Workers’ Compensation Underwriter Switch

For approximately 20 years, MHCC’s workers’ compensation insurance has been provided by Liberty Northwest, a carrier that’s been in the business of underwriting for more than 20 years. But their longstanding relationship ended when the college’s annual evaluation by LNW showed a high degree of losses for the company.

According to Gary Murph, MHCC’s chief financial officer, “They looked at our premium structure, and the record of our losses, and made a business decision that it wasn’t profitable for them.” Under LNW, MHCC’s 20-year ratio of losses to premiums culminated into a 100.4 percent difference, said Murph – meaning the college’s carrier never gained a dime in the long run, and had to shell out an additional .4 percent of the total premiums paid to pay for claims.

Brian Boe, LNW’s vice president of public affairs, said the ratio of losses to premiums wasn’t the only consideration for LNW’s decision. Exposures – what the college does that may increase the risk of accidents – play a large part in determining if coverage is viable. “We have to keep a very, very close eye on those considerations” not just because of profitability, said Boe, but because LNW has a state-sponsored competitor that doesn’t pay taxes. In order for LNW to stay competitive with SAIF, it has to be “doubly vigilant” when evaluating excess-loss clients.

The drop became official July 1, when almost instantly the college’s premium payments, $227,000 for last fiscal year under LNW, skyrocketed to $413,000 under SAIF Corp., the college’s new workers’ compensation carrier. The new rates weren’t dictated by SAIF, but through NCCI Corp., which administers the assigned risk pool accounts. Murph said the college will experience an $80,000 impact on the general fund, with other monies absorbed by things such as grant-funded programs.

Two high-dollar claims cases were the primary reason the college was ultimately assigned to SAIF. One accident that contributed to the denial occurred in 1998 with the death of Shelie Macias, a former staff member for whom an MHCC scholarship is dedicated. According to Murph, the accident occurred in one of the college’s parking lots as rain fell during a period of construction. “[Macias] was coming in, probably with her head down…and didn’t see the truck until too late.” The force of the impact threw Macias to the ground, and resulted in fatal injuries. Becky Weisen, a supervisor in the human resources department, said LNW had to pay, even though a non-MHCC vehicle caused the accident.
Another major financial settlement came last spring when a college maintenance employee, Lee Hager, was working in the gym on a ladder. The ladder broke, and the worker was “thrown to the floor and had extensive injuries,” said Murph. The worker has since recovered and returned to regular duties, but only after working through months of rehabilitation.

Oregon’s official ombudsman website states that if one carrier turns a business down, the excluded company can apply, which the college did, for the Oregon Insurance Plan – also known as the assigned risk pool. Aside from LNW, SAIF is the only licensed compensation carrier or underwriter who handles assigned risk pool cases.

Due to the state’s mandatory compensation coverage rules, the college has to have workers’ compensation insurance. Weisen said the college opted to go with SAIF and what she calls SAIF’s strong safety awareness program focus. Initially, SAIF – Oregon’s only state-run compensation carrier – denied MHCC coverage after thoroughly reviewing the college’s insurance and accident history.

The nature of Oregon’s compensation rules classifies insurers into two categories, voluntary or guaranteed – meaning an insurer may deny a business, but certain others have to take on the business, regardless of losses to premiums. The same rules dictate that if a company’s losses are too high, and an underwriter, or all of the insurers that offer workers’ compensation, turns a business down, the client must be covered by one of the two assigned risk company pools after application into the Oregon Insurance Program.
Oregon’s website stipulates that companies entered into a risk pool through one of the two carriers pay premiums to a pot which pays for accidents toward all businesses assigned to the pool. If the pot runs out, the state’s other insurers pay the difference to Oregon, who reimburses the assigned risk pool carriers. If MHCC were to, say, endure another high-dollar claim, the payout would come from the assigned risk pool pot – but when there isn’t enough money to pay, other non-risk pool insurers would pick up the tab through Oregon.
The college doesn’t anticipate having any problems with SAIF, but with the unpredictable payout of claims cases, coupled with the college’s financial woes, it is difficult for any of the parties to say whether the newfound relationship will bear the ripest fruit unless some headway is made with regard to safety awareness.

A Matter of Safety, in Small Doses

At core to the switch from LNW to SAIF was the issue of campus safety, or small, often repeated, accidents and injuries across the college.

“When you look at most of the accidents where people get injured, they’re probably caused more by carelessness than by being in a hazardous work environment,” said Murph of the ongoing issue of safety awareness among employees. “The accidents are all pretty ordinary,” he said.

From May 5 through June 23, 2005, there were 10 documented accidents and injuries at MHCC. Some were minor, such as a case where one worker neglected to use a service cart located in their work area, resulting in momentary pain in their shoulders, neck and arms due to the weight of a parcel.

Most incidents involve damage or discomfort to extremities, including a mild cut a student worker received on their finger while using the incorrect tool to remove a screw from the fitting they were working on.

MHCC’s safety council was charged with the task of devising a safety awareness strategy.
“We were thinking of using [a] promotional activity with candy with safety questions inside that would promote safety consciousness,” said Karen Reynolds, the college’s environmental health and safety coordinator and head of the college’s safety committee. The council plans to approach each department on campus – since injuries occur within all college units, according to one summer safety council meeting’s minutes – with a prepared speech and candy, as well as posters or banners, and hopes to spark conversation with departments about the respective area’s particular safety issues.

Historical or typical premiums can only be realized if the incidence of claims falls, meaning the loss-to-premium ratio must not exceed 100 percent.

“What we’re hoping is, by making safety a big issue with people – making them aware – [it] will reduce our incidence of injury,” said Murph. “And then over time – it’ll take more than a year – what we want to demonstrate is that, given where we are now and given our history, that that’s going to improve.” Meaning, if the college can show improvement, their premiums will decrease accordingly.

The college is working with Melissa Diede, a liaison from SAIF, to develop a contractually required safety program to promote safety among employees.

A Grievance Gone By

After the switch in underwriters, faculty, administrators and staff took pay cuts in an effort to help relieve some of the college’s budget shortfalls. Faculty, staff and administrators agreed to two days worth of pay cuts, spread over the course of the fiscal year. However, the Classified Association (CA) brought charges against the college claiming breach of contract.

An administrative assistant with MHCC who wishes to remain anonymous called the cuts “sneaky” in that they fell right after the college board voted to grant cost of living increases to MHCC’s employees. The source cited a history of staff willingness to accept cuts above and beyond the call of duty when budget problems called employees to rally together and pitch in, and believes the CA, whom they feel keeps the college afloat, don’t make as much money as their employee counterparts.

When Murph came to MHCC in early 2004, the CA had agreed to a five-day cut, and the faculty took a three-day cut. “Last year’s finances actually got a little better for us,” said Murph. “[The] administration made the recommendation to restore [the days employees lost the year before], so last year we had a full work year.” Murph said the reduction is an excellent tool when trying to provide continuity and stability during rough times.

The cost of living allowance, dubbed COLAs, are based on the Portland Metro Consumer Price Index (CPI), which is adjusted periodically to give employees in the region extra footing as inflation rises. College faculty contracts call for anywhere between 1 to 3 percent increases – in 2005-2006 they received the maximum increase – while CA contracts are set at increases of 2 percent each time the COLAs are instituted. Oregon has the second highest rate of inflation in the country.

Some feel MHCC’s president overstepped his boundaries before instituting the cuts.
In a lone conversation with former Classified Association president Garie Zordich, Silverman proposed the reduction – according to a CA email released last summer – then followed through with its mandate without further dialog, but since Zordich was to soon be replaced by Jennie Reinders, the current CA president, the meeting was not considered valid – at least that was the argument.

“The discussion is whether we discussed it enough with them,” said college president Robert Silverman. “Obviously, that’s open to interpretation.” Silverman feels there was adequate conversation, but admits the CA probably feels like there wasn’t enough dialogue prior to the reduction.

One classified association email, released by a staff member who wishes to remain anonymous, claimed the president spoke with only Zordich about the cuts, then took a vacation after putting through the cuts. Reinders, who wrote the email, claimed the college was required to show a financial need for the cuts, which, the email read, MHCC couldn’t show because the college’s reserve was above its goal of 5 percent. The college had exceeded, as of the start of the year, its five percent reserve goal – coming in at approximately 9 percent, or $4.4 million, according to Murph.

The college administration had denied a connection between the workers’ compensation mishap and the grievance brought against the college by the CA, but later conversations shed light on the possibility.

According to Al Sigala, MHCC’s head of the Office of College Advancement the insurance switch obviously added to the challenge of finding ways to save money. He contends the college instituted the cuts while looking at the budget as a whole, though he admits the increased premiums did play a part. “The change in the insurance and increase in costs, obviously, are a concern. There are other factors that are of concern too,” he said. “When you look at the budget that we’re dealing with…you know, enrollment is a concern too,” Sigala said.

Essentially, explained Silverman, the college has always budgeted for workers’ compensation premiums, but the amount they’d budgeted for changed unexpectedly and “now you just worry about the increase,” he said.

Earlier this term, Murph said, “This year we started a new biennium, and we had a whole different situation of fiscal constraints. We got less money from the state than we got last year. We had increased premium [insurance] costs, and a whole variety of things like that. So the days came back as another tool—for the classified [it’s] two days versus five days.”

Public safety officers at MHCC are bound by contract not to communicate with the press unless the Office of College Advancement gives the go-ahead. One officer, who also wishes to remain anonymous, confirmed that the president first instituted the cuts without proper conversation, then took a two-to-three week vacation in what they felt was an effort to circumvent, or postpone, action on the part of the CA, allowing the cuts to become official for classified members without giving them time to halt the mandate.

Silverman said the cuts were roughly the same amount dollar-wise as the cost of living increases, but contended the reduction is better than firing employees or eroding their retirement base.

“Everybody should share pain,” said Silverman. “I don’t see the discussion as, ‘We’re not going to [accept reductions].’ I think there are some technicalities we want to iron out about how we do it.” Asked whether the staff seemed selfish or stingy, Silverman said he didn’t want to cast them like they weren’t trying to help. “I think they just feel like they weren’t appropriately included,” he said.

Silverman took the two-day cut and also told the board he didn’t need to take his COLA.

“I think the president could set a tone,” Silverman said. “What’s cool about that? The gas prices are going up for [me] too,” he said.

Since the grievance process began, the college’s Classified Association has remained tight-lipped. An all-staff email was sent to all association members urging them not to talk to the press while the grievance continued, so getting a perspective of the issue from staff had been problematic.

In an effort to obtain clarification from the Classified Association, The Advocate compiled a list of every administrative assistant on campus. Most opted no comment, and some even said they weren’t aware of any grievance.

“You’re in a bad area because it’s collective bargaining,” said Silverman of the CA’s confidential stance.

The purpose of the discussions was to reach a compromise, with both sides invariably giving a little and taking a little, said Silverman.

As of two weeks ago, the grievance had been settled, said Murph, with staff agreeing to the pay cuts after the administration explained the need to use this particular tool. The staff agreed to lose pay for the days before both Thanksgiving and Christmas.

However, negotiations resulted in staff receiving an additional 1 percent increase to their COLAs for this fiscal year.

“We got a chance to talk about it,” said Murph. “The issue was about discussion, having enough discussion about it.” Reinders confirmed the cuts Wednesday, though only after months of refusing comment on the issue.

Asked whether the college had experienced trouble focusing on other issues due to the grievance, Murph asked, “Well, which grievance are we talking about?” A representative with the Office of College Advancement confirmed the possibility the college is engaged in several grievances in a comment similar to Murph’s.