State approves raise in workers compensation rate

By Frank Cho
Advertiser Staff Writer

The state today approved increasing workers' compensation rates 4.6 percent, or about half the amount the industry had requested and said was needed to cover its costs.

The National Council on Compensation Insurance, which represents the industry in tracking and setting rates, had asked for a 9.1 percent rate hike in the so-called "loss-cost" portion of workers' comp rates. But state insurance regulators said that would have raised premiums higher than the cost of claims the insurers were paying.

"This change follows consecutive decreases in 1996, 1997 and 2000, which totaled more than 41 percent," said Wayne Metcalf, the state's insurance commissioner.

The decision reverses several years of steady rate decreases by insurers and likely will mean Hawai'i businesses will be paying more money this year for compensation coverage for their workers.

According to the NCCI's most recent rate filing, the council said the "loss-cost" portion of workers' comp claims for insurers are expected to rise about 13.3 percent this year because of higher medical care costs and the rising number of claims being filed.

The "loss-cost" portion of workers' comp rates is directly related to covering the cost of claims and does not include expenses, taxes or profits of insurers. It represents about 60 percent of the premium employers pay insurers.

After several years of dramatic rate increases, the state started reforming workers' compensation insurance in the mid-1990s. Since then workers' comp rates have fallen more than 40 percent.

There has been a great deal of upward pressure on workers' comp rates over the past couple of years because of sharp increases in medical costs.ÊBut because of intense competition, many insurers said they were losing money because workers' comp premiums had been driven below cost.

Today's rate hike will be the second time in a year that the state has allowed insurers to increase a portion of the workers' comp rate. In January, insurers raised rates 3.5 percent, citing increased disability costs for Hawai'i workers.

Reach Frank Cho at fcho@honoluluadvertiser.com or 525-8088.