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Servicing Carrier Workers' Compensation Assigned Risk Plans

Old Republic Residual Market Services (ORMARKS) provides specialized assigned risk services for the workers' compensation residual markets. Pennsylvania Manufacturers’ Association Insurance Company ( PMAIC), rated A+ (Superior) XV by AM Best, is our policy-issuing insurance carrier. ORMARKS and PMAIC are members of Old Republic International, a Fortune 500 company and one of the nation’s 50 largest shareholder-owned insurance organizations.

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Workers Compensation Assigned Risk Plans

Assigned Risk Plans Are the Market of Last Resort

What Is an Assigned Risk Plan?

  • Why Workers Comp May Be Hard to Get
  • Who Administers the Plan?

How Can You Get Coverage?

Pros and cons of assigned risk plans.

Suppose you try to purchase a workers compensation policy  in the standard market but no insurer will sell you a policy. This will create a dilemma since most states require employers to purchase workers compensation insurance. Fortunately, you'll have an alternative: You can secure coverage from your state's assigned risk plan .

Assigned risk plans are established by the states as a safety net for employers that are unable to obtain workers compensation coverage from "regular" insurers. They are the market of last resort for employers that would otherwise have no source of coverage. All states except monopolistic states have established a plan.   The law in each state determines how the plan is administered and financed. Assigned risk plans are also called the residual market.

The monopolistic states don't need assigned risk plans because all employers in those states are required to secure workers comp insurance from a government-operated fund.

States have created assigned risk plans so that all employers can obtain workers compensation insurance. The ultimate goal is to ensure that employees who are injured on the job will receive the benefits entitled to them by law.

Why Might Workers Comp Coverage be Hard to Obtain?

Here are some reasons why an employer may have difficulty obtaining workers compensation insurance from a standard insurer:

  • Poor loss history : If a business has sustained many small losses or a few large ones, underwriters may assume its management doesn't care about safety.
  • New business : A new company is difficult for an underwriter to assess because it has no track record.
  • Very small business : A very small company may not generate enough premium to compensate for the risk of claims.
  • Hazardous occupation : Many insurers are unwilling to provide workers compensation coverage to employers in risky occupations like logging, trucking, and roofing.

Who Administers the Assigned Risk Plan?

All states have designated an administrator that operates the plan and oversees the issuance of policies. In most states, the administrator is one of the following:  

  • The National Council on Compensation Insurance (NCCI)
  • The state competitive insurance fund
  • The state rating organization or another third party

The NCCI administers plans on behalf of 22 jurisdictions.   Each of these states requires all workers compensation insurers that operate within its borders to participate in the assigned risk plan. Insurers may either join a multi-state reinsurance pool or serve as a "direct assignment" carrier. When an insurer participates in a pooling arrangement, it may act as a servicing carrier (issuing policies and paying claims) or provide reinsurance to servicing carriers. If an insurer chooses the direct assignment option, it must agree to accept and retain all risks assigned by the NCCI. The direct assignment insurer pays all losses incurred by the assigned employers and is not reimbursed by reinsurance.

In 14 states, the assigned risk plan is administered by the state competitive fund. Examples are California, New York, and Montana. Most of the remaining states have designated their rating organization or an insurer as their plan administrator.  

If you or your insurance agent is unable to secure workers compensation coverage for your business in the standard market, you or your agent may submit an application to your state's assigned risk plan administrator. The application procedure varies by state. If the plan in your state is administered by the NCCI, you can apply online 24 hours a day or mail your application to the NCCI via the U.S. Postal Service.

If the plan in your state is administered by a state fund or rating organization, check the administrator's website for application instructions.

To obtain coverage in the residual market, you must have applied for coverage and been rejected by one or more insurers. The number of required rejections varies by state. For instance, employers in West Virginia can apply for coverage in the assigned risk plan only if they provide evidence of rejection by two insurers.  

The primary advantage of an assigned risk plan is that it provides coverage to employers that can't obtain insurance in the standard market. One major disadvantage is cost. Employers insured in the residual market generally pay higher rates than those insured in the voluntary market. Those whose experience modifier is greater than 1.0 may also be subject to a surcharge.   In addition, some states have eliminated the premium discount on assigned risk policies. An example is Massachusetts.   A premium discount is a credit applied when the premium exceeds a certain threshold.

Another drawback of assigned risk plans is that employers can't choose their insurer. Their policy is issued and managed by the plan administrator or servicing carrier. A third disadvantage is limited coverage. Policies issued in the residual market may not be as broad as those purchased from standard insurers. For instance, many policies afford no coverage for operations the employer undertakes in states other than the one where the policy was issued.  

Key Takeaways

  • Assigned risk plans serve employers that can't find workers comp coverage in the standard market.
  • Most plans are administered by the NCCI, a state insurance fund, or a state rating agency.
  • Policies purchased from an assigned risk plan are generally more expensive and provide less coverage than policies obtained in the standard market.

IRMI. " Assigned Risk Plans ." Accessed July 30, 2020.

IRMI. " Workers Compensation Residual Market ." Accessed July 29, 2020.

NCCI. " Insuring the Uninsurable. Workers Compensation Residual Market ." Accessed July 29, 2020.

NCCI. " Options for Submitting Assigned Risk Applications Online ." Accessed July 29, 2020.

State of West Virginia, Offices of the Insurance Commissioner. " Workers’ Compensation Assigned Risk Plan ," Page 2. Accessed July 29, 2020.

NCCI. " Assigned Risk Adjustment Program ." Accessed July 30, 2020.

The Workers Compensation Rating and Inspection Bureau of Massachusetts. " Premium Discount ." Accessed July 31, 2020.

NCCI. " Producers' Guide to Understanding NCCI's Residual Market Limited Other States Insurance Endorsement ." Accessed July 30, 2020.

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  • Pennsylvania Targets Worker Misclassification: Steep Costs Await Uninformed Employers

Tucker Arensberg, P.C.

Pennsylvania is cracking down on misclassification of workers, and the costs to employers could be steep.

Pennsylvania is placing an emphasis on employee classification. Recent investigations into misclassification have revealed a more serious problem than previously imagined that is costing Pennsylvania employees and taxpayers. As a result, the Pennsylvania Department of Labor and Industry is investigating even well-intentioned employers who might not be aware of the relevant legal landscape. 

Employee classification is a complicated, ever-changing area of the law, which can make it difficult for employers. Even employers who genuinely want to do the right thing and attempt to classify their employees accurately under the law can misinterpret a statute or be unaware that a particular statute even exists.

In the United States, there are dozens of tests for determining who is an independent contractor and who is an employee. At the federal level alone, agencies have employed numerous tests, such as the common law control test utilized by the IRS, a 16-factor test used by the EEOC, and the ABC test, just to name a few. The Department of Labor alone has shifted significantly in its approach to classification over the previous fifteen years. In 2015, the Obama Administration adopted an expansive view of the employee relationship, only for it to be rolled back when the Trump Administration came to power and withdrew the Obama-era rules. Then, in 2021, under the Biden Administration, the DOL adopted a 5-factor economic reality test. In January of 2024, the DOL issued its Final Rule, which included adoption of a more complex and stringent “totality of the circumstances” standard, under which no one factor is assigned any predetermined weight.

Just in Pennsylvania, employers may not realize that there are multiple tests used to determine whether someone is an independent contractor or an employee. For example, under the Pennsylvania Minimum Wage Act, a six-factor economic reality test is used, and the Pennsylvania Workers’ Compensation Act utilizes a right to control test. Ignorance of just one of the above-mentioned rules could land you in hot water with the Department of Labor, the Pennsylvania Department of Labor and Industry, or both.

Pennsylvania is among those states prioritizing fighting worker misclassification. In January of 2021, the state launched a bipartisan Joint Task Force on Misclassification of Employees, charged with identifying problems and providing solutions moving forward. They issued a final report on December 1, 2022. Below are just some of the Task Force’s findings:

  • 5.3: Average number of misclassified employees found per employer audit conducted by the Office of Unemployment Compensation Tax Service
  • 10,892: Estimated number of misclassified employees who suffered injury or illness at work and were denied Workers’ Compensation in 2021
  • 48,939: Annual number of employers who currently misclassify at least one employee
  • 259,000: Annual number of misclassified employees in Pennsylvania
  • $383,414.74: Estimated losses to the Uninsured Employers Guarantee Fund due to misclassification in 2021
  • $91,000,000: Annual lost revenue to UC Trust Fund due to misclassification
  • $6.4 million to $124.5 million : Estimated range of lost revenue to General Fund due to misclassification in tax year 2019
  • $153,365,895.20 : Estimated losses to misclassified employees who suffered injury or illness at work in 2021 without workers’ compensation insurance.

Suffice it say, the Task Force determined that worker misclassification is a serious problem in Pennsylvania. Since the report came out, Governor Shapiro has established a collaborative effort between Pennsylvania and New Jersey to crack down on wage theft and work misclassification in both states, the state legislature is weighing a series of laws aimed at guarding against misclassification, and the Pennsylvania Department of Labor and Industry has ramped up its investigations.

These investigations do not focus only on large companies either. Any employer that misclassifies a worker could be subject to fines and penalties at the state and federal level. Given the convoluted nature of the laws governing classification, employers operating with the best of intentions could still find themselves facing fines, so it is as important as ever for employers to consult their employment attorneys on all the relevant laws before making classification decisions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Written by:

Tucker Arensberg, P.C.

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Pennsylvania court rejects red book pricing in workers’ compensation .

pennsylvania assigned risk workers compensation

In the case of Federated Insurance Co. v. Summit Pharmacy , the Pennsylvania Commonwealth Court challenged the state’s method of calculating pharmaceutical costs in workers’ compensation cases.   

The court objected to the use of Red Book values, which are similar to the manufacturer’s suggested retail price of a car, to determine the average wholesale price (AWP) of drugs.  

Federated Insurance Co. sought a review of an order from the Pennsylvania Bureau of Workers’ Compensation that required the insurer to pay Summit Pharmacy approximately $72,500 to reimburse the cost of generic drugs provided to a claimant for her work-related injuries.   

The hearing officer used the Red Book values to calculate this reimbursement amount, a practice adopted by the Bureau for resolving disputes over pharmaceutical costs.  

The insurer argued that the Bureau’s use of Red Book values was inconsistent with Pennsylvania’s Workers’ Compensation Act, which limits the reimbursement of pharmaceuticals to 110% of the AWP. The insurer also contended that the Bureau’s ongoing use of the Red Book represented an improper delegation of legislative authority to a private entity.  

Summit Pharmacy, on the other hand, argued that AWP is a term of art used within the pharmaceutical industry, which regards the Red Book as an accepted source of AWP. According to Pennsylvania precedent, AWP is intended to be an objective estimate of drug acquisition costs derived on a national basis.  

The court sided with the insurer, ruling that Red Book values did not reflect AWP as required by the Workers’ Compensation Act. The court directed the Bureau to identify and publish a different, nationally recognized schedule to determine AWP, reasoning that AWP should be an industry average price, not one charged by a single manufacturer. It noted that the Red Book’s publisher followed a policy under which AWP was reported by manufacturers, calculated based on a markup specified by the manufacturer and suggested wholesale price was reported by the manufacturer.  

Scorecard : The court ruled that the use of Red Book values to calculate prices for pharmaceuticals in workers’ compensation cases is inconsistent with the state’s Workers’ Compensation Act. The Bureau has been directed to identify and publish a different, nationally recognized schedule for determining AWP.  

Takeaway : This ruling underscores the importance of insurers understanding and challenging the methodologies used to calculate reimbursements in workers’ compensation cases. It may prompt a review of similar practices in other jurisdictions, potentially leading to more accurate and fair reimbursement rates.   &

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COMMENTS

  1. State Workers' Insurance Fund Home

    Option 1: An employee can file a typical "disease-as-injury" workers' compensation claim, which would require the employee to provide medical evidence that they were exposed to COVID-19 in the workplace. Employees must provide this type of evidence for all injury-related claims.

  2. Servicing Carrier Workers' Compensation Assigned Risk Plans

    Old Republic Residual Market Services (ORMARKS) provides specialized assigned risk services for the workers' compensation residual markets. Pennsylvania Manufacturers' Association Insurance Company ( PMAIC), rated A+ (Superior) XV by AM Best, is our policy-issuing insurance carrier.

  3. Assigned Risk Complete List

    The purpose of the assigned risk mandatory Loss Sensitive Rating Plan (LSRP) is to provide a retrospective rating plan for those employers who have an assigned risk workers compensation insurance premium of $250,000 or more. Posted Date: Current Tips for Completing Assigned Risk Applications

  4. Purchasing Workers' Compensation Insurance

    There are four ways a business can obtain workers' compensation insurance coverage in Pennsylvania: Purchase a policy through an insurance agent or broker. Purchase coverage directly from one of the 300+ private sector insurance carriers who write workers' compensation policies.

  5. AIPSO > Plan Sites > Pennsylvania

    The Pennsylvania Assigned Risk Plan (PA ARP or the "Plan") was established pursuant to Subchapter D of Chapter 17 or Title 75 (75 Pa. C.S., Vehicle Code of the Commonwealth of Pennsylvania), as amended by Act 6. All insurers writing automobile insurance in Pennsylvania must participate in the PA ARP by providing such insurance.

  6. Assigned risk

    Solving tough workers comp challenges. For businesses unable to secure workers compensation coverage in the traditional marketplace, assigned risk insurance from Liberty Mutual can help. We offer this vital service in more than 26 states, providing workers compensation solutions to customers that may not qualify for coverage in the standard ...

  7. PDF Your Guide to Workers' Compensation Insurance

    The Pennsylvania Workers' Compensation Act provides for a percentage of the average weekly wages (most often 66 2/3% of gross wages) to be paid as compen-sation. Workers' compensation benefits depend on the status of the injuries. The status of injury are classified as follows: · Temporary Total Disability.

  8. Workers Compensation Assigned Risk Plans

    Assigned risk plans are established by the states as a safety net for employers that are unable to obtain workers compensation coverage from "regular" insurers. They are the market of last resort for employers that would otherwise have no source of coverage. All states except monopolistic states have established a plan.

  9. Residual Markets

    NCCI is the source you trust for workers compensation information. ... Request an Assigned Risk Estimate Submit an Assigned Risk Application Access WCIP State Instruction Pages Access RM Expiration Lists Access Circulars Access Manuals Plan Administration. 2024 Residual Market Servicing Carriers (PDF) ...

  10. Assigned Risk Plans

    Colorado—Pinnacol Assurance Connecticut—NCCI Holdings, Inc. Delaware—Delaware Compensation Rating Bureau District of Columbia—NCCI Holdings, Inc. Florida—Florida Workers Compensation Joint Underwriting Association (FWCJUA) Georgia—NCCI Holdings, Inc. Hawaii—Hawaii Employers Mutual Insurance Company Idaho—NCCI Holdings, Inc.

  11. Insuring the Uninsurable

    A stable residual market is an indication of a healthy WC system—one in which employers can readily find coverage in the voluntary market. The workers compensation residual market premium share for NCCI-serviced pool states has also been consistent since 2014—generally hovering between 7% and 8%. In recent years, the residual market ...

  12. WCRIBMA

    The WCRIBMA submitted a rate filing on December 22, 2023 to the Division of Insurance on behalf of its members recommending an 8.3% decrease in average rates for industrial classes. The proposed effective date of the rate filing is July 1, 2024. Refer to Circular Letter #2425 for details. For additional information or to view the filing, refer ...

  13. Assigned Risk Solutions

    Assigned Risk Solutions provides superior coverage to businesses who need it, even those not accepted in the voluntary market, including high risk insurance policies. Learn More Services Medical Management Claims Fraud Detection & Prevention Loss Control Premium Audits PPO Provider Search Our Services Resources

  14. PDF Application for Workers' Compensation Insurance Coverage

    It is mandatory that employers carry workers' compensation insurance per the Pennsylvania Workers' Compensation and Occupational Disease Acts. Failure to comply with these laws subject employers to lawsuits by employees and criminal prosecution could result in substantial fines, imprisonment, or both.

  15. Assigned risk customer service

    If you are an assigned risk customer, our Assigned Risk Customer Service Center is available by phone at 1-800-653-7893 or email at [email protected]. Professionals are available Monday through Friday, 7 a.m. to 7 p.m. CT and can answer your questions related to: General inquiries regarding your coverage Policy review Billing inquiries

  16. PDF PENNSYLVANIA WORKERS COMPENSATION Loss Cost Multipliers Effective as of

    PENNSYLVANIA WORKERS COMPENSATION Loss Cost Multipliers Effective as of FEBRUARY 1, 2024 NAIC Code Insurance Company Multiplier 16862. 1842 INSURANCE COMPANY: 2.0800: ... EXECUTIVE RISK INDEMNITY INC. 1.4030; 40029 EXPLORER INSURANCE COMPANY; 1.7000 31925; FALLS LAKE NATIONAL INSURANCE COMPANY 1.5500;

  17. Pool Carriers

    Pennsylvania Manufacturers Assoc Insurance Company. PMA Insurance Co / ORMARKS. P O Box 9325. Minneapolis MN 55440-9235 (877) 347-3596. ... Assigned Risk Workers Compensation Attn: Lockbox Operations, Dept. 660333 2701 East Grauwyler Rd., Bldg. 1. Irving TX 75061 *NOTE ...

  18. Pennsylvania Targets Worker Misclassification: Steep Costs Await

    10,892: Estimated number of misclassified employees who suffered injury or illness at work and were denied Workers' Compensation in 2021 48,939: Annual number of employers who currently ...

  19. PDF Workers Compensation Insurance Plan Handbook

    WORKERS COMPENSATION . INSURANCE PLAN . HANDBOOK . EFFECTIVE ... 30 South 17th Street . Philadelphia, Pa 19103-4007 . 302-654-1435 . Fax-215-564-4328 . www.dcrb.com. 2 . PURPOSE OF HANDBOOK . This handbook will assist you in understanding the D elaware Insurance Plan (DIP) or "Plan." ... recognized by the Assigned Risk Plans of various ...

  20. Assigned Risk Supplement to the Residual Market Manual for Workers

    NCCI's Assigned Risk Supplement to the Residual Market Manual for Workers Compensation and Employers Liability Insurance (Assigned Risk Supplement) provides supporting information about the NCCI-administered Workers Compensation Insurance Plan. (WCIP). Designed to be used in conjunction with NCCI's Residual Market Manual for Workers Compensation and Employers Liability Insurance, the Assigned ...

  21. Best Workers' Compensation Lawyers Philadelphia, PA Of 2024

    Whether you work in blue-collar or white-collar jobs, the risk of workplace injuries is always present. In 2022, private-sector employers in Pennsylvania reported 123,400 non-fatal workplace ...

  22. Workers' Compensation

    Announcements The 2024 Statewide Average Weekly Wage is now available. SAVE THE DATE! The 23rd Annual Workers' Compensation Conference is May 30-31, 2024, at the Hershey Lodge & Convention Center in Hershey, PA. More information is coming soon! The 2022 Workers' Compensation and Workplace Safety Annual Report is available here.

  23. Pennsylvania Court Rejects Red Book Pricing in Workers' Compensation

    In the case of Federated Insurance Co. v. Summit Pharmacy, the Pennsylvania Commonwealth Court challenged the state's method of calculating pharmaceutical costs in workers' compensation cases.. The court objected to the use of Red Book values, which are similar to the manufacturer's suggested retail price of a car, to determine the average wholesale price (AWP) of drugs.

  24. How to Obtain a Policy

    To apply for Workers' Compensation coverage, you may obtain an Application from one of our eight (8) District Offices, or by downloading the Application for Workers' Compensation Coverage form (SWIF-429).