June 14, 2015
June 14, 2015
June 17, 2015
26.895.1 - 26.895.14
Impacts of Legislation on Construction Companies’ Profitability: A Workers’ Compensation ExampleIn the last two decades, several states have assessed possible alternatives to their state-charteredworkers’ compensation funds, specifically with respect to privatizing those funds. Such adecision in a state is critical for the construction industry (which typically employs a significantportion of the work force) in that state as privatization may have implications on the premiumsthat the companies pay, on the level-of-service they receive, and even on their ability to secureinsurance. Within this context, the overall purpose of this study is to gather, synthesize, andpresent information with respect to the privatization of state-chartered workers’ compensationfunds to educate the members of the construction industry on this topic. As such, this paperpresents: (i) a general discussion on the state-chartered workers’ compensation fund concept, (ii)a detailed discussion on the privatization experiences of three states, and (iiii) overall findings ofthis study with respect to the issues that need to be considered when contemplating theprivatization of a state-chartered workers’ compensation fund. A qualitative researchmethodology was used which included an in-depth review of published documents and follow-upinterviews with the stakeholders. The study is exploratory in nature and the limited results areused only to provide a case study reference, supporting the assertion that the constructionindustry needs to pay more attention to legislative issues. In the three states investigated in thisresearch, a one-time cash infusion to the state general fund, risk management for state run funds,and lower premiums for insured companies doing business in other states were identified asreasons as to why privatization was done.Concerns are currently being raised in the workers compensation industry about the impacts oflegislation such as the Patient Protection Affordable Care Act (PPACA), specifically the medicalloss provision requirements, and what future impact that may have on workers compensationcosts. The National Council on Compensation Insurance has also proposed changes to theExperience Modification Rating (EMR) guidelines. Additional concerns include how states viewemployers and exemptions to those required to carry workers compensation insurance. Sincemost of the cost drivers and requirements for workers compensation are controlled by sourcesoutside the corporate umbrella, it is suggested that construction industry as a whole increases itsinvolvement in the legislative process to ensure that the potential impacts of pending legislationon profitability is understood by the construction companies.
Ozbek, M. E., & Glick, S. (2015, June), Impacts of Legislation on Construction Companies: A Study of Workers’ Compensation Paper presented at 2015 ASEE Annual Conference & Exposition, Seattle, Washington. 10.18260/p.24232
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