Policy
Name:
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Deductible
Program
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Policy #:
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EP-04-01
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Code/Rule
Reference
|
ORC 4123.29(A)(3); OAC 4123-17-72, Appendices A, B, C, D, E, and F; OAC
4123-17-74,
Appendices A, B, and C; OAC 4123-17-03 and OAC 4123-17-03.3.
|
Effective
Date:
|
July 1,
2022
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Approved:
|
Rex
Blateri, Chief of Employer Services
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Origin:
|
Employer
Policy
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Supersedes:
|
The
Deductible Program policy dated July 1, 2021.
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History:
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Revised July
1, 2022; February 11, 2022; July 7, 2020; November 27, 2018; August 11, 2016;
June 25, 2015; April 6, 2015; March 18, 2010. New policy issued September 22,
2009.
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Review
Date:
|
July 1,
2027
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I. Policy Purpose
The
Ohio Bureau of Workers’ Compensation (BWC) permits
employers to participate in the Deductible Program in accordance with all applicable
laws and rules.
II. Applicability
This
policy applies to employers, authorized representatives, BWC Employer Programs,
and BWC Regional Employer Management Services.
III. Definitions
A.
Base rate: The rate that employers who are not
experience rated pay as a percentage of their payroll.
B.
Coverage period: The twelve (12) month period beginning
July 1 through June 30 for private employers, and January 1 through December 31
for public employer taxing districts. The deductible selected by the employer
will apply only to claims with a date of injury within the coverage period
defined in the deductible agreement.
C.
Deductible: The maximum amount an employer
participating in the Deductible Program must reimburse BWC for each claim that
occurs during the policy year.
1.
Small deductible: A deductible less than or equal to
$10,000.
2.
Large deductible: A deductible greater than $10,000.
D.
Experience rated
premium: The premium
obligations of an employer for the policy year, excluding Disabled Workers’
Relief Fund (DWRF) and administrative cost assessments. Experience rated
premium may include any experience rated premium related to policy combinations.
The premium is subject to the premium size factors described in OAC 4123-17-03.3.
E.
Premium: Money paid and due from an employer for
workers’ compensation insurance. Premium does not include money paid as fees,
deductibles, fines, penalties or deposits.
IV. Policy
A.
Eligibility Criteria.
1.
The employer must be
a private employer (PA employer) or public employer taxing district (PEC
employer) participating in the State Insurance Fund (SIF).
2.
As of the original application
deadline, or the continuing eligibility evaluation date, the employer must hold
active workers’ compensation coverage as follows.
a.
The employer must be
current with respect to all payments due BWC as defined in OAC 4123-17-14.
b.
The employer must meet
lapse requirements for the deductible level selected:
i.
If the employer
selects a small deductible, the employer must not have cumulative lapses in
workers’ compensation coverage in excess of forty (40) days within the twelve
(12) months preceding the application deadline; or
ii.
If the employer
selects a large deductible, the employer must not have cumulative lapses in
workers’ compensation coverage in excess of fifteen (15) days within the five
years preceding the application deadline.
c.
The employer must
report actual payroll for the preceding policy year and pay any premium due
upon reconciliation of estimated premium with actual premium for that policy
year. See the Payroll True-Up policy for additional information.
3.
The employer must demonstrate
the financial strength and ability to make payments based upon in-depth credit
and financial reviews.
B. The following employers are not eligible
for the Deductible Program:
1.
State agencies;
2.
Self-insuring
employers; and
3.
New employers if
applying for the Large Deductible.
C.
Application and
renewal requirements.
1.
The application
deadline for PA employers is the last business day of January, preceding a
policy year that begins July 1. The Deductible Program runs for a single policy
year, from July 1 to June 30.
2.
The application
deadline for PEC employers is the last business day of July preceding a policy
year that begins January 1. The Deductible Program runs for a single policy
year, from January 1 to December 31.
3.
New applicants must
submit an Application for Deductible Program (U-148) to BWC along with any other documentation required for
enrollment in the Deductible Program by the application deadline. An employer
may also apply online at www.bwc.ohio.gov.
4.
BWC will not permit
an employer to enroll in the Deductible Program outside the established
deadlines, except that BWC will allow a new employer to
submit a Small Deductible application to BWC within thirty (30) days of
obtaining coverage.
5.
Renewal in the
Deductible Program at the same deductible level for each subsequent policy year
is automatic, subject to review by BWC of the employer’s continued eligibility
and creditworthiness. An employer participating in Large Deductible must submit
an annual updated financial statement by the application deadline.
6.
An employer may
change its chosen deductible level for a subsequent policy year by submitting a
written application or by applying on-line through www.bwc.ohio.gov by the application deadline. The change
in deductible level is subject to review by BWC of the employer’s eligibility
and creditworthiness.
7.
An employer
participating in the Deductible Program will not be automatically renewed if
the employer applies for Group Experience Rating or Group Retrospective Rating
for the upcoming policy year. If the employer does not pass eligibility
requirements for Group Experience Rating or Group Retrospective Rating for the
upcoming policy year, BWC will evaluate the employer for re-enrollment in the
Deductible Program.
D.
BWC evaluation of
application.
1.
Employer’s ability
to make payments.
a.
An employer that
applies for the Deductible Program may request that a parent company’s
financial strength be used in evaluating the employer’s financial strength and
ability to make payments. The parent company must meet financial criteria for
the Deductible Program and execute a contract of guaranty with respect to the
employer’s participation in the Deductible Program.
b.
BWC may require an
employer to adopt additional risk mitigation measures as a precondition for
participation in the Deductible Program. These measures may include, but are
not limited to, either individually or in combination, the following:
i.
Adoption of an alternative
payment plan;
ii.
Providing securitization
in the form of a letter of credit or surety bond; a cash deposit, certificate
of deposit, or private express trust is not security; or
iii. For employers electing a large
deductible, selection of an aggregate stop-loss limit.
2.
Obtain credit and
financial stress scores.
a.
Employers satisfying
BWC’s eligibility criteria will be submitted to a third-party vendor to obtain
credit and financial stress scores. For an employer applying for the Large
Deductible Program, BWC may obtain additional credit information.
b.
The credit score
identifies businesses that are likely to become delinquent in their payments, while
the financial stress score identifies businesses likely to cease operations
over the next twelve (12) months. Credit and financial stress scores are rated
on a numeric scale of 1 through 5.
i.
1 = Low Risk.
ii.
2 = Low-Medium Risk.
iii. 3 = Medium Risk.
iv.
4 = Medium-High
Risk.
v.
5 = High Risk.
|
Credit
Score
1, 2, or
3
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Credit
Score
4 or 5
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Financial
Stress
Score
1, 2, or 3
|
LOW RISK
Healthy companies that
are prompt payers, less likely to experience financial distress.
|
LONG-TERM
RISK
Companies that are less
likely to experience financial insolvency but are not prompt in paying
obligations. These companies have the financial ability to pay promptly.
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Financial
Stress
Score
4 or 5
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SHORT-TERM
RISK
Companies with some
negative information that may pose a short-term risk.
|
WATCH
LIST
Unhealthy companies that
are not prompt payers and are more likely to experience financial distress.
|
3.
Small Deductible
Program.
a.
For employers
applying for a small deductible, the following criteria will be used in
evaluating their financial ability to participate in the Deductible Program.
i.
Employers in the Low
Risk Classification will be approved for all small deductible levels.
ii.
Employers in the Short-Term
Risk Classification will be approved for $500 and $1,000 per claim deductible
levels.
iii. Employers in the Long-Term Risk
Classification will be approved for deductible levels up to and including
$2,500 per claim.
iv.
Employers in the
Watch List Classification will be denied participation for all small deductible
levels.
4.
Large Deductible
Program.
a.
Employers participating
in the Large Deductible Program represent increased financial risk to the SIF.
Employers that choose a large deductible will undergo in-depth credit and financial
review to help mitigate the increased financial risk to the SIF and avoid
losses associated with the Deductible Program.
b.
Employers enrolling
in a Large Deductible Program must submit financial information to BWC during
the enrollment period preceding each policy year the employer elects to
participate. For the initial application, the employer must submit financial
statements prepared in accordance with generally accepted accounting principles
(GAAP) for the three most recent fiscal years.
i.
Employers choosing a
deductible level of $25,000 or $50,000 must submit reviewed or audited
financial statements.
ii.
Employers choosing a
deductible level of $100,000 or $200,000 must submit audited financial
statements.
iii. Employers must submit their most recent financial
statements for each subsequent year to be considered for renewal in the
Deductible Program.
iv.
The fiscal year end
date for the most recent financial statements must occur within twenty-four
(24) months of the application deadline to be considered.
c.
The submitted
financial statements will be further reviewed and analyzed to identify
indicators of any increased financial risk that an employer might represent to
the SIF, including, but not limited to:
i.
Audit opinions;
ii.
Violation of debt covenants;
iii. Disclosure of contingent liabilities;
iv.
Total assets and the
composition of assets; and
v.
Trends in
profitability, leverage, debt coverage, liquidity, and growth.
d.
All information from
the financial analysis, and the credit and financial stress scores, will be
considered in assessing the employer’s application for participation in the
Large Deductible Program.
E.
Operation of
program.
1.
Deductible amounts.
a.
The deductible is
the maximum amount an employer participating in the Deductible Program must
reimburse BWC for each claim that occurs during the policy year.
b.
The employer will
choose one deductible amount for all claims with dates of injury during a one-year
coverage period, subject to the deductible limitations of its credit and
financial stress scores.
c.
Per claim deductible
amounts:
i.
Small Deductible:
$500; $1,000; $2,500; $5,000; and $10,000.
ii.
Large Deductible:
$25,000; $50,000; $100,000; and $200,000.
d.
For an employer
selecting a small deductible, the employer cannot choose a deductible amount
that exceeds 25% of the experience rated premium obligation for the most recent
full policy year.
e.
For an employer
selecting a large deductible, the employer cannot choose a deductible amount
that exceeds 40% of the experience rated premium obligation for the most recent
full policy year.
f.
For self-insuring
employers re-entering the SIF, BWC will use the paid workers’ compensation
benefits from the last full policy year in place of experience rated premium.
g.
A new employer may
apply for the Small Deductible Program. The employer’s deductible shall not
exceed 25% of the employer’s expected premium. BWC will use the estimated
payroll from the Application for Ohio Workers’ Compensation Coverage (U-3) to calculate a new employer’s expected premium.
h.
BWC may estimate a
full year’s premium if only a partial year is available or if no premium is
available for the most recent full policy year.
2.
Annual aggregate
stop-loss limit.
a.
An employer may
request an annual aggregate stop-loss limit in combination with large
deductible levels. BWC may reject the employer’s request if the employer would
receive a credit that exceeds the maximum aggregate stop-loss liability. If the
employer’s request for the aggregate stop-loss limit option is approved, BWC
will limit deductible billings for injuries which occur during the associated
policy year to three times (3X) the deductible level chosen.
b.
Selection of the
annual aggregate stop-loss limit will reduce the premium credit. BWC may
require an employer in a Large Deductible Program to adopt an annual aggregate
stop-loss limit as an additional risk mitigation measure. See section IV.D.1.b
of this policy.
3.
Credits.
a.
BWC will apply the
premium reduction directly to the base rate established for the policy year for
base rated employers or after the modified premium rate is established for
experience-rated employers.
i.
Small deductible
premium credits are set forth in OAC 4123-17-72, Appendix A for PA employers and
Appendix B for PEC employers.
ii.
Large deductible
premium credits are set forth in OAC 4123-17-72, Appendix D for PA employers and
Appendix F for PEC employers.
b.
The premium
reduction will be applied prior to any other premium adjustments. The premium
reduction does not apply to the Disabled Workers’ Relief Fund (DWRF)
assessments or administrative expenses.
c.
BWC will calculate
the premium reduction according to the employer’s chosen deductible amount and
the applicable National Council on Compensation Insurance (NCCI) hazard group. An
employer’s hazard grouping is established by the hazard group with the largest
percentage of premium, as of the end of the enrollment period for that year.
NCCI hazard groups are set forth in OAC 4123-17-72, Appendix C for PA employers and
Appendix E for PEC employers.
i.
BWC will use payroll
and the associated experience premium for the rating year beginning two years
prior to the period the employer is seeking to enroll in the Deductible Program
to determine the appropriate hazard group. BWC will total the premium of all
the classifications in each hazard group and designate the group with the
highest premium amount as the employer's hazard group.
ii.
For a new employer,
BWC will use estimated payroll from the U-3 to determine the appropriate
hazard group.
4.
Claim costs.
a.
BWC pays all medical
and indemnity claims costs.
b.
The employer will be
billed monthly for all claim costs paid by BWC, including costs charged to the
surplus fund, up to the deductible level.
c.
The employer must
pay all deductible amounts billed by the invoice due date. Deductible billings
are subject to the same provisions as other monies owed to BWC, including
interest, penalties, and amounts certified to the Ohio Attorney General’s
office for collection.
d.
Regardless of when
payment was made by BWC and even if the claim is out of the employer’s
experience period, the employer will continue to be billed for claim costs
incurred until:
i.
The deductible
amount is reached; or
ii.
The aggregate
stop-loss limit is reached, if applicable.
e.
The employer is
liable for the full deductible on any claim that arises during a policy year in
which the employer was in the Deductible Program.
f.
For small deductible
levels, the amount to be included in the employer’s experience for a policy
year will be any claims costs for injuries incurred in that policy year, less
any deductible billed to the employer. For large deductible levels, BWC will
include the entire cost of the claim in the employer’s experience for the
appropriate policy year. Any qualifying claims where COVID-19 was contracted by
an injured worker, in accordance with OAC 4123-17-03(G)(4), and any qualifying claims where a
student is a participant of the Employers Providing Work-Based Learning Pilot Program,
in accordance with OAC 4123-17-03(G)(5), will be excluded from the employer’s
experience.
F.
Compatibility. An employer
participating in the Deductible Program may participate in other compatible BWC
rate programs. Employer program compatibility is outlined in OAC 4123-17-74, Appendix C.
G.
Removal / Exit from
program.
1.
BWC will remove an
employer from the Deductible Program during the current policy year for failure
to report actual payroll for the preceding policy year or failure to pay any
premium due upon reconciliation of estimated premium and actual premium for that
policy year, no later than the due date set forth in OAC 4123-17-14. An employer will be deemed to have met
this requirement if BWC receives the payroll, and the employer pays any premium
associated with the payroll report, prior to the expiration of any grace period.
If removed from the Deductible Program for failure to comply with this
paragraph, BWC will require the employer to:
a.
Continue to pay
claim costs for all injuries incurred from the beginning of the policy year
through the date of removal from the Deductible Program, until the selected
deductible amount is reached; and
b.
Be experience-rated,
without the deductible credit, from the date of removal from the Deductible
Program through the remainder of the policy year.
2.
BWC may remove an
employer from the Deductible Program with thirty (30) days written notice to
the employer for any of the following reasons:
a.
The employer
participates in any plan or program that is not compatible with the Deductible
Program;
b.
BWC certifies a
balance due from the employer to the Attorney General, unless the employer is
current on the payment schedule for any part-pay agreement that was entered
into for payment of premiums or assessment obligations;
c. The employer makes direct payments to
any medical provider for services rendered, to any medical provider for
supplies, or to any injured worker for compensation associated with a workers’
compensation claim, except when an employer pays salary continuation on a claim
occurring on or after July 1, 2012; or
d.
The employer engages
in misrepresentation or fraud in conjunction with the Deductible Program
application process.
3.
BWC Employer
Programs Unit will investigate allegations that the employer engaged in any of
the actions listed in section IV.F.2.a to section IV.F.2.d. If removed from the
Deductible Program, the employer may file a formal complaint through BWC’s
adjudication process. See section IV.K.
4.
An employer is not
permitted to withdraw from the Deductible Program during the policy year, and
no changes shall be made with respect to any deductible amount selected by the
employer within the policy year.
5.
Employers wishing to
withdraw from the Deductible Program for the upcoming policy year must notify
BWC in writing by submitting notice prior to the start of the policy year.
H.
Combinations and
experience transfers.
1.
Predecessor: Enrolled
in Deductible Program currently, or in prior policy years
Successor: New entity
Action: BWC will send notice to the
successor employer outlining options and responsibilities for the Deductible
Program. The successor may apply for the Deductible Program within thirty (30)
days of the notice. The successor is liable for all of predecessor’s liabilities
while predecessor was enrolled in the Deductible Program.
2.
Predecessor: Not
enrolled in Deductible Program
Successor: Enrolled in Deductible
Program
Action: Successor automatically remains
in the Deductible Program and any claims incurred on or after the combine date
are in the Deductible Program.
3.
Predecessor: Enrolled
in Deductible Program
Successor: Not enrolled in Deductible
Program
Action: Successor policy is not enrolled
in the Deductible Program. The successor is liable for all of predecessor’s
liabilities while predecessor was enrolled in the Deductible Program.
I.
Partial Transfer. If
the predecessor is enrolled in the Deductible Program currently, or in prior
policy years, the predecessor remains liable for deductible billings for claims
incurred prior to the date of the partial transfer. The successor is liable for
any claims incurred for the classifications of the predecessor, which were
transferred, beginning on the date of the partial transfer. The successor will
continue to be rated in the same manner as prior to the partial transfer,
unless the successor is a new entity which elects to enroll in the Deductible
Program under section IV.H.1.
J.
Scenarios.
1.
The employer
receives a deductible bill invoice for a claim with a date of injury which is
outside of the employer’s experience. Does the employer still owe the
deductible?
Yes, the employer is liable for the
entire amount of the deductible limit, regardless of when BWC pays the medical
or compensation.
2.
An employer was
billed and paid deductible billings on a claim where the claim allowance was
subsequently overturned. How will this be handled?
The amount of deductible paid by the
employer will be refunded to the employer. Note: The claim must be in a
final denied status. The refund will be credited to the employer’s policy and
offset by any billings that are due. If BWC owes the employer, a refund will be
issued.
3.
An injured worker is
set up overpaid on a claim that is in the Deductible Program. What is the
impact to the employer?
BWC will refund the overpaid amount to
the employer’s policy. The refund will be credited to the employer’s policy and
offset by any billings that are due.
4.
An employer was
billed and paid deductible billings on a claim where a subrogation amount was
recovered from a third party. How will this be handled?
a.
BWC will consider
subrogation collections from a third party under the following conditions:
i.
The amount collected
from a third party exceeds total incurred cost, which is the actual claim cost
if the claim is closed; and
ii.
The claim is
inactive by reserving standards, which is twenty-four (24) months with no
payments.
b.
The amount refunded
to the employer may not exceed the total deductible amount paid on the claim.
5.
The employer fails
to pay the deductible billings. What is the impact to its coverage status?
BWC will not lapse an employer if it
fails to pay deductible billings. However, the employer will be subject to any
interest or penalty provisions to which premiums are subject, including
certification to the Attorney General’s Office for collection. BWC will not
lapse the employer for the Deductible Program in the current policy year, but
the employer’s eligibility for the Deductible Program in future policy years
may be adversely affected.
6.
Does the employer
have to reimburse BWC for the full amount of the chosen deductible before any
amounts are charged to the surplus fund for vocational rehabilitation or for disability
relief?
Yes, per OAC 4123-17-72(J), BWC pays all claims costs and the
employer is responsible for reimbursing BWC for all claims costs until the
deductible amount is reached.
7.
The employer was in
a PEO agreement but has terminated this relationship. When the employer applies
for the Deductible Program, how will its premium be calculated, and the maximum
deductible amount determined?
Upon termination of the PEO
relationship, payroll will be moved back to the client employer for experience
purposes. The employer’s qualifying deductible will be based on the premium the
employer would have paid, based on experience payroll.
K.
Resolution of
complaints.
1.
Employer complaints are
processed under the General Employer Complaint Policy.
2.
Specific extenuating
circumstances that apply to the Deductible Program:
a.
Inaccurate information
on employer’s credit report or financial data.
i.
Extenuating Circumstance:
Employer protests BWC’s denial into the Deductible Program, or where BWC limits
the amount of deductible the employer is eligible for, due to inaccurate
information in the employer’s credit report obtained by BWC or in the financial
data submitted by the employer to BWC. It is the employer’s responsibility to
correct any errors by either contacting the credit reporting service or
providing BWC with accurate financial data. If BWC subsequently approves the
employer, the employer will be entered into the Deductible Program retroactive
to the beginning of the current policy year.
ii.
Supporting documentation:
The employer bears sole responsibility to provide BWC with the corrected
information, e.g., a new credit report or corrected financial data.
b.
Employer applies for
the Deductible Program after being denied participation in a non-compatible
program.
i.
Extenuating Circumstance:
Employer applied, and was denied participation in, a non-compatible program,
and subsequently applied for, and is accepted in, the Deductible Program. The
employer then appeals its rejection for the non-compatible program.
ii.
If the employer’s
appeal for the non-compatible program is granted, the program at issue in the
adjudication decision will be considered the employer’s choice of program
participation, and the employer will be removed from the Deductible Program.
Any monies the employer reimbursed to BWC will be returned to the employer.
c.
Employer has applied
for Group Retrospective Rating or Individual Retrospective Rating, and the
employer has concurrently applied for the Deductible Program.
i.
Extenuating Circumstance:
Employer has applied for, and been accepted into, the Deductible Program but
has also applied for either Group Retrospective Rating or Individual
Retrospective Rating, and BWC delays issuing a final decision on the employer’s
eligibility in these retrospective rating programs until after the start of the
rating year. The employer must not have contributed to BWC’s delay in issuing
its decision.
ii.
If an employer’s
application for either of these retrospective rating plans is approved after
the start of the rating year, the employer will be offered the opportunity to
choose which program it desires to participate in, e.g., Group Retrospective
Rating or Individual Retrospective Rating.
iii. Supporting Documentation: The employer
will have thirty (30) days from date of notification by BWC to provide BWC a
written decision as to which program it desires to participate in. Failure to
provide BWC with a written decision within thirty (30) days will result in the
employer remaining in the Deductible Program for the remainder of the current
rating year.
d.
New employer
succeeds a predecessor that was a participant in the Deductible Program.
i.
Extenuating Circumstance:
A new employer succeeds a predecessor employer that was a participant in the
Deductible Program in either the current or prior policy years. Per OAC 4123-17-72(L)(1), the successor employer is responsible
for any and all existing or future liabilities arising from the predecessor’s
participation in the Deductible Program.
ii.
In this situation,
BWC will allow the successor employer thirty (30) days from the postmark date
on the BWC notice to apply for the Deductible Program. Notice to the successor
employer includes, but is not limited to, any of the following:
a)
A letter from BWC
notifying the succeeding employer that it is not a participant in the
Deductible Program and must apply for the Deductible Program; or
b)
The first payroll
report issued to the succeeding employer where there is no credit given for
participation in the Deductible Program.
iii. Note: The successor employer must still
meet all other eligibility requirements at the time of application in order to
qualify for the Deductible Program.