Workers Compensation in the Quick Printing Industry

(1)

NATIONAL PRINT OWNERS ASSOCIATION

2110 South Dairy Road • West Melbourne, FL 32904 321-727-2444 • Fax 321-727-2166 • www.printowners.org

Results are in from NPOA’s recent-ly-concluded preliminary survey of Workers’ Compensation rates in our industry, and the findings are prov-ing to be a real eye-opener in terms of rates being paid and classifications being used.

Workers’ Compensation insurance rates are regulated and established solely at the state level. Most states (and the insurance companies provid-ing coverage within these states) rely on a classification system devised and maintained by the National Council on Compensation Insurance or NCCI. There are, however, a handful of states that do not use the NCCI classi-fication system, choosing instead to use their own. Those states are: California, New Jersey, New York, Delaware, Massachusetts, and Pennsylvania.

There are still other states that, while relying on the basic NCCI system, have chosen to make major modifications to

An NPOA Special Report

July 22, 2013

Workers’ Compensation in the “Quick” Printing Industry

many of the NCCI classification rules.

Texas is one of those states.

As an example, Texas may use a suggested NCCI code but has reserved the right to either broaden or narrow what is included under that code.

Other states such as Pennsylvania and Illinois, while relying in large measure on NCCI classifications, have created their own “special classifica-tion codes” for certain industries. As a result, these codes do not appear in the NCCI list.

NCCI Classification System

Generally speaking, the NCCI clas-sification system attempts to classify the overall business enterprise of an employer, not the particular work per-formed by specific employees - at least that’s the theory.

In practice, however, NCCI and the states relying on the NCCI classifica-tion method, allows for excepclassifica-tions

based upon the work being done, thus resulting in numerous classification codes being assigned to individual companies.

The most common exceptions allow for some employees to be classified as “clerical,” “outside sales,” and “drivers.”

The result being that while a compa-ny may have a relatively high exposure rate (roofing, window glass installers and printing), they may be allowed to use much lower rates for employees performing primarily clerical duties, outside sales and deliveries.

As additional background to this entire system is the fact that the NCCI is largely funded by insurance compa-nies with insurance industry executives making up the vast majority of its board members. Although NCCI pro-claims its “independent” status, many question this status as being one of the “fox guarding the chicken coop.”

NCCI has chosen not to provide the business community with an easy and free lookup method for check-ing specific classification codes or descriptions, choosing instead to sell this service. However, we have found a number of sources where such infor-mation can be found.

Useful Websites for Checking Workers’ Compensation Data

One of these sites is located at

https://www.wcrb.org/wcrb/classcode/ main.asp. This site is maintained by the state of Wisconsin, and while it tracks and reports Workers’ Compensation

(This study is based upon preliminary results obtained from an NPOA survey conducted in late June and early July 2013. We received surveys from 122 companies, and 238 specific Workers’ Compensation quotes.)

NPOA WORKMANS’ COMPENSATION INSURANCE INDEX

NPOA Workman’s Index

Insufficient Data <= $0.40/$100 $0.40 - $0.60/$100 $0.61 - $0.90/$100 $0.91 - $1.25/$100 $1.26/$100 or higher

(2)

rates specific to Wisconsin, it also provides a handy tool that allows us-ers to input a 4-digit code, or a general description, and it will provide the gen-eral description assigned to that code.

Although it is a commercial site offering insurance quotes and cover-age, we found the following site very informative and useful as well: http:// www.workerscompensationshop.com/ workers_compensation_class_codes. htm.

Once you arrive at the site, go halfway down the right-hand column where you will find a list of states. Select your state and it will take you to some useful information about your state and where it stands in compari-son with other states in terms of WC premiums.

As an example, visit the site above and then click on California. That will immediately bring you to the following editorial copy:

California is an expensive state for Workers’ Compensation. A 2010 study based on premium rates listed California as the 5th most expensive state for comp rates. That is a jump from 2008 when CA ranked 13th. States with higher rates than California include Montana, Alaska, Illinois, and Oklahoma. CA Workers’ Comp rates are 31% higher than the national median.

Click on Pennsylvania and it will return a similar factoid:

Pennsylvania ranks as the 14th highest state in the United States for Workers’ Compensa-tion insurance rates. With rates almost 14% higher than the national average it may be good business practice for employ-ers to shop their rates with an independent insurance agency such as Workers’ Compensation Shop.com.

Or click on MA for Massachusetts and read the following:

Massachusetts ranks as the 44th in the nation for workers’ compensation premium rates according to a 2010 study completed by the Department of Consumer Business & Services. This makes Massachusetts one of the more affordable states in the nation for workers’ com-pensation coverage. This rep-resents a slight rate increase in average rates over the same study conducted in 2008, where Massachusetts ranked 49th. However, Massachusetts work comp rates are still 25% below the national median.

Why Are Workers’ Comp Rates Important

If owners truly wish to obtain the very best (i.e. lowest) overall Workers’ Compensation coverage he or she must make every attempt to understand the

Workers’ Compensation system within their state. Otherwise they will be at the mercy of NCCI as well as insurance agents and companies, some of whom may not be fully aware of specific clas-sifications available in our industry.

NPOA’s recent preliminary Work-ers’ Compensation Survey revealed dramatic differences in Workers’ Compensation premiums per average employee being paid by companies. In some cases this could not be helped due to the specific state in question. In other cases, however, the difference in the total premiums being paid per employee were dramatic.

NPOA Workers’ Comp Index

One of the early steps taken in analyzing insurance rate data supplied by survey participants was to create a Workers’ Comp Index.

The Index was prepared by weight-ing the specific NCCI ratweight-ing data provided based upon the specific domi-nance and costs assigned to specific NCCI codes.

PREMIUMS PER EMPLOYEE – NPOA examined premium data supplied by survey par-ticipants. Participants were asked to provide their total Workers’ Compensation premium for their latest fiscal year as well as the number of employees covered under their policy. We then calculated the WC premium per employee and ranked the approximate 238 data points from low to high, and then distributed them into four equal quartiles. The results of this appear in the bar graph above. As you can see, approximately 25% of our survey participants reported paying an average of $248 per employee for their Workers’ Compen-sation coverage. At the other end of the spectrum, the top 25% of our participants reported paying premiums of $998 per employee, almost four times what those in the bottom quartile.

Average & Median Workers Comp Premiums

Per Employee by Quartile

$248 $375 $558 $998 $245 $358 $562 $939 $200 $400 $600 $800 $1,000 $1,200

1ST Quarle 2ND Quarle 3RD Quarle 4TH Quarle

Average & Median Workers Comp Premiums

Per Employee by Quarle

Average Median 3.91% 1.17% 17.58% 1.56% 3.91% 2.34% 28.91% 1.56% 6.64% 9.77% 17.19% 1.17% 4.30% 0% 5% 10% 15% 20% 25% 30% 35% #932 #2819 #4299 #7344 #7380 #8012 #8015 #8016 #8029 #8742 #8810 #8813 Misc. Pe rc en t o f A ll Re sp on de nt s

Most Common Codes Used in Prinng Industry

WC Code Distribuon - All Parcipants

$1.25 $3.40 $6.54 $1.28 $0.99 $2.28 $0.55 $0.24 $1.10 $1.43 $3.28 $1.10 $0.49 $1.94 $0.15 $0.09 $1.40 $7.96 $13.89 $1.50 $1.78 $2.56 $1.01 $0.44 $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 #932 (quick prinng PA only) #4299 (lithography & prinng) #7380 (delivery & drivers) #8012 (quick prinng - NY only) #8015 (quick prinng) #8019 (prinng - CA & IL) #8742 (sales persons - outside) #8810 (clerical or draing) 4299 (lithography, prinng), 18.3%

7380 (delivery & drivers), 4.2%

8015 (quick prinng), 30.4% 8742 (sales persons - outside),

10.0% 8810 (clerical or draing),

18.3%

Misc. Codes (Non-NCCI), 18.8%

Primary NCCI Codes Used/Cited by

Survey Parcpants

(3)

Using the resulting data, we calcu-lated a specific index for each company and then averaged that index for all companies within each reporting state (36 states reporting).

The result was a “State Index” rep-resenting the relative Workers’ Com-pensation rate for that state. Finally, we ranked all states based on their index. The results produced our map ap-pearing on page 1, and two tables: First, and alphabetical listing of states and their respective Workers’ Com-pensation Index. Second, a quartile breakout assigning each state into one of four quartiles based upon their index. The following table is our al-phabetical listing:

It is important to note when com-paring Workers’ Comp rates from one state to another, especially indexes based upon a broad selection NCCI codes, that indexes can vary signifi-cantly based upon the classifications included vs. excluded in preparation of the Index.

A state might very well have gener-ally low, overall Workers’ Comp rates, but it may also charge much higher premiums than other states for specific industries or classifications. The latter based on a higher incidence or risks associated with certain NCCI classes when compared to other states.

Common Workers’ Compensation Myths

In our research for this preliminary report, we talked to and heard from a number of printers, as well as a couple of insurance company representatives, and we heard a number of myths re-peated on numerous occasions. These are a few the myths we heard:

Myth #1 – Workers’ Compensa-tion Rates are set by the state and there is little to be gained by shopping around among insurance companies. While it is true that rates are set at the state level, it is not true at all that all insurance companies within that state charge the same rate for the same clas-sification. According to our research as well as information provided to us by insurance agents, it is not unusual to see rates for specific classifications and code vary by as much as +/- 25%.

Myth #2 – All companies within the same state and within a specific industry pay the same rates. This is not true. Even assuming no claims have been filed against the company, insurance companies have significant latitude in adjusting rates established under the NCCI system. It is quite possible for two identical companies with identical “claims history” to pay different rates for the same NCCI clas-sification code.

NPOA WORKER’S COMP INDEX SORTED ALPHABETICALLY BY STATE State State Index AZ $0.38 CA $1.56 CAN $1.30 CO $0.53 CT $0.87 FL $0.96 GA $0.61 HI $0.16 IA $1.16 ID $0.86 IL $1.18 IN $0.29 KS $1.02 KY $0.38 LA $1.00 MA $0.81 MD $0.44 ME $0.51 MI $0.68 State State Index MN $0.19 MO $0.60 MS $1.61 MS $0.93 NC $0.86 NE $0.33 NH $1.08 NJ $1.73 NY $0.61 OH $1.27 OR $0.49 PA $1.24 SC $2.01 TX $1.37 VA $0.52 VT $2.14 WI $1.29 WV $0.20 Printers from 36 states, plus two from Canada, participated in our survey.

For our second series of charts, we divided our data into four approximate quartiles and averaged the responses within each quartile. You can examine the four boxes to see into which quar-tile your state falls when compared to other states:

NPOA WORKER’S COMP INDEX STATES SORTED BY QUARTILES

TOP (highest) QUARTILE Average $1.59 State Index VT ...$2.14 SC ...$2.01 NJ ...$1.73 MS...$1.61 CA ...$1.56 TX ...$1.37 CAN ...$1.30 WI ...$1.29 OH ...$1.27 3rd QUARTILE - Average $1.05 State Index PA ...$1.24 IL ...$1.18 IA ...$1.16 NH ...$1.08 KS ...$1.02 LA ...$1.00 FL ...$0.96 MS...$0.93 CT ...$0.87 2nd QUARTILE - Average $0.68 State Index ID ...$0.86 NC ...$0.86 MA ...$0.81 MI ...$0.68 GA ...$0.61 NY ...$0.61 MO ...$0.60 CO ...$0.53 VA ...$0.52 1st (lowest) QUARTILE Average $0.34 State Index ME ...$0.51 OR ...$0.49 MD ...$0.44 AZ ...$0.38 KY ...$0.38 NE ...$0.33 IN ...$0.29 WV ...$0.20 MN ...$0.19 HI ...$0.16

(4)

Myth #3 – We employee “press operators” and we are told they must be classified under NCCI code #4299 and we are not eligible under the more popular #8015 “Quick Printing Code.” If your largest press measures less that 18” x 23” you may be eligible for classification #8015, which generally results in lower overall rates per $100 of wages & salaries.

Myth #4 – Using the #8015 “Quick Printing Code” pretty much guaran-tees us the lowest overall rate in our state. Not necessarily true. If your op-eration employs a significant number of employees who would otherwise qualify under the #8810 “Clerical” classification and/or the #8742 “Out-side Sales” category you might be better off paying a higher premium for your press operators while paying significantly lower rates for the latter.

Myth #5 – I must use an insur-ance company to purchase Workers’ Compensation coverage. Generally, this may be true, but not always. If you use a “payroll service” it may be possible to purchase Workers’ Comp insurance coverage through them. The advantage of the latter is that you can then pay your Workers’ Comp premi-ums at the same frequency that you pay your employees.

Myth #6 – I am told that all of my employees need to be classified under NCCI code #4299 since all of my employees have the same exposure to risk. This is generally not true, but once again it depends upon the state and the interpretation of the agent writing the policy. Generally speak-ing, some employees can be classified under less expensive codes such as “clerical” (#8810) or “outside sales” (#8742) if it can be demonstrated that these individuals have only incidental, casual or intermittent contact with the employees assigned to code #4299. Oftentimes, all that is required is a separate wall or door that isolates one employee classification from another.

What Codes Are You Using?

What NCCI Classification codes have you been assigned? Depending upon regulations within your state as well how insurance agents have interpreted the information you have provided, you may or may not have a lot of choice as to what codes may be applicable in your operation.

Do not, however, accept initial information regarding Workers’ Com-pensation rate as “gospel.” You need to check with at least two other compa-nies to see what type of coverage and at what costs they might offer.

Check as well with fellow NPOA members and competitors within your state and compare what others might be paying. You might be surprised.

Should Owners Exempt Themselves?

Generally speaking, owners and partners of printing firms are allowed to claim exemption under Workers’ Compensation coverage. Typical ex-amples of employees granted exempt status include:

• Officers or directors of corpora-tions registered with a state • Construction industry officers

who own more than 10 percent of the corporate stock

• Sole proprietors

• Casual employees who work at irregular intervals

• Household domestic service employees

• Employees of family members dwelling in the same household • Real estate brokers and

sales-people working solely on com-mission

• Employees covered under Federal Workers’ Compensation Laws

NCCI Takes New Look at Printing Classification #4299

As part of its core services, NCCI conducts classification inspections in all NCCI states. This process is called the Classification Inspection Program. The overall intent of the Classification Inspection Program is to monitor the accurate and consistent application of the classification system, thereby maintaining its overall integrity.

Based on an analysis of inspections completed between 2009 and the end of 2011 in all NCCI states, NCCI identi-fied five classification codes that are most commonly reclassiidenti-fied, as well as the classification codes into which the employers are typically moved. The term “reclassification” refers to governing class code changes made to an NCCI Inspection report. According to Rule 1-B of NCCI’s Basic Manual for Workers’ Compensation and Employers Liability Insurance (Basic Manual), the governing code is the classification at a specific job or location (other than a standard exception code) that produces the greatest amount of payroll.

One of those codes involving reclassification between 2009 and 2011 involved Printing – Code #4299. That code has since been reclassified to Code #8015 – Quick Printing. This means that companies formerly classified under #4299 may indeed be now eligible for the generally lower rates available under Code #8015.

(5)

Published by NPOA & Q.P. Consulting, Inc. -5- Copyright © 2013 NPOA DISTRIBUTION/USE OF SPECIFIC CODES IN “QUICK” PRINTING INDUSTRY – The graph above lists the 12 most frequently cited classifications cited by our survey participants. As an example, approximately 29% of all employees were classified under NCCI Code #8015. Note that not all codes cited above are NCCI generated. As an example, #932 is a code used strictly in Pennsylvania to designate quick printers. #8019 is also not an NCCI code, but rather one used solely in California to designate “Quick Printing.”

NPOA’s Workers’ Compensation Survey found that approximately 62% of owners chose to exempt themselves from coverage. Approximately 72% of owners indicated they chose to exempt their spouses.

Although a majority of owners appear to have exempted themselves and their spouses from coverage, this decision should not be driven solely by the desire to save money.

If the your decision to exempt yourself is based upon a fear of being charged high premiums based upon your executive salary then you should be aware that most states place a cap on executive salaries. As an example, in California, officers and owners’ salaries are capped at a fixed amount. In 2012 this cap was $104,000.

To put this in perspective, us-ing an estimated “clerical” rate of $0.75/$100 in remuneration, and a sal-ary of $104,000, the maximum work-ers’ compensation coverage would cost only $780, regardless of how much the $248 $375 $558 $998 $245 $358 $562 $939 $200 $400 $600 $800 $1,000 $1,200

Average & Median Workers Comp Premiums

Per Employee by Quarle

WC Code Distribuon - All Parcipants

$1.25 $3.40 $6.54 $1.28 $0.99 $2.28 $0.55 $0.24 $1.10 $1.43 $3.28 $1.10 $0.49 $1.94 $0.15 $0.09 $1.40 $7.96 $13.89 $1.50 $1.78 $2.56 $1.01 $0.44 $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 #932 (quick prinng PA only) #4299 (lithography & prinng) #7380 (delivery & drivers) #8012 (quick prinng - NY only) #8015 (quick prinng) #8019 (prinng - CA & IL) #8742 (sales persons - outside) #8810 (clerical or draing)

High Per $100 Low Per $100 Average Per $100

4299 (lithography, prinng), 18.3%

18.3%

Primary NCCI Codes Used/Cited by

Survey Parcpants

Most Commonly Used NCCI* Codes Cited in NPOA Survey

WC Code Distribution - All Participants

owner is paid. The theory behind the “cap” is that, “A broken leg is a broken leg, and costs the same to set for the owner as well as an employee.” Get-ting paid more does not increase the likelihood that an injury will occur.

Most important of all, and what should cause all owners to revisit this coverage, is that your regular health insurance policy may in fact refuse coverage for an injury or illness suf-fered on the job, especially so if you chose previously to exclude yourself under your company’s workmans’ comp policy.

How is that possible? Many states have adopted the “Exclusive Remedy” theory. As an example, California is an “Exclusive Remedy” state, and that means that your only remedy for benefits arising out of a work related injury or illness is workers’ compensa-tion coverage.

Thus, even if you have standard health insurance coverage (once again California is a perfect example of this)

your regular health insurance policy may very well disallow payments to cover medical expenses incurred as the result of a work-related injury or illness. The argument being that you had the oppor-tunity to seek coverage and you refused. What should you do immediately? Check-out your regular health insur-ance policy and go to the section ti-tled, “Evidence of Coverage” (EOC). Many policies state that, “We will not pay for coverage when the injury or disease is related, and if work-related benefits and coverage were or are available under workmans’ comp.” Basically, health carriers have the right to deny coverage based on the fact that it was a work related injury or illness.

Owners who find themselves lifting heavy boxes, operating potentially dangerous equipment, and delivering products to customers need to revisit the issue of whether requesting ex-emption from WC coverage is really in their best interest.

(6)

Owners who perform none of the above but who do make outside sales calls are equally at risk of injury and need to consider what would happen and who would provide coverage if they were involved in a major accident while on the way to visit a client. How would medical treatment and rehabili-tation costs be covered and by whom? The realities are that your potential risk of exposure to a job-related illness or injury may be much higher than you have previously considered. Exposure to risks, combined with the possibility of denial of coverage by your regular insurance company, plus the relatively low premiums and caps on executive coverage, are factors worth taking a new look at.

NCCI RATES PER $100

STATES WITH HIGH & LOWEST RATES

Lowest Per $100 Highest Per $100

#4299 (lithog. & printing) Ohio $1.43 California $7.96 #7380 (delivery & drivers) Oregon $3.28 Illinois $13.89 #8015 (quick printing) Georgia $0.49 Illinois $1.78 #8742 (Outside Sales Reps) Massachusetts $0.15 California $1.01 #8810 (clerical or drafting) Massachusetts $0.09 Vermont $0.44

Who Pays the Most & Least for Workers’ Comp?

Sometimes you hear printers com-plaining that, “Our Workers’ Comp rates are the highest in the country,” while others will brag that their rates are among the lowest. Of course, the reality is that it really depends on the

specific classification rate you are talk-ing about and how that rate is weighted when combined with other rates typi-cally utilized and assigned to printing in your state.

Nonetheless, someone has to be the lowest and someone else has to be the highest. The table above analyzes the

AVERAGE RATE COMPARISONS – The bar chart above reports the nationwide (or regional) rates per $100 of salary/wages for eight of the most common classifications (both NCCI and State assigned) cited for employees in the printing industry. *(Non-NCCI codes and rates reported as well).

Most Commonly Used NCCI* Codes Cited in NPOA Survey

$248 $375 $558 $998 $245 $358 $562 $939 $200 $400 $600 $800 $1,000 $1,200

Average & Median Workers Comp Premiums

Per Employee by Quarle

Average

Median

3.91% 1.17% 17.58% 1.56% 3.91% 2.34% 28.91% 1.56% 6.64% 9.77% 17.19% 1.17% 4.30% 0% 5% 10% 15% 20% 25% 30% 35% #932 #2819 #4299 #7344 #7380 #8012 #8015 #8016 #8029 #8742 #8810 #8813 Misc. Pe rc en t o f A ll Re sp on de nt s

WC Code Distribuon - All Parcipants

18.3%

Primary NCCI Codes Used/Cited by

Survey Parcpants

(7)

Average & Median Workers Comp Premiums

Per Employee by Quarle

WC Code Distribuon - All Parcipants

18.3%

Primary NCCI Codes Used/Cited by

Survey Parcpants

DISTRIBUTION OF NCCI CODES BY SURVEY PARTICIPANTS – The pie-chart above illustrates the distribution of the six most popular NCCI-assigned codes used by insurance companies to assign risks and coverage in the printing industry.

Primary NCCI Codes Used/Cited by

Survey Participants

$248 $375 $558 $998 $245 $358 $562 $939 $200 $400 $600 $800 $1,000 $1,200

Average & Median Workers Comp Premiums

Per Employee by Quarle

WC Code Distribuon - All Parcipants

18.3%

Primary NCCI Codes Used/Cited by

Survey Parcpants

five most common classifications and then provides the states with highest and lowest rates.

Conclusion

The average company participating in our survey reported they employed 7.7 “covered” employees and paid an average annual premium of $4,321. Al-though the latter was indeed the aver-age expenditure reported, many of our survey participants, because they were larger companies, indicated they were paying premiums ranging anywhere between $8,000 and $18,000.

Whether or not you participated in NPOA’s survey, we believe it would

be in the best financial interest of your company to retrieve your workers’ compensation policy and reexamine the classifications that have been assigned and used for your various employees.

If necessary, ask your insurance agent why certain employees are assigned certain classifications and whether there are any alternatives, in-cluding making changes in your plant layout that would allow reclassification of these employees.

What is your largest press? If it is smaller than 18” x 23,” you may want to double-check that your press

opera-tors have not being assigned a higher, more expensive NCCI Code than is required.

The best overall advice we can of-fer is that while you cannot control the safety practices followed by your competitors, you can ensure that you provide a safe work environment and that you insist that your employees follow prudent safety practices at all times. It is not a question of adhering to OSHA regulations or following the “letter of the law,” but rather taking a common-sense approach to safety that will result in the greatest savings for your company.