The steps taken to ensure the solvency of the Employer's Reinsurance Fund (formerly the Second Injury Fund) were successful.
Because the Legislature passed HB218 earlier this year, the fund will have a $5.5 million balance on June 30, 1989, according to Robert E. Wilcox, president of Wilcox & Co., the actuary hired to provide the State Industrial Commission with figures on the fund's balance.During Wednesday's commission meeting, Wilcox said the 8 percent premium charged self-insurers, the State Insurance Fund and commercial insurance carriers in 1988. The funds went to the Employers' Reinsurance Fund and the Uninsured Employer's Fund.
Wilcox said the increase to 8 percent in the premiums avoided the insolvency predicted for the fund by the end of 1988 or early 1989. Eight percent is the maximum premium that can be charged, but HB218 provided for annual reviews of the fund and if possible the premiums can be lowered.
Commission Chairman Stephen M. Hadley said he was excited to see that several years of work on how to solve the fund insolvency problem has resulted in success. He said HB218 accomplished what was intended and that is to keep the fund actuarily sound.
Hadley and fellow commissioners John Florez and Tom Carlson adopted Wilcox' report and approved an 8 percent premium for 1989.
Wilcox said of the 8 percent premium that will be paid in 1989, 7.25 percent goes to the Employer's Reinsurance Fund, .50 percent to the Uninsured Employer's Fund and .25 percent to the General Fund. He said the Uninsured Employer's Fund is designed to protect employees working for companies that have gone bankrupt or they were violating the law by not having workmen's compensation insurance to cover employee injuries.
For 1990, Wilcox is projecting a 7.07 percent premium that could decrease to 6.82 percent in 1991, 6.32 percent in 1992 and 5.82 percent in 1993.
In the Employer's Reinsurance Fund, Wilcox projects $11.2 million in revenue in fiscal year 1989, disbursements of $10.4 million and an ending balance of $5.5 million (some of the balance is carried over from fiscal year 1988). Even by reducing the percentage of insurance premiums in 1990 through 1993, the fund still will have more revenue than disbursements, Wilcox said.
Wilcox said a $500,000 balance in the Uninsured Employer's Fund is inadequate and suggested the law be changed to allow a $2 million balance. If several large claims were received in one year, they could easily wipe out the $500,000 balance, Wilcox said.