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Today’s Objectives

Workers’ Compensation Changes. Today’s Objectives. Review group rating changes effective Jan. 1, 2010. Provide overview of new BWC Group Retrospective Rating and Deductible programs. Discuss other alternative rating options for Ohio state fund employers. Workers’ Compensation Changes.

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Today’s Objectives

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  1. Workers’ Compensation Changes Today’s Objectives Review group rating changes effective Jan. 1, 2010. Provide overview of new BWC Group Retrospective Rating and Deductible programs. Discuss other alternative rating options for Ohio state fund employers.

  2. Workers’ Compensation Changes Group Rating – Jan.1, 2010 • Deloitte Consulting study as authorized by HB 100, targeted the inequity in premiums of group-rated employers vs non-group employers Resulting Strategy: • Lower base rates – Correct level for non-group employers • Determine the differentials in rates that would bring rates for both group-rated and non-group-rated employers to actuarially sound levels. • Set rates for employers who are not in the group rating program at a level commensurate with the risk they present to the system

  3. Workers’ Compensation Changes Group Rating – Jan. 1, 2010 • 77% max credibility for 2010 rating plan • 30% reduction in Expected Losses • 17% drop in base rates for premium calculation • Implemented a descending break-even factor by discount level. As high as 27% • Example: • 77% max discount actually 71%. • (0.23 EM x 1.27 = 0.29 EM). • 50% discount actually 41% • (0.50 EM x 1.175 = 0.59 EM).

  4. Workers’ Compensation Changes Group Rating – July 1, 2009 • Miscellaneous changes • Drug-Free Workplace discounts no longer available to group-rated employers • Safety Council participation discounts end at the conclusion of ’09 plan year for group-rated public employers

  5. Workers’ Compensation Changes Group Retrospective Rating Program approved by BWC March 2009, Available July 1, 2009. Enrollment application due December 31, 2009. How does the program work?

  6. Workers’ Compensation Changes Group Retrospective Rating (cont’d) BWC certified Group sponsors can create homogeneous groups of employers for a group retrospective rating program. Groups must meet a $1,000,000 minimum projected annual group standard premium (without BWC assessments) size requirement. Employers in the group retro program will initially pay their own full individual premium (no upfront discount). Potential for future group refunds or a risk of additional group premium invoices based on known group parameters selected by the group sponsor and the group’s incurred loss performance during the group retrospectively rated policy year.

  7. Workers’ Compensation Changes Group Retrospective Rating (cont’d) Employers selected to participate must commit to manage their program such that their claim losses for the upcoming policy year compare favorably to their share of the group’s expected losses over the same period of time. BWC’s group retrospective premium formula is as follows: (Basic Premium Factor x Group Standard Premium) + (Loss Development Factor x Group Total Incurred Losses) = Retrospective Premium.

  8. Workers’ Compensation Changes Group Retrospective Rating (cont’d) The Total Developed Incurred Losses reflect the paid losses and reserves from claims incurred during the group retro policy year multiplied by the appropriate Loss Development Factor (LDF). The Loss Development Factors have initially been estimated by Oliver Wyman, BWC’s consulting actuary, to be 3.280 at the 12 month valuation, 2.604 at the 24 month valuation and 2.317 at the 36 month valuation. BWC will apply the loss development factors to all claims costs incurred during the group retro policy year unless the claim is a PTD, Death or LSS claim.

  9. Workers’ Compensation Changes Group Retrospective Rating (cont’d) If the retro premium is higher than the premium already paid, BWC will issue an assessment/billing to each of the employers in the group. The amount refunded or assessed to an individual employer will be based upon the percentage of the total group standard premium paid by the employer at the time of evaluation.

  10. Workers’ Compensation Changes Group Retrospective Rating (cont’d) • While in Group Retro, the employer cannot participate in: • Individual retro. • $15K. • Deductible. • One claim program. • Group rating.

  11. Workers’ Compensation Changes Deductible Program Program approved by BWC March 2009. Helps employers lower their premiums by offering an upfront premium discount in exchange for accepting a per claim deductible. How does it work?

  12. Workers’ Compensation Changes Deductible Program (cont’d) Employers select among the five deductible per claim levels: $500, $1,000, $2,500, $5,000, $10,000. Deductible level can not exceed 25 percent of your premium. In return, BWC provides discounts ranging from 1.4% up to 26%. Actual discounts depend on Employer industry and deductible level chosen. Employer is liable for up to the deductible amount for any claim in the policy period (July 1, 2009 to June 30, 2010).

  13. Workers’ Compensation Changes Deductible Program - Example Employer enters deductible for January 1, 2010. Employer with $100,000 premium in hazard group “E”. Deductible options:

  14. Workers’ Compensation Changes Deductible Program (cont’d) • CAN participate in the deductible program in conjunction with group rating. • CANNOT participate in: • Retrospective rating (group or individual). • $15,000 medical only program. • Salary continuation.

  15. Workers’ Compensation Changes Deductible Program (cont’d) Cannot withdraw from program during policy year. No changes in deductible amount within policy year. Cannot have cumulative lapses in excess of 40 days within year preceding application deadline. Must meet a credit score requirement.

  16. Workers’ Compensation Changes 100% EM Cap Program Limits an Employer’s July 1, 2009 EM% increase to no more than double their 2008 EM%. Must have 2009 EM of 1.01 or greater to participate. Must be in good standing with BWC. Agree to implement 10-Step Business Plan.

  17. Workers’ Compensation Changes 100% EM Cap – Example • Employer with July 1, 2008 EM of 0.31 (69% credit). • Projected July 1, 2009 EM for 2009 1.16. • July 1, 2009 “Capped” EM = 0.62 (38% credit)

  18. Workers’ Compensation Changes 100% EM Cap – Example (cont’d) • Employer with July 1, 2008 EM of 0.31 (69% credit). • Projected July 1, 2009 EM for 2009 1.16 (Premiums of $100,000). • July 1, 2009 “Capped” EM = 0.62 (Premiums of $55,000). • July 1, 2009 Cap Program savings = $45,000.

  19. Workers’ Compensation Changes 100% EM Cap Program (cont’d) • No application needed! • Must complete 5 steps of BWC’s Ten Step Business Plan! • Failure to comply will result in lost savings!!!

  20. Workers’ Compensation Changes Drug Free Workplace Program (DFWP) • Available for July 1, 2009. • Three levels of discounts still exist: • Level 1 = 10%. • Level 2 = 15%. • Level 3 = 20%. • June 30 application deadline for July 1. • December 31 for programs beginning January 1. • Action Plan and Progress Report. • Cannot stack with Group Rating.

  21. Workers’ Compensation Changes Individual Retrospective Rating • Available Jan. 1, 2010 (Application due Nov.30, 2009). • Employer at least $25k in premium. • Must demonstrate financial strength and stability. • Program options, based on hazard group: • Minimum premium. • Max premium. • Max claim. • Employer pays minimum premium amount (retro premium); AND, • Employer is liable for claim payments for ten years. • Program might be eliminated.

  22. Workers’ Compensation Changes Safety Council • Goal = Increase safety awareness and improve claim frequency and severity. • Still available for 2009. • Need to enroll by July 31, 2009. • Employers can earn a two percent discount for meeting all of the participation eligibility requirements; AND, • Additional two percent performance bonus for reducing either frequency or severity by 10 percent (or with maintenance of both frequency and severity at zero).

  23. Workers’ Compensation Changes Premium Discount Program (PDP) Eliminated July 1, 2009 for employers.

  24. Workers’ Compensation Changes Self Insurance Process – roughly four to six months. 500+ employees in Ohio. Minimum of 2 years in state fund insurance. BWC-approved medical management plan. Demonstrated strong financial and administrative ability. Account with a financial institution in Ohio.

  25. Thank You Jim Mocho Vice President WCMS (216) 643-6959

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