State secures $2.5 million in workers’ comp refunds

The reason for the refunds dates back to 2005, when the National Council on Compensation Insurance identified an error in its rate-making system. The system omitted historical payroll information in roughly 90 classification codes in 2003, 2004 and 2005. The missing payroll data resulted in the advisory loss costs being overstated, which caused higher premiums for some policyholders.

According to a DIFP news release, advisory loss costs are actuarial estimates of what insured losses and loss adjustment expenses are likely to be in the coming year. They are developed based on historical payroll information and used by insurance companies to develop the final premiums for employers. Both the department and the NCCI provide insurance companies with advisory loss costs each year to assist companies in setting their final premium rates in Missouri.

Missouri was one of at least 12 states to request that NCCI recalculate the advisory loss costs for the affected years. At the same time, DIFP directed insurers to identify policyholders in the classification codes affected by the error and to refund any overcharged amounts of more than $10.

The policy identification process began in May 2006 and continued through the end of the year. To date, the department estimates that of the roughly 51,000 policies reviewed, about 21,000 were affected by the error. The average return for policies in Missouri was approximately $121, and the largest single amount returned to one Missouri business was $107,259.

“Missourians have created nearly 80,000 jobs over the last two years, but when employers are forced to pay more than their fair share for an insurance product, we run the risk of stifling economic growth,” Gov. Matt Blunt said in the news release. “These refunds will help ensure that Missouri businesses continue to pay only their fair share for these benefits.”

Policyholders with questions should call the Consumer Insurance Hotline at (800) 726-7390.[[In-content Ad]]