North Carolina Workers' Comp Rate Cut a Boon for Small Business

North Carolina’s more than 890,000 small businesses saw their operational costs go down for the fourth time in five years thanks to a 15.9% workers’ compensation rate cut.

Under North Carolina workers' compensation law, the state’s businesses with three or more employees, including those operating as corporations, sole proprietorships, limited liability companies and partnerships, must provide workers’ compensation insurance for their employees or qualify as self-insured employers. There are some notable exceptions to the state’s three-employee rule:

  • Businesses where one or more employees work with, or in the presence of, radiation must have workers’ compensation insurance.
  • Agricultural employers do not need to carry workers’ compensation insurance unless they employ 10 or more full-time, non-seasonal workers.
  • The U.S. Department of Labor provides workers’ compensation insurance for federal government employees in North Carolina.

Another important aspect of the North Carolina workers’ compensation insurance system is that employees hurt on the job can collect benefits without having to prove employer negligence. In exchange, North Carolina businesses are protected from costly lawsuits if an employee gets injured at work. Also unique to the Tar Heel State, it operates its own rate bureau rather than relying on National Council on Compensation Insurance recommendations.

On April 1, 2019, North Carolina workers’ compensation rates decreased and the state adopted a 15.9% decrease in loss costs, which is one of the key variables used to calculate insurance rates.

“The general explanation for the filed decrease, which follows a decrease last year as well, is insurance carriers have had fewer workers’ compensation claims and are paying less for these claims,” the North Carolina Rate Bureau said.

The average rate decreases among North Carolina’s industry groups were:

  • 18.0% decrease for goods and services
  • 18.0% decrease for office and clerical industry groups
  • 15.2% decrease for contracting
  • 14.5% decrease for manufacturing
  • 13.4% decrease for miscellaneous industry groups

View the full table of North Carolina workers’ comp rates, rating values and miscellaneous approved values at the North Carolina Rate Bureau website.

North Carolina’s recent rate cut follows a national trend that’s due in part to better safety features on modern equipment, better safety programs in workplaces and more attention paid to safety. That all means fewer reported accidents and lower rates across much of the country.

The North Carolina Industrial Commission, which administers the state’s Workers’ Compensation Act, said reforms to its medical fee schedule have contributed to cost savings. Payments for non-hospital providers went down about 5% from 2014 to 2015 for claims at 12 months of experience. In the same period, payments for hospital outpatient providers fell 24% and payments for inpatient hospital providers decreased 11%.

The commission also reported indemnity costs per claim in North Carolina have decreased from an average of $26,666 for 2009 claims evaluated in 2012 to an average of $24,675 for 2012 claims evaluated in 2015. The average period injured workers are out of work due to temporary disability has also decreased from 24.6 weeks in 2009 to 21.2 weeks in 2012 for claims evaluated at an average of three years after the injury.

The state-wide rate cut can help small businesses further control their operational costs. For instance, EMPLOYERS was able to offer the state’s small business owners a lower hurdle for securing a premium discount. Prior to the rate cut, there was no premium discount below $10,000 available to North Carolina’s small business owners. Now, EMPLOYERS can offer these owners a premium discount for policies that are $5,000 or more. EMPLOYERS also lowered its state expense constants – a set amount added to a policy to cover the cost to administer the policy  – to help reduce costs for North Carolina’s small business owners

While North Carolina workers’ compensation rates have decreased by double digits in recent years, small business owners in the state should not expect those sorts of massive cuts in the future.

EMPLOYERS is committed to helping small businesses operate safer, more efficient workplaces. If you are looking for North Carolina workers’ compensation information, or more information about the small business services we provide, contact EMPLOYERS® today to learn more about our cost-effective workers’ compensation insurance.

The information provided is intended to provide a general overview.  This information is not legal advice and should not be relied on as such.  EMPLOYERS® makes no warranties for the accuracy, adequacy, or completeness of the information provided, and will not be responsible for any actions taken based on the information contained herein. If you have legal questions or need legal advice, please consult an attorney.

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