Governor’s Proposal Could Give Ohio State Funded Employers Two Billion Dollars

May 3, 2013Articles
Governor Kasich has proposed what could result in a refund of a full-year of premiums to Ohio employers over the next two years. Specifically, he has proposed a $1 billion rebate for the policy year beginning on July 1, 2011 and ending on June 30, 2012 for those employers who paid premiums during the period, who are in good standing with the Bureau, and who do not owe any money. Of this, $113 million would go to cash-strapped local governments.

This proposal is going to the Board of Directors of the Bureau of Workers’ Compensation in its May meeting and checks could go out to employers as soon as June, according to the statement by the Governor’s office. This would be the equivalent of about a six-month payment to those employers who are eligible. The Bureau can approve the rebate without legislative activity.

In addition, the Governor is proposing that the Bureau move to a “prospective” system of paying workers’ compensation premiums whereby employers would pay two months before the beginning of the policy year, instead of the current procedure of paying afterwards. Employers would therefore pay premiums in April for the second half of each year and presumably again in October for the first half of the following year. Such a change would make Ohio’s system consistent with that of virtually every insurance carrier in every other jurisdiction in the country.

In order to make the transition, the Governor has proposed that when the first prospective premium is due, the Bureau would waive the premium for the retrospective period. In other words, if the change were effective in April of 2014 as proposed, a prospective payment would be made at that time, but the amount which is regularly due in August (October for public entities) of that year would be waived. This is essentially another rebate of one-half of one year’s premium, thus bringing the total proposed rebates to $2 billion.

The switch to a prospective payment system would require legislative action and in the event the legislature does not approve, then the premium waiver would not occur.

The rebate plus the proposed move to a prospective system is possible because the Bureau has net assets in excess of $8.3 billion, over the target level of assets in which it has established as necessary to pay claims. The Bureau has obtained an 11.4% total return on its fund over the past three years. This is indeed good news for employers and should result in lower future premium rates.