Report: Insurer's Error Led to Higher Workers' Compensation Costs for State Businesses

It turns out that Pennsylvania businesses have been unwarrantedly paying higher rates for workers' compensation insurance due to a reason beyond their control - a data error from an undisclosed insurer.

A report published by the Pittsburgh Post-Gazette revealed the news after information was released by the Pennsylvania Compensation Rating Bureau. According to the report, the PCRB - an independent agency authorized by the state to determine the average costs for businesses to provide benefits - concluded that the insurance industry's average cost of providing workers' compensation benefit rose close to nine percent as Pennsylvania businesses were overpaying.

In addition to the higher rates, this error also had a negative effect on the state's political landscape. Conservative lawmakers had previously pinpointed a Pennsylvania Supreme Court ruling last year for the higher premiums. The Post-Gazette cited that one estimate stated businesses paid a combined $165 million more in premiums as a result to the rulings. Now, it's becoming abundantly clear that the steep increase wasn't just because of the rulings.

Unfortunately, there isn't a law in place that requires insurance companies to reimburse businesses for any overpayments. However, the Pennsylvania Insurance Department has publicly stated that they are reviewing the situation and could possibly find a way to correct any identified overpayments.

But for most Pennsylvania businesses, the damage has already been done. They could potentially pursue legal action against insurance carriers, albeit any recovery reimbursement would likely be limited by policy provisions.   

"Many small businesses already struggle with the high cost of workers' comp insurance, and these inflated premiums have made it even more difficult," Gordon Denlinger, state director of the National Federation of Independent Business in Pennsylvania, told the Post-Gazette. "...NFIB believes that insurance companies unintentionally overcharging small businesses for workers' comp coverage as a result of a data error should give that money back."

We will continue to monitor the situation and provide any public updates from the Pennsylvania Compensation Rating Bureau and the Pennsylvania Insurance Department.

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