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WorkSafeBC Classification and Rate Setting for Local Government Operations

WorkSafeBC Classification and Rate Setting for Local Government Operations. Richmond, British Columbia July, 2010. Topics. WorkSafeBC’s mandate Overview of the preliminary 2011 rates Overview of the classification & rate setting system Historical rates for Local Government Operations

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WorkSafeBC Classification and Rate Setting for Local Government Operations

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  1. WorkSafeBC Classification and Rate Setting for Local Government Operations Richmond, British Columbia July, 2010

  2. Topics • WorkSafeBC’s mandate • Overview of the preliminary 2011 rates • Overview of the classification & rate setting system • Historical rates for Local Government Operations • 2011 rate details

  3. WorkSafeBC’s Mandate To work with workers and employers as follows: • To promote the prevention of workplace injury, illness, and disease • To rehabilitate those who are injured, and assist with timely return to work • To provide fair compensation to replace lost wages for injured workers during their recovery • To ensure sound financial management for a viable workers’ compensation system

  4. Overview of 2011 Rates • The average base rate will drop by 1% to $1.54 in 2011 from the 2008, 2009 and 2010 rate of $1.56 per $100 of employers’ assessable payroll. • 56 percent of employers will experience a base rate increase • 37 percent of employers will experience a base rate decrease • 7 percent of employers will have their base rate remain unchanged • Of the employers witnessing a base rate increase in 2011, 56,500 employers had their base rate increase limited to eight percent in 2010

  5. The key rate drivers for 2011 • A "payroll shift" reduction in the relative size of high risk industries in 2009 (mainly reductions in the construction and forestry sectors) • The injury rate had marginal increases from 2004 to 2006, followed by small decreases in 2007 and 2008 and a significant 20% drop in 2009, in part due to the decline in the size of high risk industries. • The claim cost rate used in the 2011 rates has decreased 3.3% from the claim cost rate used in setting the 2010 rates. • The change in the financial position from a $610 million surplus in 2008 to a $758 million surplus in 2009 to a projected $637 million at the end of 2010. • Smoothed investment income returns in 2009 of 5.5% (8.7% on a market basis) is above the actuarial requirements of 3.1%.

  6. Classification & Rate Setting • The Board has adopted a modified collective liability system, under which self-sufficient groups of employers are created on the basis of similar cost rates. These groups must be large enough to provide for an adequate spread of the risk and stability in the assessment rate. • The costs of compensable injuries and diseases, along with the costs of administering claims and carrying out other statutory requirements, are collected from employers in the form of assessments. For this purpose, employers are classified into classification units, industry groups and rate groups. The costs incurred in relation to these groups determine the assessment rate paid by their members. The Board creates groups that are large enough to provide for an adequate spread of the risk and stability in the assessment rate.

  7. Rate Group Industry Group Sector Subsector Classification Unit Classification and Rate Setting Structures as they apply to British Columbia British Columbia’s aggregate economic undertaking Assessments paid by employers ACCIDENT FUND Aggregation Granulation

  8. Rate Group Formation There are approximately 600 Classification Units (CUs) in the system.

  9. To ensure fair and equitable rates, similar CUs are grouped together to form industry groups. Industry Groups have enough credibility to allow WorkSafeBC to track historical cost rate trends.

  10. There are approximately 250 Industry Groups made up of similar CUs. Each IG has a minimum of 200 wage loss claims over the past 5 years IGs sharing similar cost rates are combined to form Rate Groups.

  11. Industry Group Movement If an Industry Group’s historical cost rate varies from its Rate Group average by more than 20 percent for three consecutive rate setting cycles, it is moved to a new Rate Group. Industry Groups are monitored for changes in their historical cost rates, and individual firms within Industry Groups are advised by the WCB if the Industry Group deviates by more than 20 percent from the Rate Group average.

  12. CH02 $1.96 Industry Group Movement 2007 Membership Cost rate $1.61 CH01 $1.58 $1.29 $1.61 $1.93

  13. Industry Group Movement 2008 Membership Cost Rate $1.53 CH01 $1.47 CH02 $2.11 CH03 $1.60 $1.22 $1.53 $1.84

  14. Industry Group Movement 2009 Membership Cost Rate $1.44 CH01 $1.37 CH02 $2.10 CH03 $1.49 $1.15 $1.44 $1.73

  15. Membership Cost Rate $2.24 BD01 2009 $2.23 Membership Cost Rate $1.44 BD04 $2.41 BD03 $2.23 CH01 $1.37 CH02 $2.10 CH03 $1.49 $1.15 $1.44 $1.73

  16. Membership Cost Rate $2.24 BD01 2009 $2.23 Membership Cost Rate $1.44 CH02 BD04 $2.10 $2.41 BD03 $2.23 CH01 Membership Cost Rate $1.38 $1.37 CH01 CH03 $1.37 $1.49 CH03 $1.49 $1.15 $1.44 $1.73

  17. Membership Cost Rate $2.24 Industry Incentives BD01 $2.23 CH02 BD04 $2.10 $2.41 BD03 An Industry Group working together to implement effective return-to-work and safety programs can reduce their premium base rate. However, an Industry Group that does not improve safety to reduce costs will see their premium base rate increase. $2.23 Membership Cost Rate $1.38 CH01 $1.37 CH03 $1.49

  18. Historical Rates

  19. Rate Group DO 2011 membership cost rate $1.04 DO01 DO01 $1.05 $0.91

  20. Rate Group DO Costs and Rates Rate group rate up due to higher benefit cost rate and reduced rate group surplus causing 12 cent decrease in amortization credit.

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