A Further Analysis of the Wyoming Workers Compensation System

One of the areas that Wyoming will need to examine is how Workers Comp claims are handled - specifically if claims that should be accepted are instead denied. This is one of the lingering questions about the North Dakota Workers Compensation system. Is there a trend to over-deny claims as the adjusters in North Dakota and Wyoming know that the Workers Comp system is one-sided?

A high-quality full claims audit from an outside source would enable Wyoming to find out if they are being fair to their injured employees. The word "independent" is crucial. The audit would have to be superior to the one in North Dakota.

From the Casper Star Tribune:

• A recent assessment of workers comp's finances by Pacific Actuarial Consulting suggested that about $642 million is required to cover benefits and liabilities based on historic and current income and payouts. It also suggested a more conservative view may call for $848.7 million, which would cover a major catastrophic scenario.
• As of Jan. 31, workers comp's cash balance was $925,296,141, according to outgoing director Gary Child. So whether the surplus is in the neighborhood of $77 million or $283 million, advocates from both the employee and employer viewpoints say they want a more detailed analysis of the finances.

I do not ever, and will never accept, an analysis from anyone in an insurance position that uses the word or words "worst-case scenario". Therefore, the analysis by Pacific Actuarial Consulting that 848.7 is needed for a catastrophe is not valid. However, I have not reviewed their findings. The $642 million seems high, but is probably more in line with actual needs of the Wyoming Workers' Compensation System. Producing a LDF (Loss Development Factor) should be sufficient for the projected needs.

One of the great things about the Wyoming Workers Compensation system is that attorneys, legislators, administrators, and others are asking questions.

Next Up - The Difference Between Premium and Reserve Audits - they are very different.

Analysis of the Wyoming Workers Comp State Fund

While we are on the topic of State Funds, Wyoming has been in quite a few online Workers Compensation publications with their huge surplus. Basically, the two basic questions that are being asked are:

• What do they do with the surplus?
• How did Wyoming get to have such a surplus?

The Wyoming surplus issue is complicated. We will address the first bullet point today and cover the second one in the next blog post.

It is, and has been, our opinion that any surplus that involves a Workers Comp Fund surplus should be returned to the employers. The surplus clearly indicates that Wyoming has been overcharging their employers for years. Refunding the Workers Comp premiums pro-rata should be the way to go. If the surplus was very small then, the State Fund of Wyoming should retain it to pay claims. I understand the surplus to be $925,000,000. That is not a small surplus for Wyoming. One may equate the return of premiums as a business stimulus. We would have to look at the numbers to see the amount of the surplus that should be returned to the employers.

One article that I read indicated that the injured employees were the ones that were shortchanged. I would have to disagree with that totally as there has never been a study conducted anywhere at any time that indicated that underpaying employees caused a surplus in a State Fund's premium. If the employee benefits were to increase that would affect only the FUTURE premiums, not the current and past ones.

One area that seems to have arisen in North Dakota with no conclusions drawn there is that too many claims were denied, and that increased the surplus. I will write a blog on that in a following post about the process of a litigated Workers Comp claim in a monopolistic state such as Wyoming or North Dakota. Could the claims process in a monopolistic Workers Compensation state be unfair? Possibly.

Next Up - Analyzing the Amount of the Surplus that should be returned.