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OhioBWC - Basics: (Policy library) - File

Group Retrospective Rating

 

Policy Name:

Group Retrospective Rating Program

Policy #:

EP-07-05

Code/Rule Reference:

ORC 4123.29(A)(3); OAC 4123-17-73, Appendices A, B, and C; 4123-17-61.1; 4123-17-68; and 4123-17-74, Appendices A, B, and C.

Effective Date:

July 1, 2016

Origin:

Employer Policy

Supersedes:

Group Retrospective Rating Program policy revised May 14, 2012; Group Retrospective Rating Program Complaint Policy revised July 23, 2012.

History:

Revised October 17, 2016; May 14, 2012; June 28, 2011; April 8, 2010. New policy issued December 9, 2009.

Review Date:

July 1, 2021

 

 

I.       Policy Purpose

 

The Ohio Bureau of Workers’ Compensation (BWC) will provide a Group Retrospective Rating Program in accordance with the applicable laws and rules.

 

II.     Applicability

 

This policy applies to employers, Sponsoring Organizations, authorized representatives, and BWC Employer Programs.

 

III.    Definitions

A.     Continuing Retro Group: A Retro Group is continuing if more than fifty percent (50%) of the members in the prior policy year continue to be members for the current policy year. A change in the name of a Retro Group will not constitute a new group.

B.     “Developed losses” or “total incurred losses (developed)”: Are a component of the retrospective rating premium formula intended to account for the fact that total incurred losses in claims are likely to increase over time. This trend results from a number of factors, including, but not limited to, reactivation of claims, additional claim awards, and claims that may be incurred but not reported for a substantial period, and result in costs that would otherwise not be captured.

C.    Evaluation period: The three year period beginning immediately after the end of the retro policy year. Annual evaluations will occur three times during the evaluation period at twelve (12), twenty-four (24), and thirty-six (36) months after the end of the retro policy year.

D.    Experience period: Has the same meaning as defined in OAC 4123-17-03(A)(1).

E.     Green period: The time interval between the last day of the experience period and the snapshot date.

F.     Gross misrepresentation: An act by an employer that would cause financial harm to the other members of the Retro Group and is limited to any of the following:

1.     The Sponsoring Organization discovers the employer applicant has recently merged with one or more entities without disclosing such merger on the employer’s application for membership in the Retro Group, and such merger adversely affects the employer’s risk of future losses, or

2.     The Sponsoring Organization discovers the employer applicant has failed to disclose the true nature of its business pursuit on its application for membership in the Retro Group and this failure adversely affects the loss potential of the Retro Group.

G.    Group Retrospective Rating or Group Retro Rating: A voluntary workers’ compensation insurance program designed to provide a financial incentive to employer groups through improvements in workplace safety and injured worker outcomes that are able to keep their claim costs below a predefined level.

H.    Homogeneous/homogeneity: A requirement for Retro Groups that employers’ businesses in the organization must be substantially similar such that the risks which are grouped are substantially similar.

I.       Incurred losses: Compensation and medical payments paid to date plus open case reserves on a claim. The total incurred losses, which are the cumulative sum of all incurred losses on an employer’s policy, will not include surplus costs. Total incurred losses will be limited to $500,000 per claim.

J.      Industry group: National Council on Compensation Insurance Classification Codes (NCCI codes) are grouped into ten industry groups, set forth in OAC 4123-17-05, Appendix A. Employers can have multiple NCCI codes assigned, but for purposes of homogeneity may only have one primary industry group.

K.     Loss development factor (LDF): Actuarially determined factors that are multiplied by the incurred losses of non-PTD/Death retro claims to produce developed losses. LDFs are unique to each retro policy year.

L.     Maximum premium ratio: A factor pre-selected by the Retro Group that is multiplied by the standard premium to determine the maximum retrospective premium. Options for the maximum premium ratio are set forth in OAC 4123-17-73, Appendix A.

M.    Member of a Retro Group: An individual employer that participates in a Group Retro plan as authorized under OAC 4123-17-73.

N.    Newly-established successor: A new employer entity that assumed the operations of a previous member of the Retro Group, and the new employer entity has established a new BWC policy. A newly established successor has the option of continued participation for the remainder of the policy year.

O.    New Retro Group: A Retro Group is new if there is a change in Sponsoring Organization or the Retro Group is moved to a new Sponsoring Organization or a new Retro Group is formed.

P.     Reserve: BWC’s estimate of the future cost of a claim at a specific point in time.

Q.    Retro Group: The member employers who collectively form a group that participates in the Group Retro plan of a Sponsoring Organization.

R.    Retro policy year: The policy year in which an employer is enrolled in Group Retro Rating. For public employer taxing districts (PEC) the retro policy year is January 1 through December 31. For private employers (PA) the retro policy year is July 1 through June 30. 

S.     Snapshot date: The date BWC captures or “freezes” payroll and claim costs for rate making purposes.

T.     Sponsoring Organization: An entity (usually a business entity) with governing members, which has been certified by BWC to sponsor and market Group Experience Rating and Group Retrospective Rating programs. Certification requirements for Sponsoring Organizations are set for in OAC 4123-17-61.1. See also Sponsorship Certification policy.

U.    Standard premium: The total premium paid by, or on behalf of, an employer for a given policy year, excluding charges for Disabled Workers’ Relief Fund (DWRF) and the administrative cost fund. In determining standard premium, total premium paid will not be reduced by any rebates or dividends issued pursuant to OAC 4123-17-10. Aggregate standard premium is the sum total of standard premiums for all employers in the Group.

V.     Third Party Administrator (TPA): Any person or organization that works with certified Sponsoring Organizations to administer and facilitate an employer’s application to Group programs.

IV.   Policy

A.     Retro Group eligibility requirements.

1.     Each Retro Group seeking participation in the program must meet the following standards:

a.     The Retro Group must be sponsored by a BWC certified Sponsoring Organization.

b.     The employers’ primary business pursuit as determined in (i) below must be homogeneous with the other employers in the Retro Group.

i.       Homogeneity is determined by the main operating manuals of the employers as determined by the predominant premium obligations for the rating year beginning two years prior to the retro policy year. Industry groups are determined by OAC 4123-17-05, Appendix A. Industry groups seven and nine as well as eight and nine are considered similar.

ii.      BWC may allow an employer to move to a more homogeneous group, after December 31, for private employers and June 30, for public employers (but before the application deadline), if the employer is:

a)     An employer without a full year of recorded premium;

b)     Reclassified as a result of an audit; or

c)     Fully or partially combined with another employer.

2.     The Retro Group of eligible employers must have aggregate standard premium in excess of $1 million as determined by BWC based upon the last full policy year premium information is available. 

a.     For employers without a full year of recorded premium, BWC may use expected premium.

b.     BWC will use the experience modified premium of the individual employers excluding Group Experience Rating discounts.

3.     The Retro Group must have at least two eligible employers.

4.     The Retro Group must substantially improve accident prevention and claims handling for the employers in the Retro Group. BWC will require the Retro Group to document its safety plan or programs for these purposes. For Retro Groups reapplying annually for Group Retro coverage, BWC will require the results of prior programs. The safety plan must follow the criteria outlined in OAC 4123-17-68. See also the Sponsorship Certification policy for additional information.

B.     Employer eligibility requirements.

1.     The employer must be a PA or PEC employer. Self-insuring employers and state agencies are not eligible.

2.     The employer must have active workers’ compensation coverage defined as follows: As of the application deadline, the employer must:

a.     Be current with respect to all payments due BWC as defined in OAC 4123-17-14.

b.     Be current on the payment schedule of any part-pay agreement into which the employer entered for payment of premium or assessment obligations.

c.      Not have cumulative lapses in workers’ compensation coverage in excess of forty (40) days within the prior twelve (12) months, except:

i.       For the policy year beginning July 1, 2015, a PA employer must not have cumulative lapses of workers’ compensation coverage in excess of forty (40) days within the prior nine months.

ii.      For the policy year beginning January 1, 2016, a PEC employer must not have cumulative lapses of workers’ compensation coverage in excess of forty (40) days within the prior nine months.

3.     The employer must timely report actual payroll for the preceding policy year and pay any premium due upon reconciliation of estimated premium and actual premium. An employer will be deemed to have met this requirement if BWC receives the payroll report and the employer pays premium associated with such report before the expiration of any grace period. See the Payroll True-Up policy for additional information.

4.     The employer may not be a member of more than one Retro Group. Further, an employer cannot be a member of a Group Retro plan and a Group Experience Rating plan in the same policy year.

5.     The employer’s Group Retro Rating application will be rejected if the employer has been included on a Group Experience Rating roster for the upcoming policy year.

6.     The employer must be homogeneous with the Retro Group. There are exceptions to the homogeneity requirement. These exceptions include an employer:

a.     Of a continuing Retro Group who initially met the homogeneity requirement. BWC will not disqualify such employer from participating in the continuing Retro Group for failure to continue to meet the homogeneity requirement;

b.     Without a full year of recorded premium;

c.      Reclassified as a result of an audit;

d.     Fully or partially combined with another employer; or

e.     Having the highest overall premium falling under the standard exception manual classification(s) has the option to participate in a Retro Group associated with another operating manual classification.

i.       The standard exception manuals included in this rule are:

a)     8810: Clerical Office Employees;

b)     8871: Clerical Telecommuter Employees;

c)     7380: Drivers, Chauffeurs, and their Helpers;

d)     8742: Salespersons, Collectors or Messengers, Outside; and

e)     8748: Automobile Salespersons.

ii.      The standard exception does not apply in every case and is determined by the true nature of the employer’s business.

iii.     Professional Employer Organizations and temporary service agencies are ineligible for the standard exception manual rule.

iv.    Industry groups seven and nine as well as eight and nine are considered similar. However, industry groups seven and eight are not considered similar and premium from industry group seven or eight cannot be combined with premium from industry group nine make industry group seven or eight the dominant industry.

C.    Application requirements / BWC evaluation of application.

1.     Application deadlines:

a.     The application deadline for PA employers is the last business day of January.

b.     The application deadline for PEC employers is the last business day of July.

2.     Employer requirements:

a.     Employers apply for the Group Retro Program through Sponsoring Organizations that are certified by BWC.

b.     Individual employers who are not included on the final Employer Roster for Group Retrospective Rating Program (U-152) or who do not have an Employer Statement for Group Retrospective Rating Program (U-153) for the same Sponsoring Organization on file by the application deadline will not be considered for the Group Retro plan for that policy year. BWC may waive this requirement for good cause shown due to clerical or administrative error so long as no employer is added to a Retro Group after the application deadline.

c.      BWC may request additional information from individual employers, as needed, in order to process an application and determine an employer’s eligibility for participation.

3.     Sponsoring Organization requirements:

a.     A Retro Group’s application is applicable to one policy year. The Retro Group must reapply each year for Group Retro Rating.

b.     Continuation of a Retro Group for subsequent policy years is subject to timely filing of an application and meeting eligibility requirements each year.

c.      The Sponsoring Organization must:

i.       Apply for Group Retro by submitting a completed Application for Group Retrospective Rating Program (U-151) to BWC with all required documentation by the application deadline. The U-151 must be signed by an officer of the Sponsoring Organization. BWC will reject the application if all relevant information is not included.

ii.      Select a maximum premium ratio on the U-151.

iii.     Identify each individual employer in the Retro Group by submitting the U-152 to BWC.

iv.    Submit to BWC a U-153 for each employer participating in the Sponsoring Organization’s Retro Group.

a)     If the employer files a U-153 within sixty (60) days prior to the application deadline, it will be presumed that the latest filed U-153 indicates the employer’s intentions for Group Retro for the upcoming policy year.

b)     A U-153 will remain in effect until the end of the policy year indicated on the form.

c)     The U-153 must be signed by the chief executive officer, owner/partner, or designated management representative of the employer.

d.     BWC may request additional information from the Sponsoring Organization. Failure or refusal by the Sponsoring Organization to provide the information on the forms or computer formats provided by BWC will be sufficient grounds for BWC to reject the application and deny the Retro Group’s participation.

4.     BWC evaluation of application:

a.     BWC will take the following actions upon receipt of an application for Group Retro Rating:

i.       Determine the industry classification of the Retro Group based upon the composition of employers in the Retro Group.

ii.      Screen individual employers to ensure they fit within the Retro Group’s industry classification.

iii.     If BWC determines an individual employer does not meet the eligibility requirements, BWC will notify the individual employer and the Sponsoring Organization of this fact. The Retro Group may continue its application for Group Retro without the disqualified employer.

b.     BWC will only honor changes to the original application that are filed on a U-153 and filed with BWC prior to the application deadline.

i.       Rescissions must be made in writing and signed by an officer of the Sponsoring Organization.

ii.      BWC will use the latest application form, or rescission received, in determining Group Retro Rating participation.

D.    Operation of program.

1.     A Retro Group may not voluntarily terminate a Group Retro plan after application has been made.

2.     An employer who sustains a claim within the “green period” must complete one of the following during the policy year of participation:

a.     Attend two hours of safety training.

b.     Take BWC’s online accident analysis training and submit a DFSP-1 accident analysis report on the claim(s) that occurred in the green period.

3.     An employer participating in the Group Retro Program may participate in other compatible BWC discount programs during its participation in the Group Retro Program. Employer compatibility for Group Retro Rating is outlined in OAC 4123-17-74, Appendix C.

4.     A Retro Group that has been established and accepted by BWC may select an authorized representative as follows (see the Employer Authorized Representatives policy for additional information):

a.     One permanent authorized representative may be selected to represent the Retro Group and the individual employers of the Retro Group for all risk-related matters relating to BWC and the Industrial Commission.

b.     The Sponsoring Organization will select an authorized representative by submitting a U-151 to BWC. The U-151 must be signed by an officer of the Sponsoring Organization. An authorized representative may be changed or terminated only by the subsequent submission of a U-151.

5.     The employer pays its individual premium during Group Retro Rating participation.

6.     BWC will consider the Retro Group as one entity when calculating the Group Retrospective premium.

7.     The Group Retrospective premium calculation will occur three times during the evaluation period; at twelve (12), twenty-four (24), and thirty-six (36) months following the end of the Group Retro policy year.

a.     On the evaluation date, BWC will evaluate all claims with dates of injury during the Group Retro policy year where the policy of record was a Retro Group member on the date of injury. The incurred losses and reserves for these claims will be captured. An actuarially determined LDF will be applied to the total incurred losses and reserves for the entire group. The LDFs can be found in OAC 4123-17-73, Appendix C. The Retro Group’s premium will be calculated based on the developed incurred losses and reserves of the group.

b.     The Group Retrospective premium will be compared to the standard premium and all subsequent Group Retro refunds/assessments.

c.      The difference between Group Retrospective premium and standard premium will be distributed or billed to the employers as a refund or assessment.

i.       Assessments will be limited by the maximum premium ratio selected by the Retro Group at the time of application.

ii.      BWC will not apply any reserving method that suppresses some portion of the employer’s costs for the purpose of calculating an experience modification (EM).

iii.     BWC may hold a portion of refunds or defer assessments owed in the first and second evaluation periods to minimize the volatility of refunds and assessments. BWC will fully distribute any net refund or assessment in the third evaluation period.

iv.    For claims of a Retro Group’s members enrolled in Salary Continuation at the time of evaluation, the full indemnity reserve will be included in the incurred losses but no amount will be included for indemnity paid.

d.     Refunds and assessments will be distributed directly to eligible individual employers based on the percentage of the total group standard premium paid by the employer at the time of the evaluation. This percentage will be multiplied by the refund or assessment and the resulting amount distributed or billed to the employer.

i.       BWC will send premium credits within four months of the evaluation date to eligible participants.

ii.      If additional premium is owed, it will be included in the employer’s next invoice and must be paid by the due date on the invoice. BWC will charge penalties on additional premium not paid when due.

iii.     If an employer has an outstanding balance with BWC, BWC will deduct such monies from the credit. BWC will then refund the difference, or if a premium balance is still due, send a bill for the balance.

E.     Gross misrepresentation.

1.      After the application deadline, but before the end of the policy year, the Sponsoring Organization may notify BWC it wishes to remove an employer from the Retro Group.

2.     The Sponsoring Organization may request the employer be removed from the Retro Group after the application deadline only for the employer’s gross misrepresentation on its application to the Retro Group.

3.     The Sponsoring Organization must notify the employer of its request to remove the employer from the Retro Group for gross misrepresentation.

4.     The burden of proof is on the Sponsoring Organization to provide sufficient documentation as determined by BWC.

5.     BWC will review the request and the employer will only be removed with BWC’s approval.

F.     BWC will remove an employer from the Group Retro program for the current policy year if the employer fails to comply with section IV.B.3 above and the following will apply:

1.     Claims costs for all injuries incurred from the beginning date of the policy year through the date of removal from the program will be included in the Group Retrospective calculation, and

2.     Only premium paid from the beginning date of the policy year through the date of removal will be included in the Group Retrospective calculation for the participation policy year.

G.    Resolution of complaints.

1.     Employer complaints should be processed under the General Employer Complaint Policy.

2.     Specific extenuating circumstances that apply to the Group Retrospective Rating Program:

a.     A new employer is not homogeneous with the Retro Group to which it applied.

i.       Extenuating circumstance: An employer, having no reported payroll and premium during the period specifically mentioned in the Group Retro Rating rules, is rejected because it is not homogeneous with the Retro Group to which it applied. BWC may permit the employer to participate in a Retro Group that is homogeneous with the employer’s operation as long as the Retro Group is with the same Sponsoring Organization. The employer, Sponsor Organization, and TPA must be in agreement with the decision.

ii.      Supporting documentation required:

a)     The employer has no reported payroll;

b)     All appropriate Group Retro Rating forms were timely filed;

c)     The employer is not rejected for any other reason; and

d)     The same Sponsoring Organization has another group the employer could be placed into that would resolve the homogeneity issue.

b.     Employer rejected from Group Retro Rating after being accepted into Group Experience Rating for the same policy year.

i.       Extenuating circumstance: An employer is listed on a Group Experience Rating roster that is submitted to BWC. After the application deadline for Group Experience Rating, the employer requests removal from Group Experience Rating in order to apply for the Group Retro Rating for the same policy year. BWC denies the employer request to be removed from Group Experience Rating because the request was made after the application deadline. BWC denies the employer’s application for the Group Retro Rating program because the employer is enrolled in Group Experience Rating.

ii.      BWC will grant the employer’s request to be removed from Group Experience Rating after the application deadline date and to be placed in Group Retro Rating if all of the following requirements are met:

a)     The employer, Group Experience Sponsoring Organization, and Group Retro Sponsoring Organization provide BWC with a written request to remove the employer from Group Experience Rating and add the employer to Group Retro Rating. All three requests must be submitted on company letterhead and be signed by an authorized representative.

b)     All letters must be received by BWC no later than thirty (30) days after the notification of the denial to the Group Retro Rating program.

c)     The removal of the employer from Group Experience Rating does not change the Group Experience Rating group’s calculated EM. The removal of the employer must result in no financial impact to the balance of the Group Experience Rating group participants.

d)     The employer must meet all other eligibility requirements of the Group Retro Rating Program.

H.    Terminations, transfers and changes of ownership; as set forth in OAC 4123-17-73(S).

1.     Rights and obligations.

a.     Successor wholly succeeds predecessor: The successor will be responsible for all existing or future rights and obligations stemming from predecessor’s current or past participation in the Group Retro Program, as outlined in OAC 4123-17-02(C).

b.     Partial transfer: If predecessor has any Group Retro policy years in the evaluation period, it will retain rights, liabilities, and obligations set forth in OAC 4123-17-73.

2.     Program participation.

a.     Transfers involving a newly-established successor.

i.       Full transfer of operations to single, newly-established successor: Predecessor’s eligibility for Group Retro Rating will transfer to successor.

ii.      Partial transfer of operations to single, newly-established successor: Predecessor’s eligibility for Group Retro Rating will transfer to successor; successor determines whether it will participate.

iii.     Transfer during the current policy year, or sixty (60) days prior to the application deadline: The successor may be considered a member of the Group Retro Program if agreed to by both the successor and Sponsoring Organization. The successor and the Sponsoring Organization must submit a written agreement to BWC within thirty (30) days of the date BWC updates the predecessor’s policy status to combine.

iv.    Successor participation is dependent on meeting Group Retro eligibility requirements.

b.     All or part of predecessor’s operations are merged with existing operations of successor: Predecessor’s eligibility for Group Retro Rating will not transfer to successor. Predecessor’s Group Retro plan(s) will terminate as of the ending date of the evaluation period.

3.     Employer cancels coverage: The employer’s premium and losses will remain with the Retro Group. The resulting refunds or assessments will be disbursed to or collected from the remaining members of the Retro Group. The Sponsoring Organization and its authorized representative have the right to represent the interest of the canceled employer on behalf of the Retro Group for claims which occurred during the year(s) the cancelled employer was in the Sponsoring Organization’s Retro Group.

4.     Employer files bankruptcy: If a current or past Group Retro Program employer with open retro policy years files a petition for bankruptcy, the employer must notify BWC Legal by certified mail within five working days from the date of the bankruptcy filing. BWC will petition the bankruptcy court to take appropriate action to protect the state insurance fund and other related funds.


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