BUSINESSMAN BATTLES WORKERS COMP COSTS

As the owner of a small, but prospering manufacturing company, Roger Mainor has had his share of growing pains.

Costs of materials are rising. Government regulations and taxes are increasing. Operating costs continue to grow. An increase in employees brings greater personnel responsibilities. And a reasonable profit margin is harder to maintain.

One of the climbing costs most businesses have had to deal with is workers compensation.

But Mainor, by taking advantage of incentives offered for adopting worker safety programs, has been able to keep his premium increases under control. In fact, most of his increased premium costs were due to expanding his workforce.

That was until recently, when he learned about the power of a company based in Boca Raton, Fla., known as the NCCI -- the National Council on Compensation Insurance -- that is charged with setting workers comp premium rates in Missouri and many other states.

Last year, Mainor was advised through his insurance company that NCCI had decided to change his classification to a higher risk category, which will drive his workers comp premiums up 40 percent. That is a direct cost of about $35,000.

Mainor started his Cape Girardeau company, Magnetic Collectibles, in 1974. He makes flexible novelty magnets, producing nearly one million a month now. It wasn't until 1985 that his company became large enough for him to need workers compensation coverage; he now has 70 employees at a factory in Cape Girardeau, 22 in Fredericktown, and has hopes of adding 20-25 more people this year.

But Mainor isn't so sure what his future holds. The unforeseen $35,000 increase for workers comp has the Cape Girardeau businessman reassessing his future growth plans and even looking at moving all or part of his operation to Illinois or Arkansas.

"If you jump it that much, you might as well kiss us goodbye," said Mainor.

"That 40 percent increase will drive us to do something drastic. I can only afford a certain amount for insurance and this may force us to only pay half of the health insurance costs for employees, or make some other adjustments. We would like to hire more people. We are in a growth mode and could hire another 20-25 people this year if conditions were right."

But Mainor is reviewing workers comp laws in other states to determine whether it might be to his advantage to move his workforce of 12 molders across the river to a facility in Illinois. He may even look at Arkansas. Ideally, Mainor said he wants to keep the whole operation at one location because it is more efficient.

What really upsets Mainor is how a company based in the state of Florida can force an insurance company to raise its premiums charged on Magnetic Collectibles.

"I always thought it was the state that sets the rates and classifications, but apparently that is not the case," Mainor said.

Last year, a representative from NCCI paid a visit to Magnetic Collectibles. Mainor explained that the person took a quick tour of the factory, asked some questions about the machinery used, and left.

"A little later, we get a call from our insurance company and they say they have some bad news: NCCI is changing our classification and our bill will jump $35,000 this year," Mainor said. "The insurance company was the first to tell me about this. I'm the guy who has to pay the bill and I'm the last to hear."

Magnetic Collectibles had been classified as a rubber manufacturer, and its magnets are molded with injection molding machines that are often used to mold plastic materials. The compound used in making the magnets has a small percentage of plastic in it and NCCI has now determined that the company should be classified as a plastics manufacturer, which is in a higher classification.

"The insurance company with all the liability is happy to stick with us as a rubber manufacturer, but here comes this company based in Boca Raton in sunny Florida saying we must be classified as plastics," complained Mainor.

He went looking for help, but so far has found only more frustration. The businessman is wondering whether the state of Missouri really is concerned about helping small companies like his.

Mainor discussed his plight with state Sen. Peter Kinder, who put him in touch with a consultant in St. Louis who once worked for NCCI.

The rate hike will take effect next month on the policy anniversary date. It is possible the increased premium payment can be delayed until the issue is resolved, but if Magnetic Collectibles remains in the higher classification, Mainor will have to pay the higher premiums retroactively.

One alternative Mainor was told he had was to file an appeal to a board in Missouri that was set up under a workers comp reform law passed in 1992 to address classification issues. But he learned no one has been appointed to the board yet, so there is no one to hear his appeal.

Mainor also believes that state legislators have not done enough to bring workers compensation rates under control, leaving companies like his struggling with an uncertain future.

Said Mainor: "The state spends all this money bringing business in, but what businessman in his right mind wants to come into a state that has such high costs and a legislature that can't decide how to bring those costs down."

Since 1991, when his company workforce started to grow, Mainor's workers comp premiums have climbed about 20-25 percent, with much of that due to increased employees. His bill for this year was expected to go up 10-15 percent; the 40 percent hike is on top of that.