Insurance Companies Have Obligation to Reimburse Small Businesses for Massive Overcharge

Date: November 14, 2018

Data error led to significantly higher workers' comp premiums since April 1

HARRISBURG, November 14, 2018 – NFIB, which represents over 12,000 small businesses in Pennsylvania, recently learned that workers’ comp premiums impacting our members would have been significantly lower if not for a data error. As a result, since April 1 of this year, when businesses renewed their policies, the premiums were much higher they should have been. While steps are being taken to reverse this, no changes would be made until January 2019. Currently, there is no plan to reimburse companies that have overpaid and will continue to overpay through the end of the year. NFIB finds this reprehensible and is seeking a solution for our small business members.

Insurance companies that offer workers’ comp coverage in the state provide financial data annually to the Pennsylvania Compensation Ratings Bureau (PCRB), where it is analyzed for the cost of losses, and then forwarded to the state Insurance Commission. When the state approves increases or decreases in “loss costs”, it directly leads to increases and decreases in businesses’ insurance premiums.

“Many small businesses already struggle with the high cost of workers’ comp insurance, and these inflated premiums have made it even more difficult,” said Gordon Denlinger, state director of NFIB in Pennsylvania.  “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.”

“The mistake in insurance companies’ anticipated losses was 8.9 percent higher than it should have been,” added Denlinger. “That drastic error wasn’t the fault of small businesses but led them to pay excessive premiums. They shouldn’t bear the significant financial burden it caused.” 

The PCRB, a nonprofit licensed by the state to annually calculate the “loss costs” of its insurance company members and file that information with the Pennsylvania Insurance Commission, has just sent an interim filing to correct the error. But, the PCRB states it doesn’t have the authority to make the change retroactive to April 1, 2018. That means businesses that were overcharged currently have no remedy.     

“The PCRB says it doesn’t have the authority to turn the clock back, only to correct the mistake going forward, and not until January, as businesses continue to be overcharged,” said Denlinger. “NFIB hopes the Insurance Commission can right this wrong and demand businesses be made whole. If not, we plan to investigate possible legal or legislative remedies.”

According to the PCRB, the data error was made by a single insurer. But that insurer has a significant share of the workers’ compensation market, and the error was severe, making the impact on NFIB’s members egregious. The name of that insurer has not been publicly revealed.

Ultimately, all businesses insured by any company providing workers’ compensation in Pennsylvania that renewed their policy after April 1, 2018, were affected by the error and were charged inflated premiums.


Related Content: Small Business News | Pennsylvania

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