State Workers' Compensation Fund Decreasing

AKRON, Ohio (AP) - The state's workers' compensation fund is not as flush as it once was, and employers soon will have to pay full premiums instead of the 75 percent reductions they've enjoyed in recent years, the Akron Beacon Journalreported in a story Sunday.

The Bureau of Workers' Compensation blames increased medical costs and smaller returns on investments.

Employers will continue to get a 75 percent reduction in premiums from the bureau for the first half of fiscal year 2003, which begins July 1. Employer charges will be reduced an additional $600 million in the next six months, and government employers will be charged $210 million less for the entire calendar year.

But the bureau's oversight commission has voted not to give reductions to businesses for the second half of the year, which means employers must pay full premiums.

Employers were billed $1.7 billion for workers' comp premiums in fiscal year 2001 but only paid about $400 million because of the reductions.

Since 1995, employers' bills have been cut by about $10 billion in six-month credits labeled as one-time reductions.

Workers Compensation Bureau spokesman Jim Samuel said Sunday that benefits to injured workers, widows and orphans will not be affected by the change. Any reduction in benefits would require legislative action, and nothing is being proposed, he said.

Samuel said the bureau has money on hand to pay the life of all current claims.

Employers' reductions were made from the bureau's surplus fund, which was created in 1995 as a cushion in case the economy weakened, Samuel said.

The surplus target is $3 billion, he said. But because of larger than anticipated investment income, it often ranged between $4 billion and $5 billion in the late 1990s, peaking at nearly $6 billion.

The surplus has fallen to $2.4 billion because of the recent economic downturn.

Some union leaders and attorneys who represent injured workers said the bureau is doing too much to help businesses.

"We're concerned about the depletion of the fund," said Jim Harris, community action program coordinator for the United Auto Workers union.

Some union officials want the agency to keep its profits and eventually pay all costs from investment income.

But bureau administrator James Conrad said the surplus was "created to be there when the recession hit. It was always created to be there so we wouldn't have to stick it to the employers in Ohio."

In a difficult economy, the bureau is obliged to help businesses by trimming itself to the minimum, Conrad said.

The bureau was criticized for the unpredictable rates of premiums, which soared in the late 1970s and 1980s, when the bureau raised rates up to 30 percent a year.

A rally in the investment markets during the 1990s earned the bureau at least $1 billion a year for six consecutive years, including $3.3 billion in 1999.

In a budget correction bill last fall, the legislature urged the bureau's administrator to continue the 75 percent reductions to employers.

But earlier this year, insurance consultants advised Conrad to raise employers' premiums from zero to 8.1 percent -- the first time in at least four years they suggested an increase.

Conrad and the commission did not raise rates, instead taking the consultants' recommendations during the previous three years by giving reductions in the middle of the suggested range.

(Copyright 2002 by The Associated Press. All Rights Reserved.)