By Lyle Adriano
The Michigan Department of Licensing and Regulatory Affairs announced October 6 that the pure premium advisory rate for workers’ compensation insurance will drop by an average of 6.9% in 2016. This is a 32.7% decrease since 2011.
“Our stable work comp system has helped in two key ways: ensuring injured Michiganders get the care and benefits they deserve and by contributing to Michigan’s comeback,” said Governor Rick Snyder.
“By continuing to reduce unnecessary costs, the system has become an important economic asset. These considerable business savings can free up capital and allow companies to hire more workers, increase salaries and expand operations," he said.
Pure premium rates help determine an employer’s total expenses for workers’ compensation. It is the portion of an employer’s insurance premium that pays for the anticipated claims costs for work-related injuries. Pure premium rates are decided through comparing the losses or claims for a given industry against the industry’s payroll.
According to comparison data, Michigan’s cumulative pure premium decrease of 27.7% from 2011 to 2015 is the lowest among Midwestern states and the second best nationally. The national average increased 11.3% during the same period.
“Michigan companies can use a reduction in work comp costs to invest in their employees and their business,” remarked Mike Zimmer, director of the Department of Licensing and Regulatory Affairs. “These decreases help us retain Michigan job providers, allow them to grow and encourage employers from around the nation to move here.”
Gov. Snyder signed legislation in 2011 that sought to reform Michigan’s worker’s compensation system. Such changes included defining disability and post-injury earning capacity and reducing costs for employers.
In 2014, a study entitled “Predictors of Worker Outcomes in Michigan” conducted by the Workers’ Compensation Research Institute found that 79% of Michigan workers were happy with the medical care received under the program.
The Workers’ Compensation Agency (WCA), in a bid to reduce costs, administered a fee schedule that controls medical costs for work-related injuries. Studies show that Michigan’s cost per claim and medical cost per claim are some of the country’s lowest.
