Delaware Governor Jack Markell signed workers' compensation reform legislation HB 175 designed to control employers' rate increases, despite insurance industry opposition.
Markell signed the bill on June 27 bringing Delaware into a group that includes Indiana and Oklahoma to approve workers compensation reform this year. The new law implements recommendations made by the Workers Compensation Task Force, created by state lawmakers to address the annual double-digit rate increases imposed on Delaware employers in 2011 and 2012.
Among the provisions in the new law is one that creates a new advocate for businesses who will participate on behalf of policyholders in the rate-setting process. The new law also controls rates by imposing a new two-year inflation freeze on some rates that have been increasing annually to account for inflation. It also cuts an annual inflation increase for hospitals treating workers compensation patients; add procedures to the states medical fee schedule; and includes cost-control provisions for pharmaceuticals, drug testing and anesthesia.
The Property Casualty Insurers Association of America and the American Insurance Association were among the groups that had opposed the bill. Both argued the new law does not address medical cost drivers. PCI argued the creation of the new policyholders advocate could bump the cost of each filing on insurers by as much as $40,000.
The new law makes changes to the states workplace safety credit program. For instance, operators must make a greater effort to find out about past injuries in a workplace before awarding credits. Changes also allow insurance company safety inspections to be as stringent as those performed by the Department of Insurance if companies want their work to qualify as a substitute in the program.
The Task Forces report said initial reforms in 2007 caused Delaware's workers compensation rate rankings issued by the Oregon Department of Business and Consumer Services to drop from third-worst to 34th by 2010, but the 2012 edition saw the states ranking move to 30th.
Earlier, Insurance Commissioner Karen Weldin Stewart approved a 14.6% increase in voluntary workers compensation rates and a 19% increase in residual market rates. The rate hike followed the Delaware Compensation Rating Bureaus initial proposal of an average increase of 38.3% in the large voluntary market and 43.5% in the residual market. The DCRB estimated that two-thirds of the 43% increase was generated by increased medical costs.
The top five writers of workers compensation insurance in Delaware during 2012 were Liberty Mutual Insurance Cos., with a 17.65% market share; Hartford Insurance Group, with 9.04%; Travelers Group, with 8.61%; Zurich Financial Services NA Group, with 5.91%; and American International Group, with 4.61%, according to BestLink, A.M Best Co.'s online financial system.