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November 19, 2002

Pennsylvania Worker's Compensation Insurance Rates

Expressed opinion by Michael A. Kerstetter, PFIW Dauphin County

Here is one of the biggest reasons that the worker's compensation insurance rates are so high for Pennsylvania.  The worker's compensation rate setting process. Here are the sections of the Pennsylvania Worker's Compensation Act 57 that govern the rates paid to insurers:

• Section 701 - This section defines what the General Assembly is trying to provide for worker's compensation insurance rates.  The Pennsylvania Legislators have authorized the worker's compensation insurance companies that serve Pennsylvania to get together and form an organization to come up with an insurance rate for worker's compensation insurance.  This practice is putting the fox on guard in the chicken coop.  The Pennsylvania Compensation Rating Bureau was formed by the worker's compensation insurance companies serving Pennsylvania as a result of section 701.  It looks and sounds like the insurance companies wanted the name of the organization to appear to be an agency of the Pennsylvania government.  The use of the word bureau is misleading.  The General Assembly wanted to have input from the insurance industry but what about some input from the employers.  They have to be able to pay the rate proposed by the rate organization and approved by the Pennsylvania Insurance Commissioner.  The employers should be represented in this process the same as the insurance industry.  Without employer input how does the Pennsylvania Insurance Commissioner know what would be a fair affordable rate?  The worker's compensation insurance rates should be set with all parties affected included in the process.
• Section 704 - This section sets the standard for worker's compensation insurance rates.
• Section 708 - This section gives authority to the Insurance Commissioner of Pennsylvania to investigate whether or not worker's compensation insurance rates are excessive, inadequate or unfairly discriminatory.  I would bet that this part of the process is very weak.  I have seen how the Insurance Commissioner's office of Pennsylvania investigates, they do not do a very good job.
• Section 709 - This section gives the authority to the Insurance Commissioner of Pennsylvania to reject any worker's compensation insurance rates that do not meet the standard of section 704.
• Section 710 - This section gives authority to the Insurance Commissioner of Pennsylvania to discontinue the use of a rate that does not meet the standard of section 704 and order the rate organization to come up with a better rate.

It is hard to imagine how we can have such high and outrageous worker's compensation insurance rates in Pennsylvania with all of these control mechanisms in place.  Just who is guarding the chicken coop if the rates are so high?  Perhaps if the Pennsylvania Insurance Commissioner took a more aggressive roll in the rate setting process and really use the tools available to control the costs of worker's compensation insurance rates perhaps we would have reasonable rates for workers compensation in Pennsylvania.   It sure appears as though the current administration is allowing the insurance industry to make large profits on worker's compensation insurance in Pennsylvania.  Is this a pay back for political contributions?

What would happen if Pennsylvania had an Insurance Commissioner who was pro insurance industry in office to oversee the worker's compensation insurance rate setting process?  Then to cover up the corporate greed and to justify the high rates the worker's compensation insurance industry put the blame on injured workers for the high cost of workers compensation insurance.  It might be just like the situation we find ourselves in today, here in Pennsylvania.

What would happen to the worker's compensation insurance rates if the workplace was safer and fewer workers were getting injured?  Pennsylvania had an incentive enacted for a brief trial period to encourage employers to strive towards better workplace safety.  It is about to run out and no one but the employers and employees wants it to continue.  It offered a small discount to worker's compensation insurance rates for employers if they organized and instituted a safety committee.  This is a good safety program to help reduce workplace injuries.  Why would the Pennsylvania Legislature want to get rid of this incentive?  Perhaps they just want to help the worker's compensation insurance corporate profits increase.  The Pennsylvania Legislators must be under great pressure by the worker's compensation insurance industry to get rid of a safety program discount incentive.    

Since worker's compensation insurance rates are so high in Pennsylvania just who is guarding the chicken coop for Pennsylvanians?  The Fox!  Let's put the blame for high worker's compensation rates where it belongs, on the Pennsylvania Insurance Commissioner, and not on the backs of injured workers.  Worker's compensation benefits for injured workers have been reduced so much that pretty soon we will have to call it Insurance Compensation.  Reduce the benefits anymore and we will be calling it "insurance compensation" instead of "worker's compensation".  Soon an injured worker will have to pay the employer/worker's compensation insurance company for getting injured on the job.

Where is the protection for the rate setting process?

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Last modified: 04/29/08