Mining Operations May See Rate Hikes Over Black Lung Amendment

Workers' compensation rates for coal mining operations in Kentucky, Virginia and West Virginia could rise up to 8.3% due to changes in the Black Lung Benefits Act included in the federal health care reform act.

The National Council on Compensation Insurance requested rate increases for the three states with a significant coal mining presence. The Kentucky Department of Insurance approved increases of 3.8% for surface mining and 6.2% for underground mining, effective July 1. NCCI called for increases of 5.9%/8% in Virginia and 7.1%/8.3% in West Virginia. Regulators in those states are still reviewing the NCCI filing, said Jeff Eddinger, NCCI practice leader and senior actuary.

"Our review of the data is still incomplete," said Jason Butcher, spokesman for West Virginia Insurance Commissioner Jane L. Cline.

The provision in the health care act amended the 30-year-old Black Lung Benefits Act to open up the possibility of new claims from the past, resulting in millions in litigation costs. The amendment presumably makes it easier for coal miners and their families to collect benefits if they acquire black lung disease, a common affliction among miners, so long as they have been employed at a mine for at least 15 years. This change is retroactive to 2005 (BestWire, April 19, 2010).

NCCI will make recommendations for other states as part of its regular schedule, beginning July 1, Eddinger said. While NCCI will make new filings when legislative developments change market conditions, the black lung-related filing is a unique circumstance because it effects just two areas of business, not a whole line, he said.

"Typically, our rule of thumb is if it has a 2% overall impact then we'll make a filing," Eddinger said.

Roger Fries, president and chief executive officer of Kentucky Employers' Mutual Insurance, said the new NCCI rates will not necessarily lead to an increase for policyholders of the state fund in the coming months. KEMI uses NCCI numbers but also relies on its own data, he said. It will consider new rates on its regular schedule, which will likely mean October filings, he said.

"We have some very safety-conscious coal accounts on our books," Fries said. "We've had very satisfactory results in coal."

In April, Fries said he expects KEMI, which insures around 200 mines in the state, to take $15 million to $30 million from surplus and put it in reserves for expected claims. He said he can't predict how many additional claims the company will see but KEMI will expect costs to go up on the litigation side (BestWire, April 19, 2010).

Kentucky Employers' Mutual Insurance has a Best's Financial Strength Rating of A- (Excellent).

The top five writers of workers' compensation insurance in Kentucky in 2008, according to BestLink, were: Kentucky Employers' Mutual Insurance, with 24.3% market share; Liberty Mutual Insurance Cos., with 20.3%; American International Group Inc., with 15.8%; Zurich Financial Services NA Group, with 5.1% and Travelers Group with 3.6%.

(By Sean P. Carr, Washington Correspondent: [email protected])