Winners and Losers in the Retro Scam
In 2007, Retro groups paid about $700 million out of $1.5 billion in premiums (47% of the total premiums that year). However, as discussed above, they also got back $100 million in direct subsidies (called refunds) and another $50 million in indirect subsidies (claims exceeding premiums). Thus, their net cost for 2007 was only $550 million dollars.
An important question is who paid the other $150 million in 2007 that Retro did not pay?
The simple answer is the one million workers and small business owners who were in the non-retro program paid for the overpayment to retro. But more precisely, retro employers are typically larger employers working in more hazardous industries who have the money and incentive to lobby for a “sweetheart deal” from the legislature. Thus, non-retro groups can be thought of as smaller employers who are engaged in less hazardous work conditions.
We can also break these employees down by industry into three distinct groups. Some industries have about a 50-50 split of retro to non-retro employers. Thus, as a whole, they neither gain nor lose from the Retro Rip Off Scandal. However, some groups have more than 55% of their workers in retro programs. These groups made a windfall Retro profit of $150 million in 2007. The third group consists of trades which have less than 45% of their workers in retro programs. These groups lost $150 million dollars in 2007.
Here is the break down of these three groups (retro %, Total Group Premiums ($M).
Note that the refunds are divided up based on premiums:
Biggest Winners= Estimate of $150 million Gain:
1. Building Construction (57%), $380 M = $80 Million
2. Misc Construction (64%) $120 M = $30 Million
3. Agriculture (62%) $50 M = $12 Million
4. Food Processing (71%), $42 M = $12 million
5. Manufacturing (58%), $42 M = $10 million
Neutral: Forest Products (51%) $60 M, Health Care (49%), Dealers/Wholesalers (46%), $62 M
Biggest Losers = Estimate of $150 million Loss:
1. Government and Schools (16%) $137 M = $80 million
2. Professional and Clerical (24%) $81 M = $26 million
3. Misc Services (38%), $130 M = $20 million
4. Stores (36%) $72 M = $15 million
5. Transportation and Warehousing (44%), $112 M = $15 million
6. Temporary Help (42%), $34 M = $8 million
7. Utilities and Communications (39%), $11 M = $2 million
Thus, the biggest winner of the unfair retro program is the Building Construction industry (including the BIAW) and the biggest losers are school teachers and government employees. Put another way, those who would gain the most from a fair Workers Comp system are public school teachers and State employees (and the State tax payers who pay both teachers and State employees).
