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Court of Appeals Finds Group Rating System Unlawful

On May 15, 2014, the 8th District Court of Appeals announced its decision in San Allen v. Bureau of Workers’ Compensation, 2014-Ohio-2071, finding the Bureau overcharged state fund employers by hundreds of millions of dollars.  This case, known by many as the “Group Rating” case, has been pending for several years.  The case involves a lawsuit filed by numerous State Fund employers against the Bureau seeking reimbursement for inflated premiums due to Ohio’s group rating system.  The plaintiff class challenged the constitutionality of the group rating system and alleged the Bureau violated R.C. 4123.29 and R.C. 4123.34, which statutes authorize the Bureau to establish group plans and set fixed and equitable rules governing premiums.

In December, 2012 the Cuyahoga County Court of Common Pleas ruled the Bureau unlawfully collected premiums from state fund employers.  Thereafter, the common pleas court awarded state fund employers $860 million, which prompted the Bureau to appeal. Upholding the trial court’s decision, in large part, the court of appeals harshly criticized the Bureau, writing: “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.”

Interestingly, since the inception of this case, the Bureau has embarked on a rating program to address some of the disparities identified by the trial court and court of appeals in its rating system.  In the summer of 2013, the Bureau issued rebates to state fund employers in the amount of roughly $1billon.  In late April, 2014, the Bureau announced it will issue credits totaling $1.2 billion to state fund employers later this summer.  It is unclear whether the Bureau will appeal the appellate court’s decision to the Ohio Supreme Court.

You can read the San Allen decision here or click here for media coverage of the decision.

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