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Q Unlike other insurance markets, which appear to be competitive, workers' compensation rates are set by the state. It seems I don't reap benefits from providing a safe work environment and I pay the same rates as high-claim employers. Is this an issue I can contest?
RANDY ZARECKI FITNESS TOGETHER
A Minnesota is a "competitive rate" state, and has abandoned uniform state rates. There are many different insurance organizations that compete for a share of the Minnesota workers' compensation market.
Insurance companies set their own rates and compete on price. All insurance companies have access to statewide data about workers' compensation benefits paid, which are used to build their base rates every year. In calculating their rates, insurers add to those benefit costs what they project to pay in overhead and claims-handling costs, and what they need to earn a profit.
Individual employers can also benefit from other mechanisms designed to shift workers' compensation costs from employers that have low claim rates to those that have higher claim rates. These mechanisms are:
"Experience rating" -- a plan used by insurers to give premium credits to employers that have less-than-average claim rates.
"Retrospective rating" -- a plan for larger employers under which the premiums actually paid are adjusted over a one- to three-year period to reflect actual rates.
"Scheduled credits" -- an upfront premium credit given to employers by the insurer.
"Dividends payments" -- paid by some insurers to policyholders to distribute a share of the insurer's overall profit from its insurance business.
While Minnesota is a state where insurers compete for business based on price, how much an individual employer can benefit from this competition depends on two well-proven approaches: keeping a safe workplace with fewer claims and shopping around among insurers for the best price.
DANIEL B. MCLaughlin, Director, Center for Health and Medical Affairs, University of St. Thomas Opus College of Business and Author of "High Performance Health Care"