Alaska Workers' Compensation Rates Decline

Juneau, AK (WorkersCompensation.com) - Alaska state officials report that this year’s workers’ compensation rate decline is the largest in 40 years.

Workers’ compensation insurance premiums decreased an average of 17.5 percent statewide and the voluntary loss costs similarly dropped 14. 8 percent, according to Grey Mitchell, director of the Division of Workers’ Compensation.

The rate decreases for 2019 follow a 5.4 percent average rate decrease, and workers’ compensation premiums are down roughly 25 percent since 2015, according to state officials.  The reductions could save employers $35 million statewide.  

Alaska Chamber of Commerce President and CEO Kati Capozzi said the state is making progress with workers’ compensation but has a long way to go. Reforming the state’s workers’ compensation program has been a major policy initiative of the Alaska Chamber. 

State officials are attributing the favorable trend to fewer claims and medical cost reductions. Lower workers’ compensation  costs, for example,  reduce the burden on small businesses that buoy the diverse Alaska economy. The rates are proposed by the National Council on Compensation Insurance and subsequently reviewed and approved by the state Division of Insurance. Oil and gas pipeline workers were expected to see significant reductions of 26 percent.

Following approval by the state legislature in 2014, the Alaska Workers’ Compensation Board approved new practices and fee structures for paying medical providers for procedures paid for through workers’ compensation in October 2015. The fee structure changes put provider reimbursement rates more in-line with general group health insurance rates. It replaced a system of paying medical service providers at the 90^th percentile of ‘usual and customary fees’’ in a given region.

Alaska was the 33^rd state to adopt the new payment system. At the time, Alaska had the highest workers’ compensation rates in the nation and highest medical costs.

Claim frequency and favorable medical costs continued to decline in 2018 which were two of the major factors contributing to declining rates. The claims frequency means that across the board there were less claims filed in 2018 compared to previous years.

Industry watchers report that this is a favorable measurement for insurance carriers because this decreases the costs related to paying out insurance claims and processing those claims.

State officials said declining medical costs is largely because of streamlined processes throughout the medical facilities operating within the workers’ compensation system.  

And finally, Alaska passed legislation that clarified who is classified as an independent contractor and who needs to be covered by workers’ compensation insurance. The bill made it easier to obtain exemptions, to acquire reporting data, and to make payments.

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