Submitted pursuant to House Bill 175, 147th General Assembly

DOVER, Del. – This afternoon, Lt. Governor Denn, Chair of Delaware’s Workers’ Compensation Task Force, and business and legislative leaders made recommendations to Governor Markell and the General Assembly to stop the large workers compensation rate increases that are burdening Delaware businesses.

Governor Markell said of today’s report and recommendations, “I applaud the Lt. Governor’s work on this extremely important issue for Delaware’s business community. His leadership ensured that the task force acted swiftly and effectively to address the high rates that have burdened our employers. The bipartisan reform package outlined today represents the culmination of a great deal of work, commitment and compromise by everyone involved with the task force.”

The Workers’ Compensation Task Force was created on January 30, 2013 by the Delaware General Assembly and the Governor, and charged with an expedited review of Delaware law relating to workers’ compensation, the impact that the 2007 amendments to that law had upon workers’ compensation premiums, the reasons for recent increases in workers’ compensation premiums, and whether any additional changes to statutes, regulations, or practices are required to control growth in premiums. As detailed in the task force’s prior report, Delaware’s workers’ compensation premiums had risen by calendar year 2006 to be the third most expensive in the country. The primary reason for Delaware’s high premiums was generally agreed to be medical costs – the Delaware Compensation Rating Bureau (DCRB) indicated that in 2006, medical costs were 60% of total workers compensation system costs in Delaware, as compared to 40% in surrounding states.

The task force delivered its first set of recommendations in May 2013, and those recommendations were consolidated into House Bill 175 which passed the Delaware House of Representatives and Delaware State Senate unanimously. Among the provisions of House Bill 175 was one that continued the existence of this task force through June 30, 2014.

The task force’s recommendations fall into three areas:

1. Heightened Oversight of Insurance Carriers. These recommendations include consolidating the Data Collection Committee and the Health Care Advisory Panel into a single committee and a Ratepayer Advocate to be hired and overseen by the Workers’ Compensation Oversight Panel, with staff support to be provided by the Department of Labor.

2. Stricter Control on Medical Costs. These recommendations include directing the Workers’ Compensation Oversight Panel to create a new medical fee schedule, using multipliers of medical codes used by the Centers for Medicare and Medicaid Services, which results in a 33% savings from all providers (to be phased in over a three year period) and recommending that the General Assembly (through the Workers’ Compensation Oversight Panel) monitor both the rate impact of these recommendations and their impact upon providers as the recommendations are phased in, and make statutory adjustments in the fee schedule if appropriate.

3. Consideration of New Rating Organization. The task force recommends that DOI undertake a formal assessment of whether there should be a change in the rating organization used by Delaware insurance carriers, and include members of the task force who have expressed concerns about the current situation in that formal assessment.

“Lt. Gov. Denn deserves much of the credit for this proposal, without his expertise and leadership we might still be struggling with this issue,” said Senate President Pro Tem Patricia Blevins, D-Elsmere. “It is our hope that this proposal will result in real savings to businesses that have been struggling with ever-skyrocketing workers’ compensation rate increases.”

State Representative Ruth Briggs King (R-Georgetown), a member of the task force, said, “This bill is the result of months of work with employers, health care providers and insurers. I believe a great deal of thought and consideration went into crafting this legislation, which I believe will help reduce the uncertainty and escalating premiums for Delaware’s small businesses.”

“I think we had an excellent group of task force members, committed to helping the business community, and I can’t thank them enough for all of their hard work,” said Senator Gerald Hocker (R-Ocean View), both a panel member and the owner of several Sussex County businesses. “It turned out to be a great idea to keep this task force together for another year, and I think the legislation that comes out of this effort is going to provide significant cost savings to the employers of the state of Delaware.”

“The members of the Worker’s Compensation Task Force have taken on the task of improving critical elements to Delaware’s competitiveness when it comes to job creation and business expansion,” said Rep. Bryon Short, D-Brandywine Hundred. “Through great effort, we have tackled one of the most important factors driving up workers compensation costs for Delaware’s employers. I believe the adoption of a relative value units-based fee schedule will have a meaningful impact on the premiums paid in Delaware. Our work is not done. Other important areas resulting in high premiums for Delaware businesses need to be examined in the coming year, and we will continue to look out for businesses and the workers they employ.”

“It was not easy to get to this point in making changes to the workers compensation payment system,” said Rich Heffron, President of the Delaware State Chamber of Commerce. “Through the dedication and hard work of my fellow Task Force members – along with Lt. Governor Denn’s leadership – today we are able to propose changes that can be expected to lower Delaware’s workers compensation rates. We still need to determine why Delaware’s cases take longer to settle, and how insurance companies calculate their reserves, but that is for a future Task Force to examine.”

A copy of the report is included, as are separate statements from the Delaware Compensation Rating Bureau, Medical Society of Delaware, and the Delaware Department of Insurance, included at their request.

Liberty Insurance Corp. and LMI Insurance Corp. Target 2014

Medical Society of Delaware’s May 9, 2014 Workers’ Comp Task Force Statement

Lt. Governor Denn’s DOI Workers’ Compensation Task Force Letter from May 12, 2014

DCRB Comments to May 14, 2014 Task Force Report

Workers Comp Report Presented May 15, 2014

Dover, DE – On Thursday, May 15, 2014 at 1:00pm, Lt. Governor Matt Denn will host a press conference to present the Workers’ Compensation Task Force Report to the Governor and the General Assembly, submitted pursuant to House Bill 175, 147th General Assembly. He will be joined by members of the Task Force – including Senators Blevins and Hocker, Representatives Briggs-King and B. Short – and the Governor, who will all make remarks, along with Rich Heffron of the State Chamber and others.

BACKGROUND – Created by House Joint Resolution 3, the task force was established on January 30, 2013 by the General Assembly and Governor to address the 34% increase in average workers compensation rates over the prior two years. Those rate increases increased costs for Delaware businesses and made it harder for them to compete for bids with businesses from neighboring states. On May 13, 2013, the task force made their first set of recommendations to Governor Markell and the General Assembly to stop the large workers’ compensation rate increases that burden Delaware businesses. The General Assembly accepted the recommendations unanimously, including keeping the task force in existence through June 30, 2014, both so that it could consider some issues that it did not have time to discuss during the short time that it had to make recommendations, and so that it could monitor the impact of its recommendations and suggest stricter measures with respect to medical costs if necessary.

The task force stated in the 2013 report that if the reforms recommended in that report were not successful in controlling workers compensation premium increases, then the task force would recommend stricter measures to control premiums. The task force believes that the 11.4% to 14% increase in rates resulting from the last filing was an unacceptable result, and that rates need to be reduced.

The report to be issued on Thursday offers those stricter measures.

Thursday, May 15, 2014
1:00pm
Tatnall Building (next to Legislative Hall)
3rd Floor – Governor’s Press Room
150 Martin Luther King, Jr. Blvd. South
Dover, DE 19901

Dover, DE-Delaware Insurance Commissioner Karen Weldin Stewart announces today that based on the agreement between the Delaware Department of Insurance, the Delaware Compensation Rating Bureau and the Ratepayer Advocate, she has approved the re-submission of the Delaware Compensation Rating Bureau (DCRB) workers’ compensation rate filing regarding the residual market rate and the voluntary market loss cost.

The annual filing was carefully reviewed and analyzed by the Delaware Insurance Department’s actuaries, as well as the Rate Payer Advocate’s actuary. The reports were posted on the Department’s website. The lower increases approved reflect a more appropriate balance in the cost of insurance premiums compared to the cost of the system. The Commissioner and the Rate Payer Advocate, along with their actuaries, concurred that the increases of 11.4% in residual market rates and 14% in voluntary market loss costs met the requirements in Delaware law that rates must not be inadequate, excessive, or unfairly discriminatory. The effective date of the increase is retroactive to December 1, 2013 for new and renewal business.

Commissioner Stewart stated “While three different actuaries have all concluded that an increase is indicated, I must weigh more than actuarial considerations in making my decision. The difficulties seen by Delaware employers as emphasized during the three public information sessions, the need for our economy to grow, and the rising costs faced by insurers must all be included in my final decision. This decision represents a savings of more than 45 million dollars to Delaware employers from the original submission. We encourage the DCRB and legislative leaders to continue to work toward a common goal of identifying and addressing the underlying cost drivers in Delaware’s workers’ compensation rates.” Stewart believes that continued momentum behind legislative reforms introduced in 2013 and those sought in 2014 to ensure that future rate requests are small will help to keep our economy strong and attract and retain businesses in Delaware. Stewart added “Unfortunately, a rate increase is necessary this year for worker’s compensation insurance in Delaware. My commitment to the consumer is unwavering; and I will continue to work with all parties to create further reform that we expect will result in a reduction in the overall cost drivers in the worker’s compensation system.”

For more information about the DCRB annual rate filings, visit the Delaware Department of Insurance website at www.delawareinsurance.gov.

Please see attached statement from the Rate Payer Advocate.
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Delaware Department of Insurance: “Protecting Delawareans through regulation and education while providing oversight of the insurance industry to best serve the public.”

Insurance Commissioner Karen Weldin Stewart announces the retention of Fred Townsend, Esquire as “ratepayer advocate” for the upcoming workers’ compensation rate filing. Pursuant to recently passed legislation Mr. Townsend shall represent the interests of Delaware workers compensation rate-payers during the Insurance Commissioner’s consideration of the rate filing.

A member of the Delaware Bar since 1990, Mr. Townsend served as Delaware’s Deputy Insurance Commissioner from 1995-1999. Since returning to the private sector in 2000, his practice areas have included insurance regulation.

Commissioner Stewart stated that she “is confident that Mr. Townsend’s background, both in the Insurance Department and in the private sector makes him well suited to represent the ratepayers’ interests during this important step of analyzing the workers compensation rate filing”.

Anyone wishing to contact Mr. Townsend should do so via e-mail. Mr. Townsend will be available at ratepayeradvocate@delaware.gov.

Lt. Governor Denn to Head Effort, First Meeting Scheduled for February 8

DOVER – Governor Jack Markell announced this week that he has asked Lieutenant Governor Matt Denn to head the state’s new Workers’ Compensation Task Force created by HJR3, established by the General Assembly and Governor to address the 26% increase in average workers compensation rates over the last two years.

The Governor and General Assembly have also appointed a number of other task force members.  In all, 20 persons will serve on the task force.

Lieutenant Governor Denn, who worked with the General Assembly in 2006 and 2007 to enact workers compensation reforms that cut rates by over 40%, expressed confidence that the task force would be able to make recommendations that would stem the recent increase in rates.  “We know this problem can be addressed because we did it six years ago,” Denn said.  “The reforms we enacted worked.  We need to find out what changed during the last two years and fix it.”

Denn said that the task force would hold its first meeting at 9:00 a.m. on February 8, 2013, and that meetings would continue through early May.  All of the meetings will be open to the public, provide an opportunity for public comment, and will be audio-recorded and posted on the Lieutenant Governor’s website.  Additionally, all documents reviewed by the task force will be posted on the Lieutenant Governor’s website.

“As the state’s Insurance Commissioner, Lt. Governor Denn played an integral role in drafting the 2007 update of Delaware’s workers’ compensation statute,” said Rich Heffron, Interim President and Sr. Vice President Government Affairs for the Delaware State Chamber of Commerce.  “His experience and expertise will serve him well as the Chair of the Workers Compensation Task Force. I look forward to working with him and the other members of the task force.”

Lt. Governor Denn is looking forward to working with all members of the task force including the 4 representatives of the General Assembly appointed to serve.

“We all know that workers’ compensation rates play an important part in Delaware’s ability to keep jobs and compete for new ones,” said Senate President Pro Tem Patricia Blevins (D-Elsmere).  “It’s important to Delaware’s competitive position to take a hard look at how these rates are set and see what we can do lower them.”

“I am happy to serve as a member of the Workers’ Compensation Task Force. Being an independent businessman for more than 40 years, I know that workers’ compensation is one of our most costly expenses,” said Sen. Gerald Hocker (R-Ocean View). “I would like to see lower rates and it is my hope we can find a solution that is business-friendly.”

Rep. Bryon Short, who sponsored the resolution creating the task force, said he hopes to build upon a similar workers’ compensation task force that succeeded in updating state law in 2007.  “The 2007 workers’ compensation review and changes have resulted in benefits for Delaware’s small business community while ensuring that employees continue to receive the coverage they need to recover from workplace injuries,” said Rep. Short (D-Highland Woods). “As co-chair of the House Small Business Caucus and a small business owner, I have been following the significant workers’ compensation rate increases – nearly 26 percent – over the last two years. I believe this is a critical time to reconstitute the task force to assess what was done right and where we can further improve Delaware’s worker’s compensation system.”

State Representative Ruth Briggs King (R-Georgetown) stated, “I am looking forward to serving on this committee and addressing some of the significant concerns facing small business owners in Delaware as another increase in workers’ compensation premiums takes effect.  Over the last several years, our small business men and women in this state have continually been hit hard by a sluggish economy and the latest rate increase only compounds the problem.  It is my hope that this task force will offer real solutions when it comes to controlling workers’ comp costs for the many struggling small business owners in Delaware.”

Friday, February 8, 2013
9:00am – 10:00am

Carvel State Office Building
820 N. French St.
Governor’s Conference Room, 12th Floor
Wilmington, DE 19801