Ohio employers currently pay their workers’ compensation premiums “retrospectively.” This means that when employers write a check for their workers’ compensation premium, they are paying for the previous six months of coverage, or in “arrears.” For example, private employers paid in February 2013 for the July 1, 2012 to December 31, 2012 coverage period.
Prospective billing is an industry standard and builds upon ongoing efforts by BWC to modernize its operation. Under prospective billing, BWC would, like most insurance companies, collect employer premiums for the upcoming policy period. In other words, employers will make upfront payments to BWC for their workers’ compensation coverage.
Potential Benefits of Prospective Payment:
The BWC believes that a switch to a prospective billing system could provide the following benefits to Ohio employers:
- Opportunities for more flexible payment options (e.g., monthly, quarterly, yearly) with possible discounts for those who pay a year in advance for example.
- Ability to better anticipate budgetary impacts of workers’ compensation coverage, especially for public-taxing districts.
- Better opportunities for BWC to provide quotes online or via phone.
- Fewer costs from employers who either don’t pay premiums timely or have workers injured without coverage being mutualized among employers in good standing.
- Moving to prospective payment also increases BWC’s ability to detect employer non-compliance and fraud.
The legislature has given BWC the authority to pursue prospective billing, meaning the switch could occur as early as late 2014. Prior to switching, BWC plans to ask its Board of Directors to authorize a credit for all employers equal to the full amount of six months’ premium. This would allow employers to make their first prospective payment without worrying about also having to pay their last retrospective payment. This would equate to an estimated $900 million savings to businesses. In addition, this switch would result in rate reductions of 2 percent for private employers and 4 percent for public employers.
Cors & Bassett will continue to monitor this BWC initiative and inform employers when to expect these savings to occur