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Businesses in Michigan are continuing to see savings in their workers compensation rates and have saved more than $277 million since 2011, a fact the state now touts to companies interested in coming to Michigan.
Businesses have seen a 27.7% drop since 2011 in the pure premium rate they pay to fund the workers' compensation system, which provides benefits to workers recovering from injuries suffered on the job. Employers pay the full cost of the program, which paid out $1.2 billion in 2013.
This year's decrease is 6.5%, and will take effect for Michigan businesses Jan. 1.
“This is a story about Michigan being competitive,” Workers' Compensation Agency Director Kevin Elsenheimer told Crain's.
Mr. Elsenheimer said the Michigan Economic Development Corp. uses this data in its business attraction efforts and considers it a net asset, as Michigan's decline in the pure premium rate is the best in the Midwest. It is also the second-largest drop in the country, behind only Montana, where the rate dropped 34.9% in that time period.
During the same time, the national average for pure premium rates increased 10.8%. The pure premium rate is the piece of a company's insurance premium that pays for anticipated claims costs for work injuries.
“Michigan's considerable reduction in workers' comp costs is great news for our employers, employees, job seekers and any company looking to move here,” Gov. Rick Snyder said in a statement. “These significant savings are a real asset in terms of growing and retaining jobs and give us an advantage over competitor states in attracting new businesses.”
Rep. Jim Townsend, D-Royal Oak, disagrees.
“Businesses don't make investments and location decisions based on workers comp rates,” Rep. Townsend said.
And, he said, as a state, we should be competing for highly skilled workers, and these changes make that harder.
“A rational worker would leave a state where they are less protected,” Rep. Townsend said. “Making our state less worker friendly is not the path to economic growth.”
Mr. Elsenheimer said this is the fourth year in a row the pure premium rate has dropped.
He attributes that savings to the improving economy and improving efficiency at his agency. But he said the biggest factor in the decreased rates is due to the controversial changes to the system contained in House Bill 5002, which Gov. Snyder signed into law in 2011.
Under that law, an employee's weekly compensation after an injury is equal to 80% of his or her after-tax average weekly wage.
Under the changes, if someone is injured on the job, they can no longer just collect their workers' compensation checks until they can return to work. If there is another job available that they could reasonably do, regardless of whether it is in their field of expertise, they have to take that job, or see a reduction in their benefits.
Rep. Townsend opposed these changes in 2011 when they were debated in the House Commerce Committee, and remains opposed today.
Republicans and business groups that sought the changes couldn't point to any abuses in the system, and rates had been falling prior to the changes as well.
“It was a solution in search of a problem,” Rep. Townsend said.
Critics have contended that while businesses are saving money, it comes at the expense of the injured workers.
“When we're saving money here in Lansing, that allows employers to use that money to improve their businesses, to hire more people and to improve the economy of Michigan overall,” Mr. Elsenheimer said.
During the debate over the changes in 2011, Democrats and union officials complained that under these new policies, rather than focus on getting better so they can get back to work, the employee will have to go out and seek a job, possibly in a profession they are not trained in.
If a worker were to break a leg at his or her factory job, for example, rather than wait until it heals and return to work, now that employee might have to take a job at a call center. “I hear that that does occur,” Mr. Elsenheimer said. “These telecommuting jobs are some of the jobs people talk about, but again, the key is to get people back into productive society as soon as possible.”
Mr. Elsenheimer said the agency has found that if people are out of a job for a period of time, the tendency is for them to stay out of work.
“We've put a priority on putting people back to work,” Mr. Elsenheimer said. “Workers' Compensation isn't a social welfare program. Workers' Compensation is an insurance policy to help people get to their maximum medical viability and get them back to work as soon as possible.”
Chris Gautz writes for Crain's Detroit Business, a sister publication of Business Insurance.
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