One item weighing down every remodeler's toolbelt is the cost of workers' compensation. Some states are admitting that their systems are broken and are trying to fix them. California, which has one of the highest rates in the nation, has recommended a 10.2% reduction in the advisory rate, which insurers usually adopt, that goes into effect this month. And, in Alaska, where rates are just below California's, the governor has introduced legislation to reform Alaska's system.
While waiting for your state to come around, there are a few things you can do to help rein in costs. James Moore of J&L Risk Management Consultants in Raleigh, N.C., suggests four ways of cutting costs in any state with a carrier or third-party administrator:
Mark Leininger, of NEK Insurance in Northern California, most of whose clients are general contractors, sees firsthand the effects of that state's system. He suggests spending more on safety programs and equipment, even if workers' compensation costs begin to decrease. “The reduction in claims activity is going to go a long way to impact or lower rates,” he says. “Many employers also have enlisted various employee incentive programs with rewarding results.” Insurance carriers also offer rewards “if you go a certain period of time without a claim or don't exceed a certain dollar amount.”
In addition, California's Workers' Compensation Insurance Rating Board has an “experience modification” rating, which is based on data culled from previous history. The number follows employers wherever they go to buy workers' compensation and is directly applied to the premium throughout the year. Leininger says it is a big help in offsetting costs. He also points to current reforms in California that will require medical care within established networks. In other states, he says “a healthy marketplace with the ability to shop insurers” will lower costs as well.