Michigan Earns Favorable Rating for Workers' Comp Costs

Michigan is doing a pretty good job of keeping its workers' compensation costs down and has the lowest rate among the 10 largest states in the country.

A recent study comparing workers' compensation premiums among the 50 states and the District of Columbia reported that Michigan had dropped to 30th, substantially improving on its ranking in 2000 when the state had the 23rd highest average premium.

"One important but potentially expensive cost of doing business in any state is workers' compensation protection for those who become injured on the job," said David C. Hollister, director of Michigan's Department of Consumer & Industry Services (CIS).

"In Michigan, we've worked hard to reduce our workers' compensation costs," Hollister said, adding lower workers' compensation costs help create a climate that helps draw new businesses to the state and retain those already here.

In the national study, Michigan's average cost was $2.25 per hundred dollars of payroll in 2002. California ranked number one in assessing the highest premium at $5.23 per hundred dollars of payroll, while North Dakota had the lowest rate at $1.24.

Among the nation's 10 most populous states, Michigan had the ninth lowest rate, tied with New Jersey. The other eight states ranked in order by average premium cost per $100 of payroll were: California ($5.23), Florida ($4.50), Texas ($3.29), New York ($3.13), Ohio ($2.89), Illinois ($2.73), Pennsylvania ($2.57), and Georgia ($2.32).

Workers' compensation policy premiums are developed by using a dollar value per hundred dollars of payroll, for more than 380 code classifications based on job type and the risk of injury associated with the job, explained David A. Plawecki, who oversees Michigan's workers' and unemployment compensation programs as a CIS deputy director.

"For example, an employer would pay less than $1.00 in premium for every $100 of payroll for a secretary in the clerical classification," he said. "In a much more hazardous job classification, such as a logger, the employer would be required to pay as much as $35 for each $100 in payroll."

The cost of providing workers' compensation insurance is driven by the weekly benefits paid, the medical benefits paid, and the efficiency of the system that provides for the delivery of those benefits.

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