Workers’ Compensation Gives Nevada Business Incentives

A study by the state of Oregon finds that Nevada’s workers’ compensation system is a selling point for attracting businesses to locate in Nevada.

Premium-related rates have increased in Nevada only once in the past five years, and the state has gone from the 11th most expensive in 2002 to No. 26 in 2004 in that category, according to the Oregon rankings and National Council of Compensation Insurance.

“It looks like you managed to have a rate decrease while most of the folks were going up,” Derek Reinke, research analyst of the Oregon Department of Consumer and Business Services told the Ren Gazette-Journal. “Position-wise, that makes you look quite a bit better.”

On average, rates Nevada employers were paying for workers’ compensation premiums went down more than 12 percent between 2002 and 2004, the study found.

“That is one of the bigger declines,” Reinke said.

“It has been good for the state, good for its workers, good for business and been very good for us for economic diversification for companies to come here that are good companies,” said Gov. Kenny Guinn of the privatized workers’ comp system. “That’s one of primary reasons we are doing so well in economic development and diversification right now.”

Nevada’s workers’ comp system is privatized, which allowed the state to move off its ledger sheet an unfunded liability of $1.6 to $2 billion with the private sector taking over responsibility for it, Guinn said. Also, the state was able to reduce its payroll by about 800 workers through retirements, employees joining the privatized company or taking other state jobs, he said.

Andrew Barbano, editor of NevadaLabor.com and a union member, said workers’ compensation reforms in Nevada began to take hold during the administration of Gov. Mike O’Callaghan in the 1970s.

“He made reforms to a seriously broken system,” recalled Barbano, who wants renewed workers’ compensation upgrades to what he says is now “your typical insurance company.”

“Workers’ comp is almost as difficult as applying for welfare,” he said. “The system is designed to jump you through lots of hoops (so) that it will frustrate you to the point where it will reduce claims.”

Guinn said that “to make sure that we are protective of our workers” Nevada retained responsibility for arbitrating cases when it privatized the system.

“We handle that, so that’s protection for individuals and the companies. We have a staff of people who actually hear those cases,” Guinn said.

The governor also noted that privatization of workers’ comp in Nevada also ensured that permanently disabled workers received a greater percentage of their normal salary.

“Costs were going up, and they were getting less and less in order to make it,” Guinn said. “It was not a good situation.”

Mary Lau, executive director of the Retail Association of Nevada, said other states have followed Nevada’s path on workers’ compensation privatization, “but then they have opened the door far too much and have ended up with problems.”

The Oregon study shows that California’s workers’ compensation premium rates are the nation’s highest at $6.08 per $100 of payroll compared with Nevada’s $2.58.

Also under the old system in Nevada, “we would lose employees through the cracks” by claims not being managed, Lau said.

Now, “there is an immediate care ethic for employees,” Lau said. “There is such a competitive nature now in employment that people are very, very concerned about getting workers back on the job force.”