In his 19 years in the pest control business, Brad Smith has never had to file a workers’ compensation claim.

That didn’t stop his company’s premiums from going up 10 percent last year. His insurance agent has told him to expect a 6 percent increase next year.

“For my size operation, it’s a significant cost for me,” said Smith, owner of Preferred Pest Control, which has seven employees. “And it’s caused me to re-evaluate what I have to charge my customers. I just don’t know any other way to do it. I definitely think it’s had an effect on my business.”

In the past year, workers’ compensation costs have continued to spiral upward across the country, driven by rising healthcare expenses. In California, some employers have had premium increases as high as 400 percent, and its legislature has scrambled to reform the state’s system.

Iowa is no exception to the trend. Since workers’ compensation rates began rising two years ago, the average premium in the state has increased about 19 percent, according to the Iowa Insurance Division.

The division recently filed a request for an additional 6.4 percent average rate increase to be effective Jan. 1, 2004.   Despite the increases, premiums for workers’ comp coverage today still aren’t as high as they were 10 years ago, said Terri Vaughan, Iowa’s insurance commissioner.

“We don’t have the kind of upheaval that they do in California,” she said. “My sense is that we’ve got a stable market, and while rates are going up, it could be worse, when you look at what’s happening in some states.”

Don’t tell that to Maurice Taylor Jr., president and chief executive of Titan International Inc., one of Des Moines’ largest manufacturing employers. The Illinois-based maker of off-road wheel and tire assemblies employs nearly 1,000 people at its Des Moines plant and distribution center.

“It’s just gone zippo; it’s gone absolutely nuts,” Taylor said of workers’ comp. “There’s not a company in Iowa it doesn’t hurt.”

A $10,000 accident, such as a worker losing a finger, will cost his company $12,000 in higher premiums, Taylor said. And though employees covered under workers’ compensation can’t sue the company, they can sue the maker of the equipment involved in the accident.

“They (the injured employees) just sue everybody,” he said. “They just hope that you’ll settle, because the defense of it will cost you more. And (the equipment maker) will sue you back. It’s just a round-robin.”

Titan has had a tumultuous relationship with its employees. The company filed suit against the United Steelworkers of America following the end of a 40-month strike two years ago at the Des Moines plant.

By law, Iowa employers must provide workers’ compensation coverage to their employees, either through an insurance policy or on a self-insured basis.

The state insurance division regulates premiums, using rates recommended by the National Council on Compensation Insurance. A not-for-profit based in Florida, NCCI provides employee-injury data to more than 900 insurance companies and nearly 40 states.

On average, workers’ compensation premiums for Iowa decreased 33 percent between 1994 and 2001, Vaughan said. Then, rates began increasing on Jan. 1, 2001, and have increased about 19 percent since then.

The ups and downs reflect national trends. Prior to last year, average workers’ comp costs across the country had decreased each year for the past seven years, according to a national study conducted earlier this year for the NCCI.

This year, the average workers compensation premium rose about 10 percent over last year, with increases in 36 of the 45 states ranked in the study. In that same study, Iowa was ranked 14th lowest in comparative costs for workers compensation insurance, based on its rates for manufacturing jobs.

Last year the NCCI recommended a 14.3 percent rate increase for Iowa; the insurance division approved a 8.6 percent hike.

“That’s one of the things we struggle with,” Vaughan said. “If we approve a rate that’s too high, companies make excessive profit. If it’s too low, they don’t want to do business in Iowa.”

From an insurer’s perspective, helping policyholders reduce their risk of workplace accidents is the most helpful tool for keeping rates low, said Jan Beckstrom, chief operating officer of GuideOne Insurance in West Des Moines.

GuideOne, which writes about $700,000 annually in workers’ comp policies in Iowa, specializes in covering churches and related institutions, such as senior living centers and private schools. In the past year it raised its workers’ comp rate in Iowa by 5 percent.

To try to reduce policyholder accidents, the insurer provides information on its Web site on issues such as preventing falls.

From a business perspective, workers’ compensation has been a good line historically, Beckstrom said.

“It’s a line that has challenges right now, but they’re challenges that can be dealt with, and we believe it will be profitable again,” she said.

SMALL STAFF, BIG WORKLOAD

Of the more than 23,500 injury claims reported to the Iowa’ Workforce Development’s Division of Workers’ Compensation last year, more than 5,000 were petitioned by workers seeking additional benefits.

Because of state budget cuts, those workers had to wait a long time for decisions. On average, last fiscal year it took the division more than 650 days to issue a decision once the petition was filed.

Why the delay? It’s because the division is both underfunded and understaffed, said Mike Trier, Iowa’s workers’ compensation commissioner.

“With the budget cuts we’ve had, we’ve basically lost one-third of our staff in about the past three years,” Trier said. On a per-capita basis, the funding the state provides to operate the division is roughly 20 to 25 percent of what other comparable Midwestern states provide, he said.

The Iowa Division of Worker’s Compensation has an annual appropriation of less than $2 million and a staff of 22 people. In comparison, Kansas, with a similar population and industry mix, has a $10 million annual budget and a staff of more than 100, Trier said.

The Workers’ Compensation Advisory Committee now has an alternative funding subcommittee looking into ways to get more funding for the division, Trier said.