The Oregon study matters to more than just Oregonians. For any cluster of states with a similar mix to each other, the relative ranking of one state may help identify efficiencies or problems. A ranking among the lower-cost jurisdictions not only means a lower cost for employers, it may also reflect a lower cost of injuries to workers. Since severity and frequency are major cost drivers, changes in ranking (particularly in states with similar benefit structures and practices) may reflect changes (or differences) in the prevention environment as well.
It is important to note the following about the Oregon premium rate study:
- The selection of classifications is based on what is important in Oregon.
Classifications are based (primarily) on NCCI definitions.
- The weightings used to develop the rates are based on Oregon payrolls (although the major classes are usually within the scope of coverage in all jurisdictions-- clerical, sales, education, medical offices, restaurants, retail stores, hospital, auto repair, trucking)
- Expense loading factors, or loss cost multipliers are accounted for.
The study result is an ordered ranking of index premiums. The median index premium rate is $2.26 per $100. Oregon, ranks 39th on the list of 51 included in the study with an index premium rate is $1.98 per $100 (83% of the median rate).
This is important information particularly for those in Oregon but remember it is Oregon’s rate ranking using Oregon payroll weights. If a jurisdiction has a similar industry and payroll mix to Oregon, the study may provide general guidance on the competitiveness of rates; if a jurisdiction has a very different mix, the comparability is likely of less value. Washington state’s ranking on the same list is 38th at $1.98 but this is based on Oregon’s weights, not Washington’s. Although one might assume some reasonable comparability between Washington and Oregon, it is conceivable that Washington could actually have a lower ranking (less costly premium) if Washington’s weights were used in the comparison.
The study does not include jurisdictions outside the US. British Columbia publishes rates [see WorkSafeBC.com] and it is possible, therefore, to generate a similar ranking based on Oregon weights. Such an exercise would show BC with rates near the lowest in the Oregon ranking. Since rates are based on a percentage of payroll, changing exchange rates are not a factor in the comparison. Put another way, if Oregon had WorkSafeBC’s premium rates for the industries and payroll weights used in this study, the result would be an index premium at the bottom of the current list.
Why would BC rank so much lower than Oregon on this scale? It may have something to do with the nature of the classification system. BC’s assessment rates are more industry based than NCCI classifications (which are more occupationally based). Lower health care costs in Canada may be a factor. Lower administrative costs, effective case management and vocational rehabilitation/ Return to Work initiatives, effective prevention initiatives, economies of scope and scale, and [perhaps] lower costs for disputes may all play a role in lower premium costs (assuming similar benefits and practices).
The bottom line is that BC, Washington and Oregon would have relatively low index rates if directly compared using the Oregon methodology, a result that benefits the economies of all three jurisdictions.