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Research and Statistics -- DLI statistics appendix

Cost of workers' compensation:  total cost; cost per $100 of covered payroll

Total cost

For insured employers, total cost is computed as written premium adjusted for deductible credits, minus paid policy dividends. Written premium and paid dividends for the voluntary market are obtained from the Department of Commerce. Written premium for the Assigned Risk Plan (ARP) is obtained from the Park Glen National Insurance Company, the plan administrator. (There are no policy dividends in the ARP.) Written premium is adjusted upward by the amount of premium credits granted with respect to policy deductibles, in order to reflect that portion of cost for insured employers that falls below deductible limits. Premium credit data through policy-year (PY) 2000 came from the Minnesota Workers' Compensation Insurers Association (MWCIA). A figure was estimated for 2001, by assuming the ratio of premium credits to written premium for the voluntary market was the same for that year as for 2000. When the actual amount becomes available for 2001, that year's total cost figure will be revised. For self-insured employers, the primary component of estimated total cost is pure premium from the Workers' Compensation Reinsurance Association (WCRA). A second component is administrative cost, estimated as 10 percent of pure premium. The final component of estimated cost for self-insureds is the total assessment paid to the Special Compensation Fund (SCF), net of the portion used to pay claims from defaulted self-insureds, since this is already reflected in pure premium. The assessment amount used includes the portion used to reimburse self-insureds for supplementary and second-injury benefits, because pure premium does not include these costs. The time reference of the total cost estimate is mixed. Written premium and deductible credits for insured employers are by policy year. Policy dividends for insured employers are by year paid. Pure premium for self-insured employers is by year earned, meaning the payment year of the payroll from which the pure premium is computed. The SCF assessment for self-insureds is by year incurred.

Cost per $100 of covered payroll

Total cost is the figure just described. Total workers' compensation covered payroll is computed as the sum of insured payroll, from the Minnesota Workers' Compensation Insurers Association (MWCIA) (annual Ratemaking Reports through policy-year (PY) 1999, unpublished data for PY 2000), and self-insured payroll, from the Workers' Compensation Reinsurance Association (WCRA). Insured payroll was not yet available for 2001; self-insured payroll is not available for 1980 through 1989. These figures were estimated by extrapolating from actual figures using the trend in nonfederal unemployment-insurance-covered payroll (from the Department of Employment and Economic Development) and the trend in the relative insured and self-insured shares of total pure premium (from the WCRA). Payroll through 1995 is adjusted for the former paid-leave exclusion by dividing by 0.9. Insured payroll is by policy year and self-insured payroll by payment year, so that the resulting total payroll figure has the same time reference as total cost and is, thus, comparable with it.

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