Are you a New York State employer grappling with the complexities of workers compensation premiums? At Third Ear Conflict Resolution, we frequently encounter disputes surrounding worker classification. This usually involves educating the Workers Compensation Board about our clients’ workforce structures and assisting small businesses with their carriers’ premium audits.
In recent years, there’s been a noticeable trend of workers compensation insurance carriers scrutinizing classifications and attempting to reclassify workers, potentially increasing premium costs. Let’s break down this conflict using the DIY Conflict Resolution process, as I did when Chase came to me.
Background
For the past five or more years before we met, Chase thought he had done the right things:
- Completed the annual premium audits from his WC insurance carrier
- Filed payroll and income taxes each year
- Worked with an accountant to ensure all bookkeeping and filings were accurate
Yet his business got a notice alleging it owed thousands of dollars in adjusted premiums. He was confused and frustrated.
Chase’s business only employed a handful of employees, including himself, and they were barely generating enough revenue to pay everyone’s salaries. They certainly didn’t have the money to pay any premium increases. When he pushed back, the insurance carrier gave notice of a its intent to cancel the policy. If that happened, Chase’s business was at risk of:
- Uninsured claims
- A Stop Work Order
- Seizure of the business bank accounts
- Difficulty finding replacement insurance
- Penalties for failing to provide mandatory insurance
Chase was understandably afraid.
Action One: Define the Conflict
We simplified the conflict into an actionable form: Chase and his insurance carrier disagreed about the risk classification of certain workers, which caused the premium increase.
Action Two: Identify the Interests
As we delved a little deeper, Chase saw that both of them wanted the premiums to be fair. But they had different definitions of fairness under the circumstances. He wanted to pay accurate premiums and preserve every bit of his operating capital. The unexpected premium adjustment would not allow him to do that, especially if he had to pay all at once. He also couldn’t understand why his receptionist was being put in the same risk category as his warehouse workers and other laborers.
The insurance agent didn’t want to be in an adversarial position with Chase, but his employer also had to maintain profitability and directed him to collect the premiums or cancel the policy. After years of underestimating the costs of claims, the insurance company was worried there might not be sufficient financial reserves available to pay claims.
Action Three: Play with the Possibilities
If Chase could have this conflicts resolve in any way possible, the insurance carrier would reconsider its worker classifications and estimated premiums, so his business would only pay what is actually due. He and his insurer would not be on opposite sides, and no one would be treated like a cheater.
Action Four: Create the Future
Reassured and prepared, we requested a premium audit. With some encouragement from the New York Compensation Insurance Rating Board (NYCIRB), everyone released most of their assumptions and biases. We instead collaborated with the auditors to provide insights into the daily operations of Chase’s business and the workforce needed to sustain it. We:
- Stopped looking for someone to blame and looked for win-win solutions
- Released all assumptions that the insurance carrier was trying to cheat Chase
- Obtained copies of the audit results and documents supporting the determination
- Asked a lot of questions about how the premium adjustment was calculated
- Reviewed the audit for errors
- Presented the insurance carrier with a detailed Application for Review
- Invited the auditor to join us on one of Chase’s worksites
Action Five: Stay on PARR
We Planned, Acted, Revised our actions, and Repeated the resolution process, until we got a fair result. The premiums were lowered, and Chase’s business is still going strong.
Next Steps
Not everyone wants to take the time to:
- Stand up for what is fair
- Challenge what appears as an 800-pound gorilla
- Risk retaliation
Unfortunately, this is what creates the environment in which abuses of power can occur. I invite you to look more closely at your premiums from year-to-year and the categories in which your workers are classified. When an increase occurs and appears unwarranted:
- Request review and further explanation
- Ask your insurance broker, attorney, and accountant to get involved early
- Set time aside each year to ensure you are getting a fair deal at a fair price–under all of your agreements.
- Be a powerful, savvy entrepreneur who creates the experiences you want.
Consistent review and advocacy are crucial to ensuring fair premiums and classifications for all of us.