Labor and Economic Opportunity
"Michigan has a very successful group-self-insurance program for workers' compensation coverage," Keith W. Cooley, director of the state's Department Labor & Economic Growth (DLEG), said. "The program is so successful, in fact, that the groups refunded $80.8 million in premium payments to their employer members last year as the funds were not needed for claims or administrative expenses."
The group self-insurance program is for smaller employers that cannot qualify for individual self-insurance because of their size. The self-insured funds allow employers from the same industry to pool their resources to fund their own workers' compensation coverage. These programs are closely regulated by the state's Workers' Compensation Agency (WCA), which is an agency within DLEG.
Currently, there are 34 group self-insured funds in the state, covering workers with approximately 8,500 Michigan employers. WCA approved creation of these funds and monitors their operations. The agency also approves the premiums they charge, and the dividend distributions they make. In 2005, the self-insured funds took in nearly $210.9 million in premiums from their members.
The premium rates charged by group self-insurance funds are comparable to rates employer members would have to pay for private insurance policies. The difference, however, comes from the group funds' specialization and targeted risk management, non-profit operation, and their ability to annually return a portion of monies not needed to pay members' claims, such as the $80.8 million distributed to group funds members in 2006.
Among the self-insurance funds, an example of their success is the School Employers Group Fund. This school group has covered work-related injuries suffered by its members' employees since July 1977. Since the fund's inception, it has refunded nearly $164.6 million to the more than 400 school districts it covers. For 2006, WCA authorized a $10 million dividend distribution to the fund's members, allowing them to cover their workers' compensation costs and still receive money back during these fiscally challenging times for the state's school systems.
In addition to group self-insurance programs, there are individual self-insurance programs and private insurance policies. Self-insurance is for large individual employers, which they set up to provide workers' compensation coverage for their employees. Other employers can purchase workers' compensation coverage from insurance providers. The three options provide a competitive market, which keeps costs down for Michigan employers.
Workers' comp costs low in Michigan
The Workers' Compensation Research Institute (WCRI) earlier this year issued its findings from a study that compares workers' compensation costs between 14 states, including Michigan. The Institute found that "costs per claim in Michigan were lower than typical compared with the 13 other large states." The total costs per claim (2002-2005) remained 35 percent lower in Michigan than the median for the 14 states in the study. These states represent 60 percent of the nation's workers' compensation benefit payments.
A recent study of workers' compensation costs, conducted by the state of Oregon's program, ranked Michigan 39th in the country in terms of premium costs. In other words, only 11 states have premium payments lower than Michigan's.
"For some reason, people assume that Michigan is a high-cost state for workers' compensation," Cooley said, "but just the opposite is true, and these surveys show that Michigan is controlling its compensation costs."
In another study of workers' compensation costs, Edward Welch, director of the Workers' Compensation Center at Michigan State University and an authority on workers' compensation, reported that in 2004 Michigan benefits were almost 20 percent lower than the national average and 34 percent lower than they were in 1994. Furthermore, the cost of medical treatment for work-related injuries in Michigan averaged 34¢ per $100 of payroll compared to 53¢ nationally.