Comparison of Montana to Assigned Risk Pools in Other States Senate Bill 304 Study Committee November 7, 2003 Jerry Keck, Administrator Employment Relations.

Comparison of Montana to Assigned Risk Pools in Other States

Senate Bill 304 Study CommitteeSenate Bill 304 Study CommitteeNovember 7, 2003November 7, 2003

Jerry Keck, AdministratorEmployment Relations DivisionMontana Department of Labor & Industry

2

Concerns – Questions To Be Addressed

Would the sale of State Fund result in increase in premium for Montana employers?

Would an increase in premiums cause more employers to go without workers’ compensation coverage?

What impact would this have on the Uninsured Employers Fund?

3

Demographics of the Montana Market 2002Premium Dollars

0102030405060708090

Dol

lars

in M

illio

ns

Premium Size

0-$5,000 $5,000-$50,000 Over $50,000

15%

40%45%

Most analysis of the workers’ compensation market is by premium dollars

27M

72M81M

4

Demographics of the Montana Market 2002Policy Count

26,806

5,338542

0

5,000

10,000

15,000

20,000

25,000

30,000

Num

ber

of P

olic

ies

Premium Size

Policy Count

0-$5,000 $5,000-$50,000 Over $50,000

16.3%

82%

1.7%

5

Demographics of the Montana Market 2002Premium Dollars Compared to Policy Count

15.0%

82.0%

40.0%

16.3%

45.0%

1.7%0.0%

20.0%

40.0%

60.0%

80.0%

100.0%P

erce

nt

0-$5,000 $5,000-$50,000 Over $50,000

Premium Size

Premium Policy Count

27M

26,806

72M81M

5,338

542

6

18%

76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Employers Employees

US Bureau of Labor Statistics*For Montana

82%

24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Employers Employees

*Most current 1st quarter 2001

31K

72.6K6.6K

225K

Private Sector Number of Business Establishments and Employees

Employers with <10 Employees Employers with =>10 Employees

7

18%24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Montana US

US Bureau of Labor Statistics*Comparison of Montana to US

82%76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Montana US

*Most current 1st quarter 2001

Employers with <10 Employees Employers with =>10 Employees

Private Sector Number of Business Establishments and Employees

8

US Bureau of Labor Statistics*NCCI Assigned Risk Pool States

Illinois 69.1% Oregon 76.2%

Nevada 71.1% New Mexico 76.4%

Indiana 72.1% South Carolina 77.1%

Alabama 73.3% New Hampshire 77.1%

South Dakota 73.3% Connecticut 77.2%

Virginia 73.6% Vermont 77.8%

North Carolina 73.8% Alaska 77.8%

Kansas 74.9% Idaho 78.2%

Mississippi 74.9% Delaware 79.0%

Arizona 75.0% District of Columbia 79.1%

Georgia 75.1% New Jersey 79.2%

Iowa 75.1% Montana 82.5%

Arkansas 75.2%

Percentage of Employers with < 10 Employees

9

NCCI Assigned Risk Pool 2002States Included in the Pool

Alabama KansasAlaska Mississippi

*Arizona1 Nevada

Arkansas New Hampshire

Connecticut New Jersey

Delaware *New Mexico

District of Columbia North Carolina

Georgia *Oregon

*Idaho2 *South Carolina

Illinois South Dakota

Indiana Vermont

Iowa Virginia

*These states have a competitive State Fund1Arizona State Fund is “carrier of last resort by Board Policy” (.4% of Assigned Risk Pool)2Idaho State Fund is “carrier of next to last resort” (1% of Assigned Risk Pool)

10

NCCI Assigned Risk Pool Statistics 2002Premium Dollars of 24 NCCI States

$0

$100

$200

$300

$400

$500

Dol

lars

in M

illio

ns

Premium Size

0-$5,000 $5,000-$50,000 Over $50,000

19.5%

40.2% 40.3%

217M

449M 450M

11

NCCI Assigned Risk Pool Statistics 2002Policy Count of 24 NCCI States

184,292

32,0033,812

0

50,000

100,000

150,000

200,000

Num

ber

of P

olic

ies

Premium Size

Policy Count

0-$5,000 $5,000-$50,000 Over $50,000

83.7%

14.6%1.7%

12

NCCI Assigned Risk Pool Statistics 2002Premium Dollars Compared to Policy Count of 24 NCCI States

19.5%

83.7%

40.2%

14.6%

40.3%

1.7%0.0%

20.0%

40.0%

60.0%

80.0%

100.0%P

erce

nt

0-$5,000 $5,000-$50,000 Over $50,000

Premium Size

Premium Policy Count

217M

449M 450M

184,292

32,003

3,812

13

Voluntary Market in 24 NCCI Assigned Risk Pool StatesPremium Dollars

$0

$2

$4

$6

$8

$10

Dol

lars

in B

illio

ns

Premium Size

0-$5,000 $5,000-$50,000 Over $50,000

9.1%

27.2%

63.7%

0.97B

2.89B

6.78B

14

Voluntary Market in 24 NCCI Assigned Risk Pool StatesVoluntary Market Compared to Assigned Risk Pool

19.5%9.1%

40.2%

27.2%

40.3%

63.7%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%Pe

rcen

t

0-$5,000 $5,000-$50,000 Over $50,000

Premium Size

Assigned Risk Pool Voluntary Market

217M

449M 450M

.97B

2.89B

6.78B

15

NCCI Assigned Risk Pool Statistics 2002Percent of Assigned Risk Pool Policies Compared to Voluntary Market

77.8%

22.2%

85.1%

14.9%

88.0%

12.0%0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

<$5,000 $5,000-$50,000 Over $50,000

Policy Count

Voluntary Market Assigned Risk Pool

16

NCCI Assigned Risk Pool Statistics 2002Minimum Premiums

Amount charged if true premium falls below a predetermined dollar amount

Like a minimum shipping charge when you order goods by telephone or on the Internet

Workers’ compensation insurance companies establish and file a minimum premium amount

17

NCCI Assigned Risk Pool States 2002Minimum Premiums in Assigned Risk Pool

Alabama $750 Kansas $750

Alaska $500 Michigan $750

*Arizona $750 Nevada $750

Arkansas $750 New Hampshire $750

Connecticut $750 New Mexico $750

District of Columbia $750 North Carolina $850

Georgia $750 Oregon $500

**Idaho $300 South Dakota $800

Illinois $750 Vermont $750

Iowa $550 Virginia $750

*Arizona has a competitive State Fund – only 0.4% of market in Assigned Risk Pool

**Idaho has a competitive State Fund – only 1% of market in Assigned Risk Pool.

18

NCCI Assigned Risk Pool Statistics 2002Minimum Premiums

In Montana private carriers minimum premium is typically $750– Premium $1 - $570– Policy Expense Constant $180

Charged Minimum Premium $750

State Fund has minimum premium of $300– Premium $1 - $185– Policy Expense Constant $115

Charged Minimum Premium $300

State Fund premium between $300 and $750– Premium $186 - $635– Policy Expense Constant

$115Charged Premium $301 -

$750

19

NCCI Assigned Risk Pool States 2002Minimum Premiums

State Fund Clerical Class Code Rate X Payroll(8810 class code rate = .77 X $20,000)

$154

Policy Expense Constant 115

Total $269

Montana State Fund Minimum Premium $300

Private Carrier Clerical Class Code Rate X Payroll(8810 class code rate = .74 X $20,000)

$148

Private Carrier Expense Constant 180

Total $328

Private Carrier Minimum $750

20

NCCI Assigned Risk Pool States 2002Minimum Premiums

State Fund Outside Sales Class Code Rate X Payroll(8742 class code rate = .86 X $45,946)

$395

Policy Expense Constant 115

Montana State Fund Premium $510

Private Carrier Outside Sales Class Code Rate X Payroll(8742 class code rate = 1.31 X $45,946)

$601

Policy Expense Constant 180

Private Carrier Premium $781

21

Demographics of the Montana Market 2002Montana Policyholders

# of Policies# of Policies % of Employers% of Employers

MSF $300 Minimum Premium 5,180 15.8%

MSF Premium $300 – $750 6,579 20%

Policyholders with Premium under $5,000Likely to be in Assigned Risk Pool (26,806 X 22.2%) 5,951 18%

Policyholders with Premiums $5,000 - $50,000Likely to be in Assigned Risk Pool (5,338 X 14.9%) 795 2%

Policyholders with Premiums Over $50,000Likely to be in Assigned Risk Pool (542 X 12%) 65 2%

Total Number of Policies in Montana Market 32,686

22

In Conclusion

Approximately 7,000 employers who are placed in the Assigned Risk Pool may see increases based on Assigned Risk Pool rates

Anticipate increased premium to cause more employers to go without workers’ compensation insurance

Anticipate increased claims to Uninsured Employers Fund