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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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slide2

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.

slide3

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
slide4

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).
slide5

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
slide6

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?

slide7

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.

slide8

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.

slide9

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.

slide10

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.

slide11

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.
slide12

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?

slide13

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).

slide14

Workers’ Compensation Changes

Deductible Program - Example

Employer enters deductible for January 1, 2010.

Employer with $100,000 premium in hazard group “E”.

Deductible options:

slide15

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.
slide16

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.

slide17

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.

slide18

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)
slide19

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.
slide20

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!!!
slide21

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.
slide22

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.
slide23

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).
slide24

Workers’ Compensation Changes

Premium Discount Program (PDP)

Eliminated July 1, 2009 for employers.

slide25

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.

slide26
Thank You

Jim Mocho

Vice President

WCMS

(216) 643-6959