In light of a number of recent public announcements from the Ohio Bureau of Workers’ Compensation (BWC), we, at Benefits 1 Group, bring you a special report intended to address key issues impacting workers’ compensation programs throughout the state. As we share this information and recent news, we also hope to provide guidance and insight as to how new rates in Ohio, recent legal activity, and other current political dialogue can affect your bottom line, as well as the future composition of your workers’ compensation program. As always, our team of experts remain available for any questions or feedback you might have regarding the state-wide activity and announcements. Every step of the way, we are looking out for the best interest of your program and its impact on the overall success of your business.

OCTOBER 31, 2011
• DFSP Application Due for January 1 start date
• Public Employers Deductible Program Application Due
• Public Group Retro Applications Due
• Public Individual Retro Applications Due

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At their May 2011 meeting, the Ohio Bureau of Workers’ Compensation Board unanimously adopted a recommendation to reduce overall workers’ compensation base rates for private employers by an average of 4% beginning July 1. The cut will save employers approximately $65 million, and unlike prior years, the average rate reduction will apply to employers regardless of whether they participated in incentive programs such as group rating.

The overall drop in base rates includes a decrease in the average rate for the Manufacturing Industry Group of 7% and the average rate for the Commercial Industry Group, which includes various retail and wholesale establishments of 5%.

The rate change reflects an average reduction. Each employer’s actual rates incorporate overall claims cost trends within their specific industry as well as their own individual performance and enrollment in savings programs. Contact Benefits 1 Group with questions regarding your specific rates.

For more information, visit: www.ohiobwc.com/home/current/news.asp

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The BWC’s Special Investigations Department (SID), which works to deter, detect, investigate, and prosecute workers’ compensation fraud, has continued its efforts to crack down on abuse throughout Ohio. In the month of April, 10 individuals (including employers and claimants) were convicted or pleaded guilty to charges related to operating a business with lapsed coverage, falsification of documentation, and collecting workers’ compensation while holding alternative forms of employment. Sentences have included restitution of funds, jail time, and community service.

Dr. James Lundeen, Sr., the subject of investigations for over-prescribing narcotic pain pills to a large number of patients throughout the state, has had his license suspended by the State Medical Board. To date, he has also been decertified by the BWC. It has been reported by the Bureau that Lundeen ranks second in the number of prescriptions administered to approximately 800 injured workers throughout Ohio.

Most recently, a Pepper Pike businessman was sentenced for operating his business without proper workers’ compensation insurance coverage while his employees filed multiple claims. The BWC is seeking an injunction for a record $600,000+ owed to the Bureau. Since his lapse in coverage beginning in 2006, the employer had 25 claims filed against his policy.

For more information, visit: www.ohiobwc.com/home/current/news.asp

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At their May 27th meeting, The Ohio Bureau of Workers’ Compensation Board of Directors determined that split rating would be postponed until 2013. Benefits 1 Group will keep you apprised of any new information announced by the BWC.

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The first meeting of 2011 of the Bureau of Workers’ Compensation (BWC) Task Force, chaired by Sen. Tim Grendell (R-Chesterland) took place Thursday, May 12, 2011. The purpose of the meeting was to resume investigation of whether privatizing the workers’ compensation system is constitutional and what is the best structure for Ohio.

The meeting began with a presentation by Chad Readler of Jones Day who reviewed the constitutionality issue surrounding private market competition and Ohio’s BWC. The short answer, according to Readler, is that the Ohio Constitution does not need to be amended and does not prohibit or limit privatization of the workers’ compensation system in Ohio. However, he did state any type of system would need to be under judicial review, but that at this point the Legislature should be able to pass legislation under Article II.

Philip Fulton, a workers’ compensation attorney, author of a book on the subject and a member of the task force, disagreed with Readler’s interpretation of the constitutionality of privatizing and with his analysis. Other members of the task force also challenged Readler’s assessment on the constitutionality of the approach. Fulton said that the constitution does not provide for a private system. He also disputed Readler’s statement regarding that a constitutional amendment is not required to privatize the workers’ compensation system.

The task force also heard from representatives of the National Council on Compensation Insurance (NCCI), a clearinghouse that facilitates workers’ compensation systems in 40 states. NCCI gave a similar presentation to the members of the task force during the 128th General Assembly.

NCCI representatives highlighted different state models for providing workers’ compensation to employers; reasons that states change from one model to another; and a review of Nevada and West Virginia, two of the most recent states to change their public state-run model to a private workers’ compensation system.

Lori Lovgren, for NCCI, explained the various state models used in the 40 states the organization represents:

• Exclusive state fund, which writes all of workers’ compensation insurance, such as Ohio
• Competitive state fund: state fund is market of last resort, which includes a state fund, private carriers and self-insured
• Competitive state fund with separate market of last resort, which includes a state fund, private carriers, self-insured and a residual market

Lovgren explained that one of the benefits of a competitive state fund is that most do not pay federal income taxes with the IRS exempting state funds that operate as the carrier of last resort from federal income tax.

It was pointed out by task force members that Ohio would lose the federal income tax advantage if privatization occurred.

Many states have made the switch to a private competitive system because of three main variables:

• To relieve the state or taxpayers from any potential liability for losses that exceeds premiums
• To reduce workers’ compensation system costs and employer premiums
• To allow the state to focus on employer compliance and system administration

Various questions that were not readily answered by NCCI representatives included market share data in other states and a comparison of insurance rates and premiums for employers and employees under a competitive system. Carter said she would provide that information to the task force.

The task force, according to Grendell, plans to continue further investigation in the coming months into whether the privatization model or a hybrid structure that would maintain the state system are viable for Ohio.

Story originally published in The Hannah Report on May 12, 2011. Copyright 2011 Hannah News Service, Inc.

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On June 9, 2011, the Ohio Supreme Court recognized the wrongful termination of an employee in the case of Sutton v. Tomco Machining, Inc. The Court determined that the employer violated R.C. 4123.90, a state law that prohibits the firing of workers in retaliation for filing workers’ compensation claims. The Court further established “Ohio recognizes a common-law tort claim for wrongful discharge in violation of public policy when an injured employee suffers retaliatory employment action after injury on the job but before the employee files a workers’ compensation claim or institutes or pursues a workers’ compensation proceeding.”

The case established that the employer, Tomco Machining, Inc., was in clear violation of public policy in so much as the company was unable to provide substantial grounds for immediate termination of a worker who happened to be injured on the job and then dismissed upon reporting the injury to the company’s president within the brief period of one hour.

In April of 2008, employee DeWayne Sutton was fired in what appeared to be a retaliatory termination. While Sutton did not file a claim during the brief period between his injury and termination, he later pursued and was awarded workers’ compensation. Later, Sutton filed a civil suit against his former employer citing wrongful discharge in violation of R.C. 4123.90, as well as wrongful discharge in violation of Ohio public policy.

R.C. 4123.90 provides that “No employer shall discharge, demote, reassign, or take any punitive action against any employee because the employee filed a claim or instituted, pursued or testified in any proceedings under the workers’ compensation act for an injury or occupational disease which occurred in the course of and arising out of his employment with that employer.”

Moving forward, it is imperative that employers look to this case as an example of how R.C. 4123.90 is upheld and interpreted in the courts. Employers must have credible evidence in support of the termination of an employee, and that termination cannot be related to a worker’s intent to report an injury. The Court’s decision also establishes that any awards paid out for wrongful discharge identified as those in violation of the public policy against retaliatory employment actions are limited to those listed in R.C. 4123.90. Therefore, this limits a judgement to any further damages.

Content and quotes used in this article were originally published in Sutton v. Tomco Machining, Inc., Slip Opinion No. 2011-Ohio-2723.

For more information on the case, visit The Supreme Court of Ohio & The Ohio Judicial System website: www.supremecourt.ohio.gov/PIO/summaries/2011/0609/100670.asp

If you have any questions regarding workers’ comp law, we encourage you to seek advice from your corporate counsel.

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