November 16, 2017

OR DCBS: Workers’ Compensation Costs to Drop for Fifth-Straight Year

Salem, OR -The Department of Consumer and Business Services (DCBS) recently announced that Oregon employers will see a key portion of their workers’ compensation costs drop by an average of 14 percent in 2018. This marks the fifth year in a row that businesses will experience an average decrease in the “pure premium.” Altogether, the rate has declined by an average of 33 percent since 2013.

Next year’s average decrease in pure premium – the portion of the premium employers pay insurers to cover claims costs for job-related injuries and deaths – is part of a package of rates designed to maintain workplace safety and health programs while preserving historically low costs.

The other rate proposals include:

  • An increase in the premium assessment, which funds state costs of running workers’ compensation and workplace safety and health programs, from 6.8 percent to 7.4 percent. The increase is needed to support worker protection and related programs to keep pace with an expanding economy.
  • No change in the payroll assessment, which supports the Workers’ Benefit Fund. The fund pays for highly successful return-to-work and other special injured-worker programs. The assessment will remain unchanged at 2.8 cents per hour worked.
  • The combination of the changes in pure premium and assessment rates is a net reduction in costs for the average employer. The average employer would pay 90 cents per $100 of payroll for claims costs and assessments, down from $1.03 in 2017.

    “Keeping workers’ compensation costs low helps maintain a healthy business climate for Oregon employers,” said Jean Straight, DCBS acting director. “Oregon is unique in achieving these low costs while at the same time preserving strong worker protection programs and benefits for injured workers.”

    The decrease in pure premium is based on a recommendation from the Florida-based National Council on Compensation Insurance Inc. (NCCI), which analyzes industry trends and prepares rate recommendations for the majority of states. Pure premium reflects only a portion of workers’ compensation costs, but is the key factor behind annual cost changes. The decrease is an average, so an individual employer may see a larger or smaller decrease, no change, or even an increase depending on the employer’s own industry, claims experience, and payroll. Also, pure premium does not take into account the varying expenses and profit of insurance companies.

    The decrease in the pure premium is effective Jan. 1, 2018, but employers will see the changes when they renew their policies in 2018. The changes to the premium and payroll assessments are effective Jan. 1, 2018.

    Workers’ compensation pays injured workers for lost wages and medical care for job-related injuries. Declines in average medical care and wage replacement costs are the key factors continuing to drive down the pure premium.

    Oregon’s workers’ compensation premium rates have ranked low nationally for many years. Oregon had the seventh least expensive rates in 2016, according to a biennial study conducted by DCBS. That was an improvement from Oregon’s ranking as the ninth least expensive state the last time the study was done, in 2014.

    A chart summarizing all the changes: http://www.oregon.gov/DCBS/cost/Documents/wc-summary.pdf (PDF)

    A public hearing on the premium assessment is set for Thursday, Sept. 21, at 3 p.m. at the Labor and Industries Building, Room B, in Salem.

    Annual Oregon average pure premium rate changes and average changes by industry (PDF)

    Source: OR DCBS

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