State lawmakers say workers' comp hikes detrimental

October 25, 2012

As members of the House Small Business Caucus, we would like to state publicly how concerned we are over a proposal to increase workers’ compensation insurance rates by more than 40 percent for nearly all businesses in Delaware.

If approved, a 40 percent increase to premium rates - set to take effect Dec. 1 - could essentially cripple Delaware’s economy, making the state’s rates the second highest in the nation, only behind Illinois.

Workers’ compensation insurance provides coverage for an employee who is injured on the job.  Coverage for injured employees typically includes medical and rehabilitation costs, as well as lost wages.

The proposed rate hike is part of a filing submitted recently by the Delaware Compensation Rating Bureau.  The proposal will be the subject of a public hearing next month by the State Insurance Commissioner and, at that time, discussions will be held on whether to approve the rate hike in its current form or to amend the filing.

Realizing the magnitude of this issue and the possibly very damaging effects a more than 40 percent increase could have on Delaware’s small business community, members of the House Small Business Caucus recently met with the Department of Insurance and its team of experts reviewing the DCRB filing.

Deputy Insurance Commissioner Gene Reed provided the committee with an overview of the filing, explaining that the rate increase proposal - using 2010 insurance claim data - is the result of two main outlying factors:

• An increase in the length and severity of the claims; and

• An increase in the medical costs associated with treating the claimants.
The larger concern, at this point, is the effect a more than 40 percent increase would have on small business owners in Delaware.  There is a general consensus that a rate hike to this degree would have a detrimental effect on companies.  In simple terms, a business now paying $20,000 in workers’ compensation rates will be paying nearly $30,000, and a company paying $70,000 would be paying close to $100,000.

These increases to the already numerous and often rising costs of running a business are expected to go into effect in less than a month-and-a-half.  What business could really afford such a dramatic budget increase with only weeks’ notice?  Not only will business growth be automatically stunted if this increase goes into effect, many companies could be forced to examine whether layoffs are necessary.  Neither decision would benefit Delaware’s already sluggish economy.

We encourage small business owners to attend a public information session that has been scheduled on the rate hike proposal, Tuesday, Oct. 30, between 7 and 9 p.m. at the CHEER Community Center on Sandhill Road in Georgetown.

A public hearing by a hearing officer will then be held Tuesday, Nov. 20, after which the insurance commissioner will make a determination on “whether the requested rates are excessive, inadequate, or unfairly discriminatory.”

We appreciate the feedback we have received so far from many Delaware companies on this proposal and we hope that they stay involved in the process over the next few weeks.  In addition, we will continue to examine the workers’ comp issue, as well as whether anything can be done legislatively as it relates to improving the system when the General Assembly reconvenes in January.

The Small Business Caucus remains committed to those issues and concerns that impact employers throughout the state and we realize workers’ compensation is at the forefront of those.  As caucus members, we will be sure to keep workers’ compensation as a high-priority item to be addressed upon the legislature’s return next year.

Daniel B. Short
Bryon H. Short
S. Quinton Johnson, IV
Ruth Briggs King       
Michael Ramone
Darryl M. Scott
Lincoln Willis
David L. Wilson
Delaware House of Representatives

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