Michigan’s Work Comp rate continues to decrease, saving job providers $327 million since 2011

Article courtesy of LARA 
Media Contact:  Jason Moon 517-373-9280

October 6, 2015 – Michigan’s workers’ compensation system continues to demonstrate to job seekers and employers that our state has the right regulatory environment for economic growth while still protecting injured workers. The Michigan Department of Licensing and Regulatory Affairs today announced the pure premium advisory rate for workers’ compensation insurance will drop by an average of 6.9 percent in 2016, a 32.7 percent decrease since 2011, saving Michigan employers an estimated $327 million.[1] Recent reforms have stabilized Michigan’s 103-year old workers’ compensation system, ensuring the promise of compensation for injured Michigan employees.

“Our stable work comp system has helped in two key ways: ensuring injured Michiganders get the care and benefits they deserve and by contributing to Michigan’s comeback.” said Gov. Rick Snyder. “By continuing to reduce unnecessary costs, the system has become an important economic asset. These considerable business savings can free up capital and allow companies to hire more workers, increase salaries and expand operations.”

The pure premium is a key factor in determining a job provider’s overall expenses for workers’ compensation and is the portion of an employer’s insurance premium that pays for the anticipated claims costs for work-related injuries. These rates are developed by comparing the losses (or claims) for a particular industry to the payroll for that industry.

The most recent comparison data shows that Michigan’s cumulative pure premium decrease of 27.7 percent from 2011-15 outpaces all Midwestern states and is second best in the country. While Michigan’s rate continues to plunge, the national average increased 11.3 percent.[2]

“Michigan companies can use a reduction in work comp costs to invest in their employees and their business,” said LARA Director Mike Zimmer. “These decreases help us retain Michigan job providers, allow them to grow and encourage employers from around the nation to move here.”  

In late 2011, Gov. Snyder signed sweeping legislation reforming the state’s workers’ compensation system. These improvements included defining disability and post-injury earning capacity, and have played an underlying role in the reduction of costs for our employers. The changes brought certainty to Michigan’s work comp system, ensuring the protection of Michiganders injured on the job and have helped put them back to work.

“Michigan employers and workers continue to see the benefits from the state’s reforms,” said Michigan Workers’ Compensation Agency Director Mark Long. “These improvements created a foundation for our agency’s efforts to reduce costs for employers and ensure that we continue to help Michiganders return to health and protect injured workers.”

A 2014 Workers’ Compensation Research Institute study, Predictors of Worker Outcomes in Michigan, found that 79 percent of injured Michigan workers were satisfied with their medical care.  

The WCA’s emphasis on reducing costs for job providers has included the administering of a well-developed fee schedule which controls medical costs for work-related injuries. A recent study shows Michigan’s cost per claim (CPC) and medical CPC are among the lowest in the country.[3] 

The effective cost containment is in conjunction with the Reinventing Performance in Michigan initiative. All of the WCA’s regulatory processes were thoroughly reviewed and extensive technology upgrades were implemented to reduce claims processing times for business customers. Improvements include:

Michigan’s injured workers and their employers are governed by the Workers’ Disability Compensation Act. The Act was first adopted in 1912 and provides compensation to workers who suffer an injury on the job and protects employers’ liability. The mission of the WCA is to efficiently administer the Act and provide prompt, courteous and impartial service to all customers.