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Monday, May 14, 2012

Ohio Businesses Behind on Workers' Comp Insurance

Story first appeared in  Springfield News-Sun.

Thousands of Ohio companies violated state law by not paying their most recent workers’ compensation insurance premium, which can drive up insurance costs for businesses that follow the rules, a Dayton Daily News analysis found.

Some employers fall behind on payments because of financial woes. Some go out of business and forget to notify the state they no longer need coverage. Still others skip payments intentionally to cut costs to obtain a business advantage.

Most of the time when you see somebody who doesn’t pay their workers’ comp premium, they are trying to cut corners on their overhead. If they do not pay for insurance premiums, they can charge less for jobs.

But companies that allow their coverage to lapse risk fines and even criminal charges. Employers can also face costly lawsuits if any workers are injured on the job while coverage is expired.

If there is an injury in the workplace when they didn’t have workers' compensation coverage, it would be an issue for them because the Ohio Bureau of Workers’ Compensation will pursue reimbursement for all medical and compensation costs.

The bureau identified about 41,247 private employers in the state that failed to report their payroll data and submit premium payments to the agency by the Feb. 29 deadline. This included 1,458 employers in Butler, Champaign, Clark, Greene, Miami, Montgomery and Warren counties.

An average of about 40,000 policies are allowed to lapse annually.

The payments and paperwork due at that time covered the period between July 1 and Dec. 31 of last year. By law, private employers must pay into the workers’ compensation system twice a year or be self-insured if they are a large company.

Some employers that did not meet the February deadline caught up just weeks after it passed. By April 13, about 24,639 Ohio companies who missed the deadline brought their policies up to date, and more have caught up since then.

But more than 12,200 accounts remain outstanding, and those companies owe an estimated $5.6 million in premiums. When the accounts were past due by 45 days, the bureau sent them to the Ohio Attorney General’s office for collection.

Construction companies, child care centers, law firms, political executive committees, bars, retailers, union organizations and many types of small businesses were among the Miami Valley employers that did not make their workers’ compensation payment as required by state law, a review by the Daily News found.

Studebaker’s Urbana Soft Water Service in Champaign County was one of the companies that missed the deadline. The company currently owes about $12,600, officials said.

An attorney for the company, said his client fell behind because it sells heating fuel, and the unusually warm winter negatively impacted sales.

Bureau officials say they try to work with struggling companies before imposing penalties.

The penalties can add up, but companies risk much heftier costs if workers become injured or develop illnesses related to their employment. If the bureau approves those claims, it first covers the employee medical care and lost wages and then seeks full reimbursement from the employer.

The strictest penalty for noncoverage is that anything that occurs during that period is charged to the employer, dollar for dollar.

Recalcitrant employers also face criminal prosecution if they intentionally defraud the system or repeatedly ignore warnings about noncompliance, according to the bureau.

The former owner of Bagel Cafe in Kettering, was found guilty in February of failure to comply for operating her business without workers’ compensation coverage, officials said. She received a 60-day suspended jail sentence, was placed on probation and ordered to pay restitution.

Employers that do not pay into the system increase the premium payments for everyone else because the costs are spread across a smaller pool of accounts, officials said.

Failing to pay into the insurance system gives companies an unfair advantage when bidding for contracts or setting their prices because they can undercut competitors with their lower overhead expenses, according to the bureau.

The Ohio executive director for the National Federation of Independent Business, said it is important to remember that the vast majority of businesses pay their premiums on time. Even if you have a couple of thousand nonpaying accounts, it is probably no different than any major insurance carrier in the world.

The bureau sought collection this year on about 5 percent of the approximately 250,000 employers statewide that pay into the insurance system.

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