WILMINGTON – Delaware government and business officials are touting a new study of workers’ compensation premium rates as another indication that the First State is improving its ability to attract and retain businesses.
Following a systemic overhaul of its workers’ compensation system, Delaware produced the most significant downward drop in workers’ compensation premium rates of any state in the nation, according to recently released 2010 rankings by the Oregon Department of Consumer and Business Services (see report here).
The ranking lists Delaware’s workers’ compensation premiums as 34th highest in the country. That is a dramatic drop from 2008, when Delaware had the 7th highest premiums, and 2006, when Delaware came in third.
The 2010 rankings are the first since workers’ compensation reform efforts were fully enacted in Delaware.
“Five years ago, Delaware’s high workers’ compensation insurance premiums were really in albatross around our business community’s neck,” said lieutenant governor and former insurance commissioner Matt Denn. “Our state’s workers’ comp rates were among the five highest in the country, and those high rates were just making our businesses less competitive and our state less competitive. And the good news today is that we’ve turned that around.”
Lt. Gov. Denn adds that the impact of the drop in premium rates can be seen most significantly from a regional perspective, where Delaware competes directly with other states. New Jersey’s premiums are 7th highest, and Pennsylvania’s are 14th highest. Maryland is still better than Delaware, ranked 42nd in the Oregon survey.
Denn still sees significant progress. “Our rates in Delaware are now better than Pennsylvania’s rates and better than New Jersey’s rates, whereas two years ago they were worse,” he said. “Those two states are neighboring states where businesses there were underbidding Delaware businesses for Delaware work partly because of our state’s higher workers’ compensation premiums. So the fact that we now have lower premiums than two of our neighboring states is another piece of significant news.”
Delaware State Chamber of Commerce President Jim Wolfe says in the current economic climate Delaware’s worker’s compensation premium rate ranking is welcome news, loosening “one of the major bottlenecks for businesses coming into the state.”
Denn points to legislation passed by the General Assembly in January 2007 as one reason for the drop. He says rate reductions he ordered in 2007 and 2008 as insurance commissioner also played a role. Those rate reductions came after the insurance commissioner’s office determined that insurance companies were charging higher premiums than costs warranted. The reductions withstood a court challenge by insurance providers in 2008.
The legislation passed in January 2007 was cosponsored by state Senate President Pro Tempore Anthony DeLuca and recently retired state Representative William Oberle (R-Beecher’s Lot). The changes included the creation of a health care payment system intended to control health care costs in connection with workers’ compensation. The system was developed by a health care advisory panel appointed by Governor Ruth Ann Minner and later adopted by regulation of the Department of Labor. The system provides clear schedules of maximum acceptable charges for professional services, hospital services, independent treatment centers, laboratory work, and pharmaceuticals and allows the schedules to be adjusted annually relative to the Consumer Price Index. The reforms also included health care practice guidelines, certification of health care providers, a fee schedule, health care provider and employer forms, and utilization review.
Sen. DeLuca says bringing all interests involved to the table, including the business community, the legal community, organized labor, and contractors, allowed this reform effort to succeed where others had failed. “It does demonstrate that when you get diverse groups in the room together—you get business, you get labor, you get Republicans, you get Democrats, you have the House, the Senate—and you lock the doors and say basically, ‘We’re not coming out until we have an agreement,’ and you diligently work at it, you can come forth with a plan and everybody’s behind it.”
Sen. Anthony DeLuca discusses how workers’ comp reform in Delaware was achieved (audio).
Former Rep. Oberle believes the key difference in this reform was that it identified the root causes of Delaware’s high premium rates. ”There was always this suggestion out there that the legal community was the cost driver in terms of workers’ comp, and when we got down and started looking at the numbers, we found that to be untrue. The cost driver was on the medical side.”
Oberle applauds the work of Dr. Bruce Rudin, a member of the Health Care Advisory Panel. “He took the problem head on. He acknowledged that there was a problem, and then we began to compromise in areas where we could cut cost and still provide a level of service that the injured worker demands and should have.”
Chamber of Commerce President Wolfe says looking outside the state for solutions made this effort effective.
“We didn’t do it in a vacuum. We checked with other states to see exactly what worked, what didn’t work, what was significant, why things failed, and we put the things we thought were working in place. And obviously they must have worked [here] too.”
Denn says state officials estimated that the reforms would cut the workers’ compensation rate by about 45 percent. “That meant that literally tens of millions of dollars were going to stay here in Delaware instead of flowing out of state to insurance companies and other states. And that was, among other things, a real boost to some of our local businesses during this period of time where we were facing a major recession.”
