ARTICLE
29 May 2014

When Bureaucrats Don’t Listen To Actuaries

RB
Reinhart Boerner Van Deuren s.c.

Contributor

Reinhart Boerner Van Deuren is a full-service, business-oriented law firm with offices in Milwaukee, Madison, Waukesha and Wausau, Wisconsin; Chicago and Rockford, Illinois; Minneapolis, Minnesota; Denver, Colorado; and Phoenix, Arizona. With nearly 200 lawyers, the firm serves clients throughout the United States and internationally with a combination of legal advice, industry understanding and superior client service.
Sometimes you don’t know who won an appeal until the very last pages of the decision, but not so in "San Allen, Inc. v. Buehrer".
United States Accounting and Audit

Sometimes you don't know who won an appeal until the very last pages of the decision, but not so in San Allen, Inc. v. Buehrer, 2014 Ohio 2071 (Ohio App., 2014), The first sentence of that May 15 decision made clear the outcome:

Reduced to its irreducible essence, this appeal is about a cabal of Ohio Bureau of Workers' Compensation ("BWC") bureaucrats and lobbyists for group sponsors who rigged workers' compensation insurance premium rates.

These were tough words from an appellate court which found that a system in Ohio of premium rating based on experience wrongly favored employers in group rating plans over those employers who were not included in the plans. The overcharges totaled in the hundreds of millions of dollars, and now the BWC will need to pay it back.

The Ohio Court of Appeals repeatedly noted that the BWC had been warned by actuaries that the system was prone to manipulation and was, in fact, leading to a premium system which was simply inequitable:

In this case, the BWC violated one of the most basic principles of workers' compensation insurance, i.e., that every employer participating in Ohio's workers' compensation system be charged a reasonable, accurate, and equitable premium rate that corresponds to the risk the employer presents to the workers' compensation system. The record reflects that for more than fifteen years, the BWC ignored the criticisms and recommendations of its actuarial consultants and maintained an unlawful and inequitable rating system under which it knowingly overcharged nongroup-rated employers workers' compensation insurance premiums in order to subsidize massive, undeserved premium discounts for group-rated employers. There were both clear winners and clear losers under the BWC's rating system. The clear winners were group-rated employers and their group sponsors; the clear losers — the nongroup-rated employers.

The moral of the story — if you are a bureaucrat and you contract with professionals like actuaries for their expertise, listen to their advice.

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