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Ohio: Workers’ Comp Bureau Must Refund Millions to Overcharged Employers

By Susan R. Heylman  7/29/2014
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The Ohio Bureau of Workers’ Compensation (BWC) developed and maintained a grossly inequitable premium rating system that overcharged approximately 300,000 Ohio companies—mostly small business owners—for more than 15 years, an Ohio court ruled.

“In this case, the BWC violated one of the most basic principles of workers’ compensation insurance, i.e., that every employer participating in Ohio’s workers’ compensation system be charged a reasonable, accurate, and equitable premium rate that corresponds to the risk the employer presents to the workers’ compensation program,” the court said.

Under BWC’s unlawful rating system, excessive premium discounts were given to employers who participated in the BWC’s group rating plan (group-rated employers) at the expense of employers who did not participate in the group rating plan (nongroup-rated employers). The BWC must refund millions of dollars to those affected employers.

“Reduced to its irreducible essence,” the court said, “this appeal is about a cabal of Ohio Bureau of Workers’ Compensation (BWC) bureaucrats and lobbyists for group sponsors who rigged workers’ compensation insurance premium rates” so that it was “heads we win,” for the group-rated employers and “tails you lose” for the nongroup-rated employers.

The BWC was unjustly enriched at the expense of the class members, the court said, because it failed to follow the legislative mandate to establish a retrospective group rating plan and rather set up a prospective group rating plan without sufficient controls to address the plan’s susceptibility to manipulation by group sponsors and the potential for premium inequality as a result of the generous discounts provided to group-rated employers under the plan.

“The BWC allowed group sponsors, on an annual basis, to self-select group members for their groups and to jettison, without consequence, those employers from the group who presented a higher risk, exacerbating the problems associated with the overly generous discounts provided to group-rated employers under the BWC’s group rating plan,” the court concluded.

The record also reflected that the BWC continued to maintain its inequitable rating system long after actuarial consultants warned it that the group rating plan was creating substantial premium inequity between group-rated and nongroup-rated employers and should be changed.

The ruling came in the BWC’s appeal of a trial court’s determination that the BWC’s premium rating system violated the Ohio Constitution’s Equal Protection Clause. The trial court awarded over $859 million in restitution of the unlawful premium overcharges to the class of nongroup-rated employers made over the class period of 2001-2008.

The court of appeals affirmed the ruling, but has remanded the case for the trial court to recalculate the restitution for class members who were group related during part of the time period by including an offset for the subsidies they received during the years they were group related.   

San Allen, Inc. v. Buehrer, Ohio Ct. App., No. 99786 (May 15, 2014).

Susan R. Heylman, J.D., is a freelance legal writer and editor based in the Washington, D.C., area.
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