Thirty-six states and the District of Columbia allow qualifying workers' compensation insureds to apply for and be granted premium credit for participation in specific "loss avoidance" and "cost savings" programs as well as plans that avoid punishing a specific class of employers. These four programs are: drug-free premium savings programs; managed care programs; construction/contractor classification premium credit programs; and safety committee programs.

Only one state, Florida, allows qualifying employers to take advantage of all four premium credit programs. Fourteen states choose to stay totally clear of any of these four premium reduction programs.

Credits offered by these individual programs are in addition to any other premium credits offered by underwriters or premium discounts related to the size of the premium.

Drug and Alcohol Free Programs

As the name suggests, insureds within the 21 states utilizing this program reward those insureds who have instituted a drug- and alcohol-free workplace program. Qualifying for these programs requires more than simply completing a form pledging that the employees will stay drug and alcohol free; generally stringent standards must be met to qualify for the premium credit (which is most commonly 5 percent).

Insureds seeking this credit in the applicable states must generally:

• Develop and disseminate a written drug-free workplace policy;
• Conduct employee training on the policy;
• Establish a drug testing policy to include: pre-employment, routine, post accident, reasonable suspicion and follow-up testing;
• Establish an employee assistance program (EAP); and
• Complete all the necessary paperwork and renew annually.

State and federal laws must be followed in the administration of a drug-free workplace program; and laws can vary by state.

Managed Care Program

Five states apply a managed care program credit. Employers who contract with approved managed care providers for the management of workers' compensation injury claims can receive a discount in these states.

The reasoning behind this credit is that a work-related injury properly managed in such a cost containment program is less expensive in the long run. Medical costs are lower due to the pre-negotiated fees and the provider is specifically trained to work with work-related injuries which may lower the indemnity benefits.

Contractors/Construction Classification Premium Adjustment Programs

Some contractors may pay their employees comparatively high wages in relation to other construction employers. Since premium is based on payroll, twenty-one states created a premium adjustment program to avoid penalizing these construction class employers.

States differ regarding the fundamental application of this premium credit program. Most require that at least 50 percent of the payroll come from a construction code. A few states require that only one construction-related class code be present (this is the exception rather than the rule). Beyond this, the differences among the states offering this program relates to the minimum qualifying average hourly wage and the maximum credit available.

To qualify for the program, employers must first be able to prove that the average hourly wage for all employees (even part-time workers) is greater than a specified minimum amount. Should the average wage be less than the set amount, the insured does not qualify for the program or its credits. Ten dollars was the lowest minimum average hourly payroll found and the highest minimum average payroll was $24 per hour.

Credits also fluctuate based on the average hourly payroll. The greater the difference between what the employer pays, on average, and the minimum qualifying hourly wage amount the higher the credit applied. In most states, the highest credit available is 25 percent; however, a few states granted even higher credit. Illinois, for example, showed a maximum available credit of 40 percent.

Safety Committee Premium Reduction Programs

Thirteen states and the District of Columbia make premium credits available to insureds who institute a safety committee. Several states that allow premium credit for a safety committee only do so for those insured's in that state's assigned risk program. Many other states require safety committees for specific insureds based on their experience modification factor or class of business; but these states do not necessarily provide any premium credits for these committees. Be careful not to confuse the requirement for the creation of a safety committee with a premium credit program for having a safety committee.

Like the drug-free credit program, qualifying for a safety committee premium reduction requires more than simply setting up a "safety committee." Rules vary by state, but generally the insured must:

• Be inspected by an external safety company;
• Pick the safety committee from among the employees and the management;
• Train the committee members on safety issues specific to their operation and in general;
• Conduct and document the finding of regular safety inspections of the facility;
• Hold regular safety committee meetings. As proof, each meeting's agenda, minutes and attendance records must be kept and available for review; and
• Conduct extensive post-accident investigations.

In addition to these requirements, some states require the insured to qualify for experience rating before being eligible for any safety committee credit.

The most common credit offered among those states that offer this program is 5 percent. However, there is at least one state that offers up to 20 percent credit based on specific grading factors.

A Map of the US

Attached is a map of the United States indicating which credits are offered by each state. Although every reasonable effort has been made to assure the accuracy of this information, there is no guarantee that all the information captured is current or absolutely correct. Comments and corrections are welcome as we desire to post correct information. Any corrections will be applied to the map in a timely basis.

Additional information on the differences among state workers' compensation systems can be found in "The Insurance Professional's Practical Guide to Workers' Compensation: From History through Audit."