14-May-16 Appeals Court Blasts BWC In Group Rating Decision

An appeals court has taken the Bureau of Workers’ Compensation to task in an unusually harsh, 3-0 ruling this week that largely upheld a lower court decision ordering the agency to refund nearly $860 million to certain employers.

Ohio’s 8th District Court of Appeals in Cleveland said the trial court correctly determined that the BWC operated an unlawful rating system that granted excessive premium discounts to employers participating in the group rating system at the expense of nongroup-rated businesses.  

“Reduced to its irreducible essence, this appeal is about a cabal of Ohio Bureau of Workers’ Compensation bureaucrats and lobbyists for group sponsors who rigged workers’ compensation insurance premium rates so that for employers who participated in the BWC’s group rating plan (‘group-rated employers’), it was ‘heads we win,’ and for employers who did not participate in the group rating plan (‘nongroup-rated employers’), it was ‘tails you lose,’” Judge Kenneth Rocco said in the decision. 

 “For more than 15 years, the BWC allowed nongroup-rated employers to subsidize excessive, undeserved premium discounts to group-rated employers who were handpicked by group sponsors to participate in the BWC’s group rating plan. The temerity of the group sponsors, untempered by any notions of equity from or of the BWC, exacted a heavy price for nongroup-rated employers – over $859 million.”

 The BWC’s group rating programs, which are sponsored by local and statewide business groups, offer participants’ employees workplace safety training and gives employers significant savings on workers’ compensation premiums.

Judge Rocco said the Cuyahoga County Common Pleas Court was right to order the BWC to refund the overcharges the bureau unlawfully collected from non-group employers, but remanded the case back to the lower court to recalculate the award to account for class members who at times participated in the group rating system between 2001 and 2008.

Appeals court Judges Eileen Gallagher and Mary Eileen Kilbane concurred in the decision. 

“While we’re pleased the court recognized that many of the businesses in the suit benefitted from the group rating program, we are, of course, disappointed with the decision and are considering our options,” BWC Administrator Steve Buehrer said in a statement.

BWC spokeswoman Melissa Vince said the bureau had previously set aside $854 million from its net assets to cover a potential court loss.

Earl Stein, lead plaintiff in the case that includes more than a quarter of a million employers in the class, hailed the ruling.

“After years and years of waiting, we have been vindicated. It is now time for the bureau to accept responsibility, acknowledge the harm it has caused – particularly to the thousands of businesses who were forced to close their doors as a result of the bureaus’ actions – and pay us back,” he said.

Mr. Stein noted that Gov. John Kasich recently told a television interviewer that he was sensitive to the businesses in the case and called on the governor to tell the BWC not to appeal and refund the money. “It’s time to end the costly legal games,” he said.

In his decision, Judge Rocco lamented the difficulty involved in ensuring adequate restitution for the non-group businesses and suggested the General Assembly should have gotten involved earlier.

“A court cannot turn back the clock; it cannot ‘put the genie back in the bottle’; it has no means by which to ‘claw back’ and redistribute all of the years of undeserved subsidy benefits group sponsors secured for group-rated employers at the expense of those excluded from groups,” he said.

“For this reason, perhaps the best remedy in this case would have been for the legislature to have more promptly intervened, to have conducted a thorough investigation as to how this situation came about – i.e., was it mere negligence on the part of the BWC or was there some form of collusion between the BWC and group sponsors that resulted in the BWC’s implementation of such an inequitable rating program – and to have fashioned a timely and equitable legislative remedy.”

In 2009 the BWC modified the group rating program by starting to reduce the maximum discount, which at one time exceeded 90% off base rate premiums. It has since been cut to 53%.

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