State: CA Contractor Sting Nabs 5 Without Comp Coverage:

A sting targeting Central California Valley contractors charging excessive up-front payments caught five contractors who were operating without workers’ compensation insurance, including a registered sex offender who had not submitted to a background check, according to a press release from the Contractors State License Board.

The board’s Statewide Investigative Fraud Team (SWIFT), together with the Fresno District Attorney’s Office, the Employment Development Department, California Highway Patrol and Fresno Police, posed as homeowners looking to catch contractors charging down payments exceeding the lesser of 10% of the contract price or $1,000.

A total of 21 contractors were cited during the sting, conducted Jan. 11 and 12. Five contractors cited for operating without comp insurance include:

– Martin Mendoza, 35, of Mendoza Fencing in Fresno was also cited for contracting without a license. Mendoza is a registered sex offender and state law requires contractors applying for a license submit fingerprints for a Department of Justice background check.
– Tree services contractor Johnny Guerrero Garcia Jr., 43, of Fresno, who was also cited for contracting without a license, illegal advertising and soliciting excessive down payments.
– Painter Luis Luz Gonzales, 27, of Fresno, was also cited for contracting without a license, illegal advertising and soliciting excessive down payments.
– Antonio Arnaldo Lemus, 47, of Custom Painting in Fresno, was also cited for contracting without a license, illegal advertising and soliciting excessive down payments.
– Painter Gilbert Joseph Bustos, 60, of Handy Man Services in Fresno, was also cited for contracting without a license, illegal advertising and soliciting excessive down payments.

Garcia, Mendoza and Gonzales are scheduled for arraignment on Feb. 28 in Fresno County Superior Court. Lemus and Bustos will be arraigned on March 6.

Visit our website at www.wccop.com

Source: CSLB, WorkComp Central

Standard & Poor’s Says Comp Profitability Unlikely:

By Greg Jones, Western Bureau Chief

Despite rate increases in some states and talk of a hardening market for workers’ compensation insurance, international credit-rating agency Standard & Poor’s said it remains “bearish” on the industry because of the sluggish economy.

Siddhartha Ghosh, a credit analyst with S&P in New York, wrote a report published on Monday that warns of continued years of poor profits for workers’ compensation carriers and possible downgrades of ratings for some insurers with a heavy concentration in the workers’ compensation line.

The title of Ghosh’s report sums up the rating agency’s outlook: “For the U.S. Property/Casualty Industry, Making Workers’ Compensation Profitable May Be Mission Impossible.”

The report says the industry has had a poor track record for underwriting results in the past 20 years. The industry has posted combined ratios below 100% only three times — 1995, 1996 and 2006 — between 1991 and 2010. The national combined ratio will reach at least 115% in 2011 and could stay there until 2013, Ghosh writes.

But not everyone agrees that carriers have to keep their combined ratios at 100% or below to earn a profit. When rejecting a proposed increase in the pure premium rate in 2007, California Insurance Commissioner Steve Poizner said that a combined ratio exceeding 100% does not necessarily indicate a carrier is losing money, because the ratio does not include investment income. Part of the decision written by Senior Staff Counsel Chris Citko said based on a set of assumptions that includes an estimated 6.72% yield on invested assets, a carrier could operate profitably at a combined ratio of 112%.

“To put it another way, the shortfall of 12% above the amount necessary to pay for claims and expenses is handily covered by investment income and should leave enough left over for a healthy profit,” Citko wrote at the time.

Ghosh agreed that a combined ratio in excess of 100% doesn’t necessarily indicate a carrier is operating at a loss. Because each insurer’s portfolio will determine the impact of investment income on performance, S&P doesn’t look for a magic number, but it is not possible to be profitable in the current economic environment with a combined ratio of 115%.

“If underwriting results are expected to be at least 115% or 116%, we need 10% to 12% return to get to a break-even scenario,” Ghosh said.

With the struggling economy, Ghosh said he does not expect to see double-digit investment returns.

A stagnant economy creates additional problems because workers’ compensation profitability is sensitive to payroll, Ghosh said. The market analysis predicts the national unemployment rate, which fell to 8.5% in December, will not change much over the next two years.

The analysis from S&P predicts an average unemployment rate of 8.7% in 2012, improving to 8.6% in 2013.

Ghosh said he also feel strongly that industry reserves are inadequate, noting in his report that the property and casualty industry prematurely released $2.8 billion in reserves from the workers’ compensation line between 2006 and 2008. Ghosh writes that because of the long tail of workers’ comp, it is almost impossible for an insurer to have a high level of confidence in initial reserves. He expects to see carriers reporting adverse reserve developments for accident years 2007 through 2010.

Ghosh told WorkCompCentral that the various factors, such as the economic conditions and reserving, are not equally weighted, and economic performance is more significant.

“But the combination of all of that is staggering in terms of any kind of profitability in the near future,” he said.

Some insurance experts have commented that recent trends suggest that the workers’ market is hardening — a hard market being the condition where demand for insurance exceeds supply — which would bring more profitability to carriers.

A survey by the Council of Independent Agents and Brokers found price increases of 4.1% and 2.6% in the first two quarters of 2011, Ghosh reported. Another survey from the Risk and Insurance Management Society found average renewal prices declined a modest 1.7% in 2010, compared to larger declines of 3.8% in 2009 and 3.5% in 2008.

Ghosh called these signs of improvement evidence of a trend going in a favorable direction, but he isn’t convinced the market is actually hardening.

“It’s just too early to know whether the trend will continue,” he said.

In California, Insurance Commissioner Dave Jones reported on Jan. 19 that insurers filed for an average rate hike of 2.8% for 2012.

Ghosh said the increase in California isn’t sufficient to overshadow combined ratios of 130% reported by the Workers’ Compensation Insurance Rating Bureau for 2009 and 2010. He also said rates filed by carriers do not indicate what is ultimately charged to employers after discounts and credits are factored in.

“Even if charged prices increased — that’s good news because it’s been a while — there is a question about sustainability and whether it’s wide scale or national,” Ghosh said.

Mark Gerlach, a consultant for the California Applicants’ Attorneys Association, said the Golden State is in a unique position because of profits generated in the years after reform legislation was enacted.

Information from the Rating Bureau showed combined ratios of 57% in 2004, 55% in 2005 and 69% in 2006.

With substantial profits, California carriers were able to put more into investments. The result, Gerlach said, is that excess investment income earnings continue to subsidize higher combined ratios, which explains why insurers increased rates an average of 2.8% in light of a combined ratio of 130%.

“The situation is unusual, and can’t be sustained for the long term, but it is a situation where California insurers are making rational decisions based upon their level of investment income,” he said.

Gerlach said he does not expect to see significant rate increases in California, because he doesn’t think carriers are under significant pressure. He expects to see increases of about 3% as the economy improves over the next few years, but that is about it.

Gerlach has not seen the S&P report, but did note that the agency looks for greater profits than he thinks is necessary. S&P looks for profits of 15% to 20%, while Gerlach said he thinks 10% is appropriate for insurance carriers.

Ghosh said S&P is “bearish” on the workers’ compensation market, and the idea behind his report was to explain why it thinks performance will continue to struggle over the coming years.

“On the pricing side, in order for things to improve materially, there has to be a wide scale rate improvement across the board,” he said. “A countrywide rate increase would benefit a great deal of companies and make the line more attractive.”

Ghosh also cautioned that if some insurers strengthen their reserves, causing their operating earnings to fall below S&P’s expectations, the agency would consider lowering some ratings.

Karen Oxman, owner of GNW-Evergreen Insurance in Encino, Calif., said the she doesn’t think a downgrading by S&P would have a significant impact, because employers mostly look to A.M. Best for ratings of insurance companies. She added that A.M. Best looks at S&P’s report, so there could be some impact there.

“Unless it’s a real severe change, I don’t think most people are impacted,” she said. “People get a quote and if it’s the best quote, I think they’re inclined to take it.”

Oxman said her official position as president of a brokerage firm is that clients should go with the company that has the best rating, but that is not always what customers are looking for.

Visit our website at www.wccop.com

Source: WorkComp Central

Learn how to keep construction workers safe

The most important thing you can do to keep your employees safe on a construction site is to create, maintain and follow a strict health and safety plan.  In general, as the owner of a construction business, or someone involved in the construction industry, safety should be your top priority.  Without a good safety plan, your company is more likely to experience a high number of accidents and injuries resulting in more workers compensation claims.

It is not enough to have a detailed safety plan, you must also make sure to properly inform your employees, and everyone else who may be on your construction site.  Employees need to be educated about the possible hazards, what to watch out for, what to do in the case of an emergency, and who to contact should the need arise.

In addition, perform periodic safety training sessions with your staff to ensure that people continue to be kept informed as situations, and safety considerations, change over time.  The time to find out that someone needs training is NOT during a crisis, or an emergency. 

Try to keep an open line of communication between employees and management as it relates to safety.  Each member of your staff should feel completely confident and comfortable discussing safety issues and concerns, and they should be able to answer your safety related questions on a moments notice.

Help for employers…

Employers who are concerned that they might be in violation of the FLSA classifications should submit form SS‐8 (found at: http://www.irs.gov/pub/irs‐pdf/fss8.pdf) for any employees in question. The IRS uses a list of common‐law criteria to determine whether a worker should be considered W‐2 or 1099. The criteria can be summarized in three main characteristics: Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job. Type of Relationship factor relates to how the workers and the business owner perceive their relationship. In general, if the business has the right to control or direct not only what is to be done, but also how it is to be done, then the workers are most likely employees. If the business can direct or control only the result of the work done—and not the means and methods of accomplishing the result, then the workers are probably independent contractors.

 

1. Bureau of National Affairs, Inc. (2011) Bill Would Amend FLSA, Target Misclassification Payroll Practitioner’s Monthy 22(5). Accessed from Business

Source Complete. Retrieved from http://web.ebscohost.com

 

2. Aspen Publishers, Inc. (2011) Sweeping Overhaul of Worker Classification Ahead? Payroll Manager’s Letter, 27(6), 1‐2. Accessed from General OneFile

Infotrac. Retrieved from www.gale.cengage.com/onefile/

 

3 . US Office of Management and Budget 2011). Fiscal Year Budget of the US Government. WashingtonDC: Author. Retrieved from http://

whitehouse.gov/omb/budget

Regulators: Florida workers’ comp healthy

JacksonvilleBusiness Journal

Date: Wednesday, January 4, 2012, 6:36pm EST

State regulators reported Wednesday that Florida’s workers’ compensation system, once the target of business groups angered over skyrocketing rates, is financially healthy and, unlike property insurance, remains almost entirely in the private market, according to The News Service of Florida. 

In an annual update on the statewide system, the Office of Insurance Regulation noted that changes made in 2003 and 2004 to rein in costs have been largely successful in keeping rates down in both the voluntary and residual markets.

Business groups and insurers welcomed the report, saying legislative action has led to a relatively stable, reliable marketplace dominated by small carriers.

“Economic good news has been tough to come by, but the continued improvements in our workers’ compensation insurance system are welcome news for Florida’s workers and employers,” said Bob Lotane, spokesman for the National Association of Insurance and Financial Advisors. “The reforms brought about by Gov. (Jeb) Bush and the Legislature in 2003 continue to pay dividends in taking a moribund workers’ compensation system and making it competitive, fair and affordable.”

Among its key findings, the report found thatFlorida’s workers’ compensation market is healthy enough to encourage private companies to provide coverage. Unlike property insurance, which has required a substantial government effort to remain viable, the workers’ compensation system remains competitive and not overly concentrated in the hands of a few providers.

The largest single insurer in the state, Bridgefield Employers Insurance Co., has a market share of 12.6 percent.

“Florida continues to be the largest state in the country for which the private market insurance industry is the dominant provider of workers’ compensation insurance,” the report notes.

Reforms made a few years ago that included a cap on attorney fees have resulted in Florida having one of the most profitable markets for workers’ comp carriers among the nation’s most populous states, the report said.

Source: bizjournal.com

Mutual: Florida Citrus Came Through Freeze In Pretty Good Shape

Florida Citrus Mutual spokesman Andrew Meadows says the citrus industry came through the Tuesday night-Wednesday morning freeze “in pretty good shape.” He tells what happened in different areas of the citrus belt. Commissioner of Agriculture Adam Putnam discusses the lack of dormancy in citrus trees prior to this week’s freeze and mitigating factors that apparently kept citrus from being severely harmed. Listen to their reports and read the latest update from Mutual on the second night of the freeze.

2012 Notice of State Unemployment, Federal Unemployment and Workers’ Compensation Changes

As our country continues to try to pull itself out of the worst economic recession in more than 40 years, business owners nationwide have experienced increased costs related to state and federal unemployment rates. The number of people out of work continues to be a critical issue for local, state and federal governments.

In our home state of Florida, as well as many other states, we continue to experience high unemployment levels. While the United States as a whole experienced a small decrease in the national unemployment rate in 2011, the percentage of unemployed workers in Florida is still more than triple what it was ­five years ago. Consequently, the state is paying out an unprecedented amount in benefi­ts to our unemployed citizens.

The state of Florida pays unemployment benefi­ts to qualifi­ed recipients from the Unemployment Compensation Trust Fund. This fund was kept solvent through the years as a result of the state unemployment taxes paid by employers throughout the state. In August 2009, however, the trust fund balance fell to zero.

 Our state has been borrowing from the federal government to pay unemployment benefi­ts ever since. Currently, Florida has borrowed over $1.7 billion to pay benefi­ts to our unemployed workforce.

When the trust fund falls below a certain threshold, state law adjusts the unemployment tax rates to rebuild the balance in the trust fund, which was evidenced in the increase last year in unemployment tax rates. However, even with last year’s increase, the state has not yet paid off this government loan.

Federal law dictates that when a state’s unemployment trust fund loans have been outstanding for two consecutive years, the state experiences an increase in federal unemployment taxes of .3% for each additional year the loan remains outstanding. Because this is the third year that Florida has had an outstanding balance, all Florida employers’ FUTA rates will increase from .9% to 1.2% in 2012.

Interest on the federal loan will begin accruing January 1, 2012 and, by federal law, must be paid from sources other than the state trust fund account. The Florida Department of Revenue will notify state employers of the surcharge amount in the fi­rst quarter of 2012. We will keep you posted as information becomes available.

In an attempt to generate more revenue for the Unemployment Compensation Trust Fund, the minimum State Unemployment tax rate in Florida has risen steadily from .12% in 2009 to .36% in 2010, 1.03% in 2011, and now 2.02% for 2012. While that is now the lowest rate available for any company in our state, most companies have rates much higher than that.

Along with higher tax rates for many employers, the state is attempting to balance out the Unemployment Compensation Trust Fund by raising the taxable wage limit from $7,000.00 per employee to $8,500.00 per employee. However, the maximum state unemployment tax rate of 5.40% remains unchanged. With unprecedented amounts of money and resources needed to handle the number of unemployment claims, these changes still may not be enough to balance out the fund. There are several factors working against the state including the increase in the length of time people are eligible for bene­fits and the growing number of employers already at the maximum state unemployment rate.

As an employer funded system, there is no way around the fact that rising unemployment rates are going to impact all employers. However, there are steps you can take to help control costs to the greatest extent possible. For example, documentation and record keeping of employee issues will assist in avoiding unnecessary or invalid unemployment claims. The use of job descriptions and performance appraisals can help when establishing cause for terminations. Also, be on the lookout for fraud. According to unemployment insurance (UI) experts, as much as ten percent of all costs in the UI system are attributed to fraud.

At WCCOP, we are doing all we can to you understand and absorb these rising costs. While no one is sheltered from the effects of this economic climate, we are here to help in any way we can by providing you with the knowledge, insight, and expertise needed to manage unemployment claims and pay unemployment taxes.

With regards to workers’ compensation insurance rates in the state of Florida, the vast majority of workers’ compensation classifi­cations have experienced an increase to their standard rate (an average of 8.9% over last year’s rates). Effective January 1, 2012, many clients will experience an increase to their Florida workers’ compensation rates. These rate changes will vary for individual clients based on the workers‘ compensation categories that their employees are classifi­ed within.

One of the primary reasons the state of Florida, in conjunction with the National Council for Compensation Insurance, has increased workers’ compensation rates is the rising cost of health care and rehabilitative services. Also contributing to this year’s increase is the fact that from 2004 through 2010, workers’ compensation rates in Florida steadily decreased to the point where the premium generated was insufficient to cover claims. Now, the state is attempting to balance the revenue and cost by increasing the cost for workers‘ compensation insurance for all carriers in our state. Officials appointed with the responsibility of setting workers’ compensation rates in the state of Florida have worked with actuaries to determine the proper rates for the various job classifi­cations in our state and have provided all workers’ compensation insurance carriers with the new rates for 2012. In most cases, these rates are higher than 2011, but still signifi­cantly lower than they were several years ago.

Thank you for your time and understanding. If you have any questions or concerns, please contact us at 1-813-684-5684.

 

1. “Unemployment Compensation Rate Update.” Florida Association of professional Employer Organizations. 12 Dec. 2011.

2. “Bureau of Labor Statistics Data.” Labor Force Statistics from the Current Population Survey. Web. Dec. 2011.

3. “FL Dept Rev – Employer Information on UC Law.” Florida Department of Revenue. 2011 Unemployment Compensation

Tax Rates Fact Sheet. Web. Dec. 2011.

Increases in minimum wage…

Increases in the minimum wage often involve protracted political battles, but not so for 10 states that will increase their rates in 2012. That’s because these states tie annual increases in their minimums to increases in the cost of living.

The minimum wage will increase by 28 cents next year in Colorado; 30 cents in Montana, Ohio and Oregon; and 37 cents in Washington state. Other states that have laws requiring their minimum wages be adjusted annually are Arizona, Florida, Missouri, Nevada and Vermont. Announcements regarding rate increases in those states are still to come.

Nationwide, 18 states and Washington, D.C., have minimum wage rates that are higher than the federal minimum wage of $7.25, according to U.S. Labor Department data. Washington state has the highest hourly rate at $8.67, which will go to $9.04 next year when the new rate goes into effect.

The automatic revisions aren’t without controversy. Florida didn’t want to increase its rate this year because of slight deflation that occurred in 2008-09. Washington businesses sued to block the increase for this year. In both cases, courts ruled that the rates had to go up.

Proponents of a higher state minimum wage see it as a way to put more money into the pockets of working families who then boost the local economy by spending more. “Oregon’s economy will not rebound if we allow 144,538 minimum wage earners to fall behind inflation,” Oregon Labor Commissioner Brad Avakian said in The Portland Tribune.

One in five American adults last year worked in jobs that paid “poverty-level wages,” Paul Osterman, an economist at the M.I.T. Sloan School of Management wrote in a recent New York Times editorial. He says the current minimum wage is lower, in inflation-adjusted terms, than it was in 1968. Currently, 6 percent of all hourly workers make no more than the federal minimum wage of $7.25, TIME.com reports.

A study from the National Employment Law Project found that the majority of new jobs created in the wake of the recession are in low- and mid-wage industries. The group says that supports the case for higher rates. “These modest annual minimum wage increases are one of the few policies that counteract declining wage trends and prevent America’s lowest-paid workers from falling even further behind,” NELP Executive Director Christine Owens said in a statement. NELP estimates that the federal hourly minimum wage would have to increase to $10.39 to keep up with inflation.

Critics say a higher minimum wage doesn’t help the poor and often forces employers to let go of workers when the rates go up. These increases, says the Employment Policies Institute, come with “unintended consequences that are particularly harmful to less-educated and minority groups” who are the most likely to lose their jobs, the group says.

In Colorado, the increase in the hourly rate is estimated to provide workers an extra $582 a year. “Businesses will try to pass the cost on to people,” economist Fred Crowley told KRDO broadcast in Colorado. “But for businesses like fast-food restaurants, people could buy less and in turn it could end up hurting unemployment.”

Bradley Schiller, a professor of economics at the University of Nevada, Reno, has a different critique. While there is serious poverty in the United States, he says, very few families depend on the earnings from a single minimum-wage job for their economic support. In a recent Wall Street Journal editorial, Schiller predicted that the minimum wage issue is likely to be a hot-button topic in the 2012 presidential campaign.

MINIMUM WAGE HIKES FOR 2012

Colorado: 28 cent increase to $7.64

Montana: 30 cent increase to $7.65

Ohio: 30 cent increase to $7.70

Oregon: 30 cent increase to $8.80

Washington: 37 cent increase to $9.04

Source: National Employment Law Project, October 2011

State of Florida Work Comp Increase…

State: FL – Florida Insurance Commissioner Kevin McCarty gave final approval to an 8.9% increase in workers’ compensation rates that took effect on January 1, 2012. (source: workcompcentral)

For more information regarding this increase call a WCCOP representative today at 813-684-5684.

Evaluate Workers Compensation as it relates to Terrorism

On September 11, 2001, the US was attacked with devastating ferocity as we experienced the largest terrorist attack on native soil in the country’s history.  Among the aftermath of these attacks were the workers and employees injured or who became ill as a direct result of these attacks.  The number of workers compensation claims as a direct result of these attacks was enormous and brought renewed attention to the needs of terrorism training and awareness to business owners of all sizes as well as concern about how to cover these types of large, unanticipated expenses that go above and beyond normal work related exposure.  What is a small business owner to do?

After all, terrorism is certainly beyond the control of large and small companies! As our country began the slow process of sorting through the chaos, among the issues to be handled was that of workers compensation. From its conception, our current workers compensation system was never designed to address the issues faced by employees or employers in the face of terrorism. As the weeks and months went by, our nation was forced to face the fact that the system did not have the resources to fill all the need that resulted from the attack. In 2002, at the urging of insurance industry, the government enacted a federal terrorism program that would serve as a backstop to support the current workers compensation system in the event of a terrorist attack. This program requires the federal government to pay a portion of the cost cause by an attack by foreign terrorists. Once costs exceed $10 billion dollars, the federal government then pays 90% of the cost, to a maximum of $100 billion. The government, will however, pay smaller amounts if losses total less than that.