Hawaii considers insurance cost cut
Worker's compensation insurance could be cheaper starting Jan. 1
The state is considering allowing a reduction in the cost of workers' compensation insurance beginning Jan. 1, following a request by the National Council on Compensation Insurance.
The council has filed for a 16.8 percent decrease in loss costs -- the largest component of insurance premiums -- for Hawaii.
The reduction is based on fewer claims filed by local employers in 2005, the last year complete data is available.
The state has 90 days to decide whether to approve the request.
State Insurance Commissioner J.P. Schmidt said yesterday that his agency does have questions about the filing, but expects a to make a decision within a month.
Even if the filing is approved, insurance companies are not required to reduce premiums. But they can choose to adopt the council's loss costs and subsequently file their own cost factor for covering other components that ultimately determine premiums.
Besides loss costs, workers' comp premiums are based on production and general expenses, contingencies, profit, taxes, licenses and fees.
A significant reduction in claims over the past two years also resulted in decreases of 18.2 percent and 12.3 percent in loss costs, which represents what insurers' pay for claims. However, the state approved a 3.9 percent increase last year because of rising health-care provider costs.
"Claim frequency has continued to drop due to the great efforts of Hawaii's employers in providing a safer workplace for our workers," said Schmidt.
Meanwhile, the state Department of Labor and Industrial Relations has made improvements in the enforcement of the state's workplace safety and health laws through partnerships with employers and labor unions, also contributing to the reduction in workers' comp claims.
"However, we still need to work with the Legislature to reduce the adversarial nature of the system and improve the quality of care to our injured workers," Schmidt said.