Columbus: Seven years after an investment and ethics scandal engulfed the Ohio Bureau of Workers’ Compensation and led to criminal charges against more than 20 people, the state-run insurance program for injured workers is set to return about $1 billion to public and private employers across the state.
The checks may be the strongest indication yet that the BWC is on solid footing again after the stock market collapse and the scandal that preceded it, forever known as “Coingate.”
But while employers welcome the rebates — the first doled out by the BWC since 2005 — workers’ compensation premiums through the program remain a potentially crippling expense for small and medium-size businesses that don’t have the option of being self-insured, some say.
“I’m happy to get anything, but at this point we need to review the entire system,” said Doug Barry of Barry Staff in Dayton, whose job placement company paid $426,000 in workers’ compensation premiums last year. “Come next year, I’m still going to be paying this same amount.”
Barry Staff is due for about $239,000 in rebates from the BWC.
The BWC Board of Directors, an 11-member body appointed by Gov. John Kasich, is expected to review the rebate plan Thursday, which returns approximately 56 percent of an employer’s annual insurance premium.
The bureau will also seek legislative approval to shift to a prospective or advance billing cycle (rather than retrospective billing based on past coverage), which the agency hopes will improve collection rates.
If approved, it would mean a short-term break for employers because their 2014 premiums would be “forgiven” for six months due to the changeover, providing a savings of $900 million. In addition, the agency plans to triple the grant money for workplace safety programs to $15 million.
“At the end of the day, we have a proposal that will help employers, help workers and make the system better, which ultimately helps the economy of Ohio,” said BWC Administrator Stephen Buehrer.
The big-money giveback is possible thanks to strong gains in the stock and bond markets. The state insurance fund delivered 7.38 percent average annual returns over the past five years — well above the bureau’s anticipated return of 4 percent.
That boosted the total investment portfolio to $25 billion currently, up from $17.3 billion in fiscal year 2008, and left the bureau with a cash cushion of $8.8 billion.
“The Bureau of Workers’ Compensation is a large insurance company. It’s different than any other state agency you cover. We’ve seen the assets grow and it was time to do something,” Buehrer said.
The $1 billion rebate plan will send an average of $4,762 to the more than 200,000 Ohio employers that pay into the State Insurance Fund. Some will get checks as little as $5 while the biggest employers will see a rebate of more than $3 million. Generally, the largest employers will get the biggest checks.
“It is new money that (employers) weren’t expecting that can be invested in workplace safety programs and invested in their operations in the Dayton area,” said Chris Kershner of the Greater Dayton Area Chamber of Commerce.
The BWC is the largest state-run workers’ compensation insurance fund in the country. It collects $1.8 billion in annual premiums and pays out roughly the same amount for lost wages and medical expenses incurred by injured workers. The system has 1.1 million open claims, including about 105,000 new ones filed each year.
BWC invests premium payments in bonds, stocks and other instruments. Buehrer said because BWC is a unique animal, it is difficult to benchmark its investment performance against comparable large state investment funds.
The $1 billion seems like a large figure, but between 1996 and 2005 the BWC returned a total of $8 billion in rebates to employers.
It was shortly after the last rebate when the public first learned of Coingate.
The BWC invested $50 million in rare coins through Maumee-based coin dealer Tom Noe, who had been a well-connected Republican but is now in state prison after being convicted of tapping millions from the fund.