp policies and the employment situations there reflect that.[3]
In late 2011, Gov. Snyder signed sweeping legislation reforming the state's workers' compensation
system. These improvements included defining disability and post-injury earning capacity, and have
played an underlying role in the reduction of costs for our employers. The changes stabilized the
100-year-old system, ensuring the promise of compensation for injured Michigan employees.
The 2011 reforms have served as an important foundation in our agencys cost containment efforts
for businesses and have allowed us to continue to protect Michiganders injured on the job, said
Michigan Workers Compensation (WCA) Director Kevin Elsenheimer. The WCA is focused on
continuing to improve our regulatory processes to protect Michigan workers and lower costs for
employers.
The WCAs emphasis on reducing costs for job providers has included the administering of a well-
developed fee schedule which controls medical costs for work-related injuries. A recent study shows
Michigans cost per claim (CPC) and medical CPC are the lowest in the region and among the
lowest in the country.[4]

The effective cost containment is in conjunction with the Reinventing Performance in Michigan
(RPM) initiative. Through a thorough review of all regulatory processes and extensive upgrades in
technology, the WCA is focused on reducing processing times for business customers.
Reviewed all forms, bulletins, guides and customer-facing material to ensure 100% utility.
Started eliminating the 30-year-old COBOL system allowing businesses to receive real time
data.
Replaced obsolete microfilm system with digital imaging.
Developed electronic mailbox and eliminated the requirement to mail or fax documents.
The independent Data Collection Agency Board develops and approves the annual rate by analyzing
historical loss information combined with regulatory reforms.
Michigan's injured workers and their employers are governed by the Workers' Disability
Compensation Act. The Act was first adopted in 1912 and provides compensation to workers who
suffer an injury on the job and protects employers' liability. The mission of the WCA is to efficiently
administer the Act and provide prompt, courteous and impartial service to all customers.
A work comp fact sheet follows this release.
[1] Compensation Advisory Organization of Michigan, Analysis of Premiums, 2014
[2] National Council on Compensation Insurance, Annual Statistical Bulletin, 2014
[3] Watchdog.org, August 4, 2014
[4] Workers Compensation Research Institute, 2014
For more information about LARA, please visit www.michigan.gov/lara
Follow us on Twitter www.twitter.com/michiganLARA
Like us on Facebook or find us on YouTube www.youtube.com/michiganLARA

FACT SHEET
WCA Workers Compensation Decreases
Michigans Workers Compensation (WC) system is a strategic asset to the state.
Michigans WC pure premium rate will drop by 27.7% since 2011, saving Michigan
businesses an estimated $277 million in WC insurance premiums. -Compensation Advisory
Organization of Michigan (CAOM), Analysis of Premiums)
The continued decreases in workers compensation insurance costs give Michigan a real
competitive edge over neighboring states in attracting and retaining businesses.
Greg Baise, president and CEO of the Illinois Manufacturers Association, said high workers
compensation rates are one reason Illinois employers are taking their businesses and the
jobs they provide to other states. Indiana and Michigan have more business-friendly
workers comp policies and the employment situations there reflect that. -Watchdog.org,
August 4, 2014
MIs pure premium advisory rates for workers' compensation insurance will drop by an
average of 6.5% in 2015 and will decrease by an average of 6.3% annually from 2011-15. -
CAOM
According to the most recent comparison data Michigans cumulative pure premium
decrease of 22.7% from 2011-14 is best in the Midwest and second best in the nation. While
Michigans rate went down 22.7%, the national average went up 10.8%. (National Council on
Compensation Insurance, 2014 Annual Statistical Bulletin) SEE TABLE BELOW
The pure premium is a key factor in determining a job providers overall expenses for
workers compensation and is the portion of an employers insurance premium that pays for
the anticipated claims costs for work-related injuries. Pure premium rates do not account for
administrative and other overhead costs that an insurer will incur and, consequently, an
insurer's rates are typically higher than the pure premium rates.
Pure premium rates represent the average risk of loss for a classification, not simply the
most hazardous aspect of an industry. These rates are developed by comparing the losses
(or claims) for a particular industry to the payroll for that industry.
MIs cost per claim (CPC) and medical CPC are also the lowest in the region and among the
lowest in the country. MIs rate of growth for medical CPC is also among lowest in the U.S.
(Workers Compensation Research Institute, 2014)
WC premiums are overhead costs and these savings can free up additional capital to hire
new employees and open additional facilities, and give companies one more reason to move
to MI.
In 2011, Governor Snyder signed sweeping legislation reforming the state's WC system.
These improvements included defining disability and post-injury earning capacity, and have
played an underlying role in the reduction of costs for our employers. The changes have
stabilized the 100-year-old system, ensuring the promise of compensation for injured
Michigan employees.
With the help of these legislative reforms, the Workers Compensation Agency (WCA) has
been squarely focused on containing costs for employers. Efforts include the administering of
a well-developed fee schedule which controls medical costs for work-related injuries.
The effective cost containment is in conjunction with Reinventing Performance in MI (RPM)
initiative, where the WCA has reviewed all forms, bulletins, guides and customer-facing
material to ensure 100% utility.
WCA has made extensive technology upgrades to the workers compensation system that
will allow businesses to save time and money.
o Eliminating 30-year old COBOL system allowing businesses to receive real time
data.
o Replaced obsolete microfilm system with digital imaging
o Developed electronic mailbox and eliminated the requirement to mail or fax
documents


State *
2011
Rate
Chang
e
2012
Rate
Chang
e
2013
Rate
Chang
e
2014
Rate
Chang
e
Cumu
l
2011-
14
Avg
Ann
2011-
14
2015
Rate
Chang
e
Cumu
l
2011-
15
Avg
Ann
2011
-15
Montana -28.0% 0.0% -6.2% -3.6%
-
34.9%
-
10.2
%
n/a n/a n/a
Michigan -1.9% -7.4% -7.2% -8.3%
-
22.7%
-6.2% -6.5%
-
27.7%
-
6.3%
Kentucky -7.5% -7.9% -9.0% n/a
-
22.5%
-8.1% n/a n/a n/a
West Virginia -7.6% -7.6% -7.2% n/a
-
20.8%
-7.5% n/a n/a n/a
Arkansas -5.8% -4.1% -8.3% -1.4%
-
18.3%
-4.9% n/a n/a n/a
Tennessee 1.2% -4.7% -1.6% -12.9%
-
17.3%
-4.6% n/a n/a n/a
Oklahoma 1.7% -1.7% -0.3% -14.6%
-
14.9%
-3.9% n/a n/a n/a
Alabama -12.4% -9.2% 4.0% 3.3%
-
14.5%
-3.9% n/a n/a n/a
Pennsylvania 0.9% -5.7% -4.0% -5.2%
-
13.4%
-3.5% n/a n/a n/a
Illinois -7.4% 3.5% -4.7% -4.5%
-
12.8%
-3.4% n/a n/a n/a
Maine 0.4% -7.0% 1.3% -7.7%
-
12.7%
-3.3% n/a n/a n/a
South Dakota 1.2% -0.2% -3.9% -8.3%
-
11.0%
-2.9% n/a n/a n/a
Alaska -2.5% 2.7% -4.7% -2.6% -7.1% -1.8% n/a n/a n/a
Minnesota -1.7% -2.7% -0.8% -2.0% -7.0% -1.8% n/a n/a n/a
Oregon -1.8% 1.9% 1.4% -7.6% -6.2% -1.6% n/a n/a n/a
Virginia -12.4% 10.5% -6.4% 4.1% -5.7% -1.5% n/a n/a n/a
Georgia -3.7% 3.0% -6.5% 2.3% -5.1% -1.3% n/a n/a n/a
Nebraska -4.5% 4.9% -0.5% -4.8% -5.1% -1.3% n/a n/a n/a
Texas 0.0% -0.3% -3.8% 0.1% -4.0% -1.0% n/a n/a n/a
New
Hampshire
-2.9% 6.7% -0.2% -6.5% -3.3% -0.8% n/a n/a n/a
Utah 1.5% -1.6% -2.0% n/a -2.1% -0.7% n/a n/a n/a
Massachusett
s
0.0% 0.0% 0.0% -1.8% -1.8% -0.5% n/a n/a n/a
Vermont -2.6% 4.1% -3.4% 1.2% -0.9% -0.2% n/a n/a n/a
Kansas -2.5% -0.5% 1.4% 0.9% -0.7% -0.2% n/a n/a n/a
South
Carolina
-3.7% 3.0% 0.2% n/a -0.6% -0.2% n/a n/a n/a
North Carolina 0.6% 0.0% -1.4% 0.3% -0.5% -0.1% n/a n/a n/a
Wisconsin 0.0% -1.4% -1.7% 3.2% 0.0% 0.0% n/a n/a n/a
Indiana 1.7% 2.6% 4.4% -7.7% 0.5% 0.1% n/a n/a n/a
Nevada -3.9% 1.0% 1.1% 3.2% 1.3% 0.3% n/a n/a n/a
Louisiana 4.2% 6.0% -1.5% -5.1% 3.2% 0.8% n/a n/a n/a
Missouri -4.4% -3.0% 2.1% 11.6% 5.7% 1.4% n/a n/a n/a
Mississippi -9.8% 10.0% 3.1% 3.8% 6.2% 1.5% n/a n/a n/a
Arizona -2.8% 5.2% 2.9% 3.2% 8.6% 2.1% n/a n/a n/a
Dist. of
Columbia
6.2% 0.4% 1.9% n/a 8.7% 2.8% n/a n/a n/a
Idaho 3.7% 2.9% 3.4% -0.9% 9.3% 2.3% n/a n/a n/a
Countrywide 0.0% 8.4% 2.2% n/a 10.8% 3.5% n/a n/a n/a
Maryland 5.7% 1.4% 2.9% 1.4% 11.8% 2.8% n/a n/a n/a
Iowa 4.7% 4.4% 7.0% -2.0% 14.6% 3.5% n/a n/a n/a
Hawaii 0.0% 3.6% 4.2% 6.2% 14.6% 3.5% n/a n/a n/a
Colorado 3.3% 3.7% 4.3% 3.0% 15.1% 3.6% n/a n/a n/a
Connecticut 3.3% 3.7% 4.3% 3.0% 15.1% 3.6% n/a n/a n/a
California 0.0% -0.4% 7.6% 7.6% 15.3% 3.6% n/a n/a n/a
Rhode Island 3.6% 5.3% 6.5% n/a 16.2% 5.1% n/a n/a n/a
New York 9.1% 0.0% 9.5% n/a 19.5% 6.1% n/a n/a n/a
New Mexico 4.2% 7.4% 4.0% 4.0% 21.0% 4.9% n/a n/a n/a
New Jersey 3.9% 6.9% 8.3% 3.6% 24.6% 5.7% n/a n/a n/a
Florida 7.8% 8.9% 5.6% 0.7% 24.8% 5.7% n/a n/a n/a
Delaware 12.6% 21.7% 14.0% n/a 56.2%
16.0
%
n/a n/a n/a

*Rate Change Statistics obtained from 2014 NCCI Annual Statistical Bulletin
[1] Compensation Advisory Organization of Michigan, Analysis of Premiums, 2014
[2] National Council on Compensation Insurance, Annual Statistical Bulletin, 2014
[3] Watchdog.org, August 4, 2014
[4] Workers Compensation Research Institute, 2014