Workers’ Compensation Premium Rates Ranked by State

According to the Insurance Journal, workers’ compensation insurance rates fell in 2014, good news for small business owners. The rate hit a record low of $1.85 for each $100 of payroll. This varied by state, from a low in North Dakota of $0.88 to a high of $3.48 in California.

The study was done by the Oregon Department of Consumer and Business Services. Conducted every two years, it checks rates for a range of industries in all the states and the District of Columbia.

Highest and Lowest

In 2014, six states ranked high, including New Jersey, Connecticut, Oklahoma, Alaska, California and New York. The states that were at the bottom of the price list included North Dakota, Massachusetts, Arkansas, Indiana and Virginia.

Over half the states had changes in their premium levels, reported to the National Council on Compensation Insurance. The net rate was lower for the five-year period ending in May of 2014.

The biggest reductions were:

  • Montana, minus 39.1%
  • Kentucky, minus 30.65%
  • West Virginia, minus 25.4%

The three states with the highest increase were:

  • Delaware, 52.3%
  • New York, 24.2%
  • Connecticut, 21.4%

Trending Down

Workers comp rates have been going down over the last 20 years. In 1994, the medium rate was $3.35, in 2004 it was $2.85, and in 2010 it was $2.04, and then $1.85 in 2014. This is heartening news to owners of small companies. Insurance rates are a major expense.

Beside good news, it could have practical value for a company looking to relocate in order to deal with lower overhead.

Moving from California, with its rate of $3.48 for every $100 paid out in payroll, to North Dakota, where it is only $0.88, could save a lot of money annually. If you manufacture surf boards, it may not be a sound decision.

How Rates Are Calculated

The rates depend on three factors:

  • How big your payroll is.
  • What type of claims history you have. More claims equal a higher rate.
  • The classifications for your workers. Those in higher risk fields require higher premiums. And within a company, risk varies. Cooks are in a higher risk category than waitresses at a restaurant.

Your payroll actually has a number of factors, including how much is paid out in wages, salaries, commissions, bonuses, stock purchase plans, pay for holidays, vacation and sick leave, pension plans, meals and lodging as part of pay, plus credits, certificates and store merchandise.

You don’t have to move to save money. Keep your premises in good repair and cultivate a culture of safety among your employees.