MIRA II Reserve Preliminary Report MIRA II vs MIRA I

1. MIRA II Reserve Preliminary ReportMIRA II vs MIRA I Presented to the BWC-Actuarial Committee July 21, 2008 Presenter: Rex Blateri, MIRA II Project Manager/Business Lead

2. MIRA II Project:Major Events • Online Tutorial to External Customers • MIRA II Reserve Evaluation • MIRA II Web Testing • Preparation for MIRA II Training-Phase II • MIRA II Reprediction Service • MIRA II Reserve Sign Off: Prediction as of Aug 17, 2008 • Prepare Staff for Sept 5 Release of Reserves

3. MIRA II vs. MIRA I Statistics Report Data: Original File • Reserves calculated as of June 30, 2008 • 1.7 million claims sent through original prediction process • Approximately 328,000 claims with MIRA II or MIRA I reserves greater than zero

4. MIRA II vs. MIRA I Statistics Report Data: Limited File for Statistical Reporting • Private and Public Employer Claims with date of injury 2000 thru 2008 • Claims with either a MIRA II or MIRA I reserve greater than zero • Not including claims with Injury Type 6 (Medical Only) since BWC suppresses reserves on Medical Only claim NOTE: • Reserve amount is the Total Incurred (prediction) – Total Paid (medical and Indemnity) • Claim reserves where both MIRA I and MIRA II is zero (0) are not used in statistical report

5. MIRA II vs. MIRA I Statistics • MIRA II Injury Types: • Type 1-Death • Type 2-PTD • Type 5-Temporary Condition • Type 6-Medical Only (not included in claim count and averages) • Type 9-Permanent Condition

6. MIRA II vs. MIRA I Statistics Lower overall Reserve predictions Improved and quicker stop logic Lower avg reserve prediction More claims with Reserve equal to zero

7. MIRA II vs. MIRA I Statistics MIRA II vs. MIRA I Claim Count by Injury Type Claim Count shift from Permanent Condition to Temporary * Includes claims with reserve equal to zero (0)

8. MIRA II vs. MIRA I Statistics

9. MIRA II vs. MIRA I Statistics MIRA II vs MIRA I Average Reserve Breakdown by Injury Type Identified Error in MIRA II Prediction, Indemnity Prediction Too Low Improved Medical Cost Predictions Fewer Claims Reserved as Type 9 * Claim Count and Averages revised on July 17, 2008 after the publishing of the initial report NOTE: Calculation uses only claims with reserves greater than zero, does not include zero claim reserves

10. MIRA II-Improved Accuracy Sample PTD Claim Claim Facts – Claimant Current Age – 26 Remaining Life Years – 48 years ICD-9 – Serious Head Injury Paid to date 2008 - $120,187 Paid 2007 -             $315,959 Paid 2006 -             $282,342 Paid 2005 -             $384,097 Total Medical Paid to date - $2,833,915 Both MIRA I and MIRA II use a method to calculate PTD medical where the first 3 yrs of claim life is consider the ‘critical’ care time period and the years > 3 yrs is consider ‘chronic’ care.  In MIRA II ‘chronic’ care considers what has been paid in the current year and the prior three years and uses a weighted average of the paid and than calculates for remaining life expectancy years.  MIRA I used a flatter baseline amount for calculating ‘chronic’ care amounts. Summary: It is obvious the MIRA I incurred is too low based on the claimant age, injury and what is being paid annually.   The claim will be re-predicted on an annual basis and if the medical payments significantly decrease the prediction will trend downward.  3 + Years of Medical Payments

11. MIRA II-Not Always Lower Reserve Example Claim: Permanent Total Disability (PTD)

12. MIRA II vs. MIRA I Statistics

14. Thank You