Workers' compensation insurance rates: Alaska businesses pay one of highest rates.

• Author: Waller, Jeff
• Position: Legal Speak

Businesses in Alaska face one of the highest insurance rates for workers' compensation coverage of any state. In 2012, Alaska is expected to take over the No. 1 position for the most expensive insurance rate charged for workers' compensation insurance. And it appears that this cost will increase even more.

Every Alaska business with employees is required to have workers' compensation insurance, with the exception of the very few businesses that are large enough to be self-insured. As a result, practically every Alaska business must incur this substantial business expense.

MEDICAL OVERSHADOWS INDEMNITY

Workers' compensation benefits are divided into two categories: medical and indemnity benefits. Medical benefits cover the medical treatment and travel related costs needed to treat the work injury. These benefits are typically paid directly to the medical provider, not to the injured worker (the worker is reimbursed for travel expense if needed). For the most part, medical benefits are paid according to a set fee schedule.

Indemnity benefits cover a variety of areas, including lost wages benefits, which includes temporary total disability, temporary partial disability, permanent total disability; as well as permanent partial impairment and reemployment training benefits that may include a weekly stipend paid during the retraining process. These benefits are typically paid to the injured worker and are based upon the employee's spendable weekly wage.

In Alaska, 76 percent of every dollar paid for workers' compensation benefits goes toward medical benefits, not for lost wages or retraining benefits, despite the fact that Alaska's median household income is usually in the top five in the nation. According to the 2011 Alaska State Advisory Forum, the national average for workers' compensation medical benefits was 59 percent of every dollar. That means that in Alaska, regardless of the higher wages paid, medical benefits consume approximate 30 percent more of workers' compensation benefits than the national average.

NEW FEE SCHEDULE

Additionally, the Alaska Legislature recently issued a new fee schedule for medical services, which substantially increased the amount payable for certain medical treatments under the Workers' Compensation Act. For example, the allowable amount chargeable by hospitals or ambulatory surgery centers doubled, and the amount allowable for radiology increased by 120 percent.

It does not take a financial genius to determine...