COLUMBUS - Over the last nine years, an Ohio Bureau of Workers' Compensation flush with investment cash gave back more than $10 billion in dividends to employers even as premiums remained high.
Now with the give-backs disappearing following revelations of some $230 million in investment losses and the bureau announcing a 4.4 percent premium hike, employers and workers alike wonder whether the dividends masked deeper problems.
"Maybe we should have challenged [investment policy] before, but we figured that if they can make money and not reduce benefits, what's wrong with that," said Phil Fulton, an attorney for injured workers and president of the Ohio Academy of Trial Lawyers.
Despite recent bad investment decisions, Gov. Bob Taft and the bureau insist the fund is sound and no worker's injury will go untreated as a result of bad investment decisions.
The bureau was created in 1913 in reaction to an increase in factory injuries that accompanied the industrial revolution. The State Insurance Fund essentially serves as a state-run insurance company, pooling premiums from employers to pay for injured workers' medical bills and compensate them for lost wages.
Roughly two-thirds of Ohio's workers are covered through the bureau. The other third work for self-insured businesses that have demonstrated they have sufficient assets to cover claims.
Last year, roughly 288,000 employers paid $2 billion into the system, making the fund the second-largest workers' compensation underwriter in the country and the largest of five state-run monopolies that also include West Virginia, North Dakota, Washington, and Wyoming.
Other states, including Michigan, rely on fully or partially privatized systems. West Virginia, which recently had to use tax and tobacco settlement dollars to shore up its fund, has decided to abandon its monopoly and open up to private insurers in 2008.
Ohio voters shot down the idea of a privatized system in the early 1980s.
Both employers and workers largely agree that today's bureau has come a long way from where it was a decade ago, when then-Gov. George Voinovich labeled it "the silent killer of jobs."
"Employers were frustrated," state Rep. Stephen Buehrer (R., Delta) said. "Injured workers were frustrated. I was an aide in the Ohio House of Representatives at the time, and we used to get all kinds of constituent inquiries about benefits lost, complaints that the bureau was unresponsive to their needs. That kind of thing has virtually disappeared."
Mr. Buehrer is sponsor of a pending House bill that insiders agree amounts to tinkering compared with the massive changes of the mid-1990s.
Even with the 4.4 percent premium hike, rates remain 29 percent below what they were 10 years ago. Staffing at the central office and 16 satellite offices has declined 37 percent.
Turnaround time for claims processing has plummeted with the introduction of online filing and tracking. Managed care was introduced in an attempt to rein in skyrocketing medical costs.
The number of claims filed by injured workers has declined 30 percent, which some partially credit to bureau grants and programs rewarding workplace safety.
Fans and foes applaud the leadership of former administrator James Conrad in making the improvements. Mr. Conrad recently resigned under the cloud of bureau decisions to invest in a risky hedge fund operated by Pittsburgh-based MDL Capital Management and rare-coin funds managed by prominent Toledo-area GOP fund-raiser Tom Noe.
"We are an international leader in workers' compensation," said Mr. Conrad's interim replacement, Tina Kielmeyer. "I feel very confident in the safety, medical, claims, risk consulting services. Absolutely, we excel."
Confidence on the investment side is less certain. On Thursday, the bureau's oversight commission rejected a recommended dividend for private employers for the first time.
Andy Doehrel, president of the Ohio Chamber of Commerce, said the bureau's rates were so "out of kilter" in the early 1990s that, even with a 29 percent reduction overall, today's premiums are too high.
"When you look at the studies that are out there, Ohio is still in the top 10 in the country," he said. "It depends on which study you look at. It's hard to compare apples to apples, but all show high costs in Ohio for workers' compensation. That's not where you want to be when you want to be competitive."
Ms. Kielmeyer said medical costs are the culprit.
"The medical benefits costs continue to rise," she said. "We've got to bring our medical costs under control."
According to a 2004 study by the Oregon Department of Commerce and Business Services, Ohio, at $3.59 per $100 of payroll, had the fifth-highest premium in the nation.
But bureau spokesman Jeremy Jackson noted the study examined rates associated with the top industries associated with Oregon's economy, many of which don't correlate with Ohio.
In a January memo, Mr. Conrad wrote that if the numbers were adjusted to reflect the impact of the dividends, Ohio's rate would drop to $1.74, among the lowest in the country.
But Ohio doesn't have a dividend against which to offset rising rates for private employers so far this year. Begun in 1997, the givebacks peaked at $3.6 billion in fiscal year 1998 and had dropped to their lowest point of $415 million last year.
Charlie Smith, a Columbus workers' compensation defense attorney, has helped to write legislation on behalf of the National Federation of Independent Businesses and Ohio Manufacturers Association.
He said the new investment-fueled scandal has not yet spawned the type of crisis in confidence in the bureau that led to the overhaul of the early 1990s. "It could get there," he said. "They've been doing a better job with the changes Conrad put in place. But there is concern that confidence in the bureau could waver. The bureau has taken a black eye."
The bureau's own survey of the satisfaction of those it serves shows that employers generally rate their experiences 4.19 out of 5 in 2005. Workers rated their satisfaction at 3.96.
The bureau would not have gotten that high a score from Howard Skow, a 60-year-old former tool manufacturer from Toledo who went back and forth with the bureau for six years before being placed on total disability earlier this year.
He suffers difficulty breathing from an allergy or asthma that was apparently caused or aggravated by his job.
"When I was going through this, it was worse than when my son got killed," he said. "You just feel like you're the lowest person on the earth. It was not the people themselves, but the process I went through."
Tom Schaffer - partner and head of the workers' compensation section of the Toledo law firm Gallon, Takacs, Boissoneault & Schaffer - praised improvements at the bureau, but said some of the solutions have created new headaches.
"Once the bureau decides it wants to fight, it uses conservative doctors, and workers have to deal with a whole separate bureaucracy of [managed-care organizations]," he said.
Contact Jim Provance at: email@example.com or 614-221-0496.39.96196 -83.00298