The cost of workers’ compensation insurance in Vermont has decreased in recent years, a development Gov. Phil Scott championed this week as a change that has made doing business in the state more affordable — particularly for loggers.
The Scott administration said that improved workplace safety and regulatory adjustments have helped slash rates for workers’ compensation since 2016. Workers’ compensation is insurance that provides wage replacement and covers medical costs for employees who are injured on the job.
The governor said that on average, employers are paying 20% less for the insurance now than they were three years ago, which represents about $40 million in savings.
The state’s logging industry, which has among the highest rates for workers’ compensation and about 1,000 employees, has particularly benefited from the changes. Between 2011 and 2016, the cost of the insurance rose by about 60%.
Scott highlighted the industry’s decline in insurance premiums at a news conference at Anderson Equipment, a Montpelier construction equipment company, on Wednesday.
“It’s one of the largest costs for many employers,” the governor said. “And this has been especially true for loggers.”
Workers’ compensation insurance rates for mechanized loggers—those who work with advanced machinery— recently cost around 24% of workers’ pay and rates for non-mechanized—those who work with less equipment— were as high as 54% of payroll. The rates are paid by employers.
Now, those rates are down to 16% and 36%, officials with the Vermont Department of Financial Regulation said this week.
The department said it has made several regulatory changes to help reduce workers’ compensation rates across the board.
They recently eliminated a surcharge that insurers could apply to companies that had seen accidents.
Getting rid of the surcharge led to rates for some companies to drop by 7%.
For the logging industry, DFR made other modifications that have resulted in savings, changing some insurance classifications.
Log haulers for example, used to be in small insurance class of their own before DFR moved combined them into a class with other commercial truckers, which lowered their rates significantly.
“There are certain regulatory levers that we’ve pulled,” said DFR Commissioner Mike Piecak.
“We basically wanted to make sure that the actual risk in the marketplace matched up with what people are paying and we’ve been aggressive on that.”
Piecak said that dropping rates stem from the regulatory changes, but also improved enforcement of workplace safety regulations by the Department of Labor, fewer claims, and better adherence to safety standards.
He said the lower rates means that employers have more money in their pocket to expand and grow their businesses.
The state also rolled out a new training program for loggers this year meant to increase safety standards, and help lower the cost of workers’ compensation.
The trainings are more comprehensive than what was previously offered, and apply to more of the equipment that is being used by mechanized loggers.
Sam Lincoln, the deputy commissioner of the Department of Forests, Parks and Recreation, said that modernizing training for loggers, and increasing safety will lead to lower workers’ compensation rates.
“It’s been a huge barrier to growing and sustaining employment in this sector for decades,” Lincoln said of the cost of insurance.
“We intend for this to open up possibilities to grow their business.”
Lincoln said that many logging companies don’t properly insure their workers because the cost of doing so is so expensive: fewer than 70 companies in the state pay for their employees’ workers’ compensation insurance.
Lincoln called insurance “avoidance” a “self-fulfilling prophecy.”
“The higher the cost goes people avoid it … and then more people drop out of the pool and the rates go higher,” he said.
The state has created new checklists for landowners to use to determine whether loggers working on their property are insured.
Gabe Russo, who owns a logging company in North Rupert called Southwind Forestry said that he still hasn’t seen the benefit of the lower rates for workers’ compensation.
He still has to pay the cost of 26% his one employee’s salary to an insurance company to make sure he is covered.
But Russo hopes that the state’s push to address workers’ compensation rates will soon mean lower costs.
“We’re going to work safer and because of that we’re going to reap the benefits of lower rates,” he said.