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The Nuts _ Bolts of BWC Rating _ Alternative Discount Programs

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									The Nuts & Bolts of BWC Rating
& Alternative Discount Programs
          Todd L. Spence, MBA, ARM
            Dave Merz, ARM, AIS
       The Frank Gates Service Company
                  Dublin, OH
         Multiple BWC Reforms


Ohio BWC adjusting premiums in
pursuit of “the right rate for the right
risk”
   Goals: stable costs and accurate rates
     Stable, to avoid extreme fluctuations in
     premiums from year to year
     “Toward equitable premiums for every
     Ohio employer” [BWC e-news, Sept.
     2009]
     Arrive at premium rates to establish Ohio
     as a more attractive place to operate
     business
                                                 2
                Sticker Shock


Many 7/09 Group Rating
employers paid much higher
premiums in Feb. & Aug. 2010
  Not all of them; after all, 96,000 are in groups

Little or no new claims cost
How’d that happen?


                                                     3
     Group “Breakeven Factors”

7/1/09
  31.1% across-the-board increase to
  Experience Modification Rate (EMR)
7/1/10
  Applied on sliding scale
     40.7% increase to max. group EMR
         65% max. discount becomes 51% discount
     No increase to groups at .83 EMR (17% discount
     or less)
7/1/11
  On 8/27/10 BWC approved same breakeven
  factors as 7/1/10 policy year
                                                      4
            Breakeven Factors (cont’d)

Orig. Gp.   Gp. EM B.E.F.   New Gp.     New
Discount                    Discount
                                       Gp. EM
 65%          .35   40.7%    51%        .49

 53%          .47   30.5%    39%        .61

 41%          .59   20.4%    29%        .71

 29%          .71   10.2%    22%        .78

 17%          .83    0%      17%        .83
                                              5
        2-Hour Safety Training
            Requirement

Began 7/1/09
Continues 7/1/10
BWC mandate
  Every Group Rating participant with at
  least 1 claim between 1/1/08 &
  12/31/09
Attend 2-hour safety training event


                                           6
        2-Hour Safety Training
         Requirement (cont’d)

Next completion deadline, 6/30/2011
Various options
  Frank Gates 2-hour training session on
  9/28/10
    At BMI Federal Credit Union office in Dublin, OH
  Frank Gates Seminar Series, May 2011
  Ohio Safety Congress, Mar. 29 – 31, 2011
  BWC’s on-demand courses (web-based)
  On-site classes at BWC’s Pickerington, OH
  training center
  More
                                                       7
          Safety Council Rebate
                 Program

A continuing program
2% premium rebate:
  for monthly safety council meeting
  attendance
     Ten out of 12 monthly meetings
     CEO must attend one
Additional 2% if one of two claims
benchmarks are met
     10% improvement in frequency
     10% improvement in severity
Group Rating and Group Retro Rating
employers not eligible
                                       8
         100% EM Cap Program


Limits the amount of premium increase,
especially if employer was removed from
Group Rating
Allows no more than a doubling (100% ↑)
of previous year’s EM
Example
  7/09, .25 Group EM [75% discount]
  7/10, out of group due to high claim costs
     .25 +.25 = .50 EM [50% discount]
     Without Cap Program, company has a 1.20 EM
     [20% penalty rating]
                                                  9
   100% EM Cap Program (cont’d)


BWC eligibility criteria
Employer’s EM
  has increased by more than 100%
  from previous year
  is 1.01 or greater (non-merit rated
  employers ineligible)
Timely submit U-18 application
  9/30/10 deadline for 7/1/10 policy yr.
10-Step Business Plan for Safety
                                           10
              Deductible Program



          A new insurance option

Upfront premium discount in return for employer’s
     agreement to pay a per-claim deductible




                                              11
    Deductible Program (cont’d)


Small Deductible Program began
7/1/2009
5 choices
$500   $1.5K   $2.5K   $5K   $10K
Employer limited to an amount not
exceeding 25% of previous policy
yr. premium, without assessments
Premium discount: 1.4% to 26%
                                    12
    Deductible Program (cont’d)


Large Deductible Program began
7/1/2010
4 choices
  $25K   $50K    $100K    $200K
Employer limited to an amount not
exceeding 40% of previous policy
yr. premium, without assessments
Premium discount: 19% to 77%
                                    13
    Deductible Program (cont’d)


BWC form U-148
April 30th deadline for upcoming July
1 policy year
Employer’s obligation for paying
claim costs extends indefinitely, until
deductible amount is reached
Claim costs paid by employer are
still included in future experience
rating
                                      14
     Drug-Free Safety Program


New DFSP begins 7/1/10
No 5-year limit on premium rate
discounts
Permits non-continuous participation
Application deadlines:
  10/29 for upcoming Jan. 1st start date
  Last business day in April for
  upcoming July 1st start date
                                           15
              DFSP cont’d


Basic Level
  4% discount
  0% discount if in Group Rating
  No random testing required
Advanced Level
  7% discount
  3% max. discount (not 7%) if in Group
  Rating
  Random testing of 15% of workforce
  each program year
                                          16
                 DFSP cont’d

5 Components
Written policy statement
Training and education for basic and
advanced level:
  Supervisor training
     2 hours initially
     1 hour annually in subsequent years
  Employee education
     minimum 1 hour annually
Drug testing
Safety
Employee assistance
                                           17
        Group Retrospective Rating



         A new insurance option

“…a voluntary performance based incentive program.
  BWC-certified sponsors create groups of employers
  who practice effective workplace safety and claims
  management to achieve lower premiums than they
                 could as individuals.”
               – www.ohiobwc.com


                                                   18
    Group Retro Rating (cont’d)


Employers are pooled with similar
companies
Actual losses are compared to
estimated losses
BWC determines group’s premium
savings potential and maximum %
assessment


                                    19
    Group Retro Rating (cont’d)


Each company pays premium in full
After the Retro Rating policy year,
are claim costs:
  Lower than expected?
    Some premium refunded
  Higher than expected?
    “Assessments” are due
1-year commitment, but 3 future
claim reviews and prem. adjustments
                                      20
    Group Retro Rating (cont’d)


  July 1, 2010 – June 30, 2011
           Program Year

Claim evaluation Follows
  June 30, 2012
  June 30, 2013
  June 30, 2014


                                  21
         One-Claim Program


A 40% discount off the base rates
Same discount continues for the 4
years that the “big” claim is in
experience, provided employer:
  Annually attends a BWC-approved full-
  day training course
  Does not rejoin Group Rating before
  the 4 yrs. are up
Open to employers who were in
Group Rating the year before
                                      22
     One-Claim Program (cont’d)


One high-cost claim prevents Group
Rating re-enrollment
The claim at issue:
  Is entering the experience for the first time
  from the green year
  exceeds employer’s “Total Limited Losses”
  (TLL); the 4-year anticipated claims cost
Other claims in the experience cannot
exceed 3 in number
  Their combined cost cannot exceed the TLL
                                                  23
          Other BWC Reforms

The Split Experience Rating Plan
Formula:
  A new mathematical formula for developing
  employers’ premium rates
    To replace the current experience rating formula
    Probable for 7/1/2012
BWC is reserving medical-only claims as
of 7/1/2010
Privatization of BWC?
  Legislative Task Force
Future Reforms
                                                       24
              Questions?


          Todd Spence
Director of Ohio State Fund Operations
             614-791-7696
       tspence@frankgates.com


            Dave Merz
       Assistant Vice President
            614-793-5408
       dmerz@frankgates.com
                                         25

								
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