Business Agency Reports On Workers’ Comp Increases, Form 1099 Tax Mandate

HARTFORD — According to a recent report from the Connecticut Business & Industry Association, many employers will pay higher workers’ compensation insurance premiums in 2011. The state Department of Insurance has approved an overall increase of 5.8 percent for policies purchased in the normal or voluntary market and an increase of 7 percent for assigned risk policies.

Costs for self-insured companies will likely increase as well, since their costs generally mirror those for insured businesses. The rate changes were proposed by the National Council on Compensation Insurance, Inc (NCCI), which analyzes and recommends workers’ comp rates for insurers in more than 40 states.

The new rates are “pure premium” rates, which do not include costs associated with administration, premium taxes, and other expenses — nor do they take companies’ claims experience into consideration. Rates will take effect for policies as they are purchased or renewed on or after January 1, 2011.

“We’re seeing an increase in wage-replacement costs in all of the states,” said Laura Backus Hall, CPCU, state relations executive at NCCI. Wage-replacement and medical coverage are the two components of the workers’ compensation benefit.

Behind The Increases

Ms Hall explained that one of the reasons for the increase in wage-replacement costs is Connecticut’s aging workforce. (According to a report by the Connecticut Commission on Aging, Connecticut has the nation’s seventh oldest workforce.)

“Typically, wage replacement benefits for an injured older worker are higher because [those workers] are more experienced and they’re making more money,” says Ms Hall.

Another factor in this year’s overall rate increases are rising medical costs and the fact that the decline in claims frequency seen over the past several years is slowing. Previously, that decline has helped to offset the effect of rising wage-replacement and medical costs.

While there is an overall 5.8 percent increase in the voluntary market, it does not necessarily mean any one company’s premium is going to go up. It will depend on an employer’s claims experience.

Here’s how the new rates break down by industry for the voluntary market:

*Manufacturing, +6.1 percent

*Contracting, +4.4 percent

*Office & Clerical, +0.1 percent

*Goods & Services, +7.1 percent

*Miscellaneous, +10.6 percent

*Overall, +5.8 percent

(A breakdown for the assigned risk market was not available at press time)

Repeal Of 1099 Mandate?

The CBIA also recently noted that in the wake of Republican victories in Congress and the US Senate, President Obama has apparently opened the door to the possible rollback of at least one controversial aspect of federal health reform.

One of the costly provisions of the health care reform is the mandate requiring all businesses to file a miscellaneous 1099 form with the IRS for all purchases of property and services that exceed $600, starting in 2012.

Unless this provision is repealed, businesses will have the burden and expense of tracking all purchases and then reporting the dollar amount of sales on a 1099 form whenever the $600 threshold is reached.

In remarks after Election Day, President Obama said that certain heath reform provisions could be on the table for negotiation — including the Form 1099 mandate.

The president said he wants to work with the new Congress and its Republican House majority to speed the nation’s economic recovery.

Businesses believe this mandate would significantly increase their administrative burdens as well as open them up to increased audits. The measure was included in the legislation to raise about $17 billion to help pay for some of the cost of health reform.