The state ran into problems, though, when several insurers became insolvent, which cost the state more than $1 million in recent years.
Starting Jan. 1, all the premiums began going into a trust account, which pays the claims as needed. The insurance providers will not be called upon unless that account runs dry, Cooper said.
The state safety net for Worker's Compensation insurance began the new year with a new plan to pay claims, one that might lead to fewer headaches and lower expenses down the road.
The Indiana Compensation Rating Bureau debuted a new assigned risk pool Jan. 1 to handle Worker's Compensation coverage for businesses that have a hard time finding it.
Essentially, the bureau decided to change the way it handles money for this crowd and its claims.
By law, every Indiana business must provide Worker's Compensation insurance. However, some companies are too small and some lines of work-like trucking or roofing-carry too much risk to qualify for regular coverage.
That's where the ICRB and its assigned risk pool
Until this month, Floridabased NCCI Holdings Inc. helped manage Indiana's assigned risk pool as part of the National Worker's Compensation Reinsurance Pool that tracked data for about 20 states, according to Larry Hochstetler, a state relations executive for NCCI.
Now, Mississippi-based Compensation Insurance Services helps manage Indiana's pool. Its only other client is the state of Mississippi, Cooper said.
enter the picture. Those companies pay premiums to this pool. The bureau, which is a private not-for-profit, arranges coverage in return-"a market of last resort," according to ICRB President Ron Cooper.
Business can be brisk for this market. In 2003, Indiana's assigned risk pool reported 5,333 claims and collected $66 million in premiums. It paid out more than $26 million.
Every Worker's Compensation insurance provider in Indiana must chip in to support this assigned risk pool. How the cash flows into this pool, and the involvement of all those insurers, changed Jan. 1.
Under the old system, businesses in the assigned risk market paid their premiums. Then, after expenses, those premiums were distributed among the state's Worker's Comp insurers. The size of each insurer's premium depended on how much business it did.
The state then called for those premiums, which the Worker's Comp insurers
Before, an insurance company that went under took with it the slice of assigned risk pool premium it was holding. From 2001 to 2003, five carriers became insolvent, and the assigned risk pool lost $1.5 million, Cooper said.
The new plan eliminates that risk, but insurers no longer have the opportunity for investment income from their chunk of assigned risk premium. That money can still make money, Cooper noted, in the trust account. And that might mean the account can handle more claims so the insurers pay less in the long run.
The average employee who submits a claim shouldn't notice a difference, said Amy Strati, chief counsel for the Indiana Department of Insurance.
"It will have no impact on that and it should not even impact timing [for a claim's payment] at all," she said.
The change should be invisible to employers as well, according to Cooper. Ultimately, he said, the pool could become more efficient, which could lead to more savings.