OhioBWC - Basics: (Policy library) - File

 

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, 2023

Approved:

Rex Blateri, Chief of Employer Services

Origin:

Employer Policy

Supersedes:

Group Retrospective Rating Program policy effective July 1, 2022.

History:

Revised January 5, 2023; July 1, 2022; February 11, 2022; October 17, 2016; May 14, 2012; June 28, 2011; April 8, 2010. New policy issued December 9, 2009.

Review Date:

July 1, 2028

 

 

I.      Policy Purpose

 

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

 

II.    Applicability

 

This policy applies to employers, sponsoring organizations, authorized representatives, and BWC Employer Programs.

 

III.   Definitions

A.    Continuing retrospective rated group: A retrospective rated 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 retrospective rated group will not constitute a new group.

B.    Developed losses: 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 and result in costs that would not be covered by premium collected. This claim cost development 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.

C.   Evaluation period: The three-year period beginning immediately after the end of the retro policy year. Annual evaluations 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: The oldest four of the latest five completed policy years immediately preceding the beginning of the policy year to which a rate is applicable.

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 retrospective rated 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 retrospective rated group, and such merger adversely affects the employer’s risk of future losses, or

2.    The sponsoring organization discovers the employer applicant failed to disclose the true nature of its business pursuit on its application for membership in the retrospective rated group, and this failure adversely affects the loss potential of the retrospective rated group.

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

H.   Homogeneous/homogeneity: A requirement for retrospective rated 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, COVID-19 cost as defined in OAC 4123-17-03(G)(4), or losses where a student is a participant of the Employers Providing Work-Based Learning Pilot Program as defined in OAC 4123-17-03(G)(5). Incurred losses used in the group retrospective rating premium calculation will be limited to $500,000 per claim.

J.     Industry group: Used in calculating an employer’s premium rate and in some program participation, this is the main business pursuit of an individual employer; e.g., construction or transportation. National Council on Compensation Insurance classification codes are grouped into ten industry groups, set forth in OAC 4123-17-05, Appendix A. Employers can have multiple classification 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, excluding incurred losses of permanent total disability and death claims, to produce developed losses. LDFs are unique to each retro policy year and are set forth in OAC 4123-17-73, Appendix C.

L.    Maximum premium ratio: A factor pre-selected by the retrospective rated group that is multiplied by the standard premium after application of the premium size factor to determine the maximum retrospective premium. Options for the maximum premium ratio are set forth in OAC 4123-17-73, Appendix A and Appendix B.

M.   Member of a retrospective rated group: An individual employer that participates in a group retrospective rating 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 retrospective rated group, and the new employer entity has established a new BWC policy.

O.   New retrospective rated group: A retrospective rated group is new if there is a change in sponsoring organization, the retrospective rated group is moved to a new sponsoring organization, or a new retrospective rated group is formed based on the percent of employers returning to the retrospective rated group.

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

Q.   Retrospective rated group: The member employers who collectively form a group that participates in the group retrospective rating plan of a sponsoring organization.

R.   Retro policy year: The policy year in which an employer is enrolled in group retrospective rating. For public employer taxing districts (PEC employers) the retro policy year is January 1 through December 31. For private employers (PA employers) 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 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 the Sponsorship Certification policy for additional information.

U.   Standard premium: The total premium paid by, or on behalf of, an employer for a given policy year including any premium size factor adjustment, 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 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.    Retrospective rated group eligibility requirements.

1.    Each retrospective rated group seeking participation in the program must meet the following standards:

a.    The retrospective rated group must be sponsored by a BWC certified sponsoring organization.

b.    The employers’ primary business pursuit as determined in section IV.A.1.b.i below must be homogeneous with the other employers in the retrospective rated group.

i.      Homogeneity is determined by the main operating classification codes 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 and industry groups two and four, as well as four and six, are considered similar. However:

a)    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 to make industry group seven or eight the dominant industry.

b)    Industry groups two and six are not considered similar, and premium from industry group two or six cannot be combined with premium from industry group four to make industry group two or six the dominant industry.

ii.     BWC may allow an employer to move to a more homogeneous group, after December 31, for PA employers and June 30, for PEC 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 retrospective rated 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 for which premium information is available.

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

b.    BWC will use the experience modified premium of the individual employers excluding group experience rating discounts.

3.    The retrospective rated group must have at least two eligible employers.

4.    The sponsoring organization must document with the group retrospective rating application its program to improve accident prevention and claims handling for the employers in the retrospective rated group. For existing retrospective rated groups who are reapplying, the sponsoring organization must document the effectiveness of prior programs and any proposed improvements to these programs. The safety program requirements are outlined in OAC 4123-17-68. See the Sponsorship Certification policy for additional information.

B.    Employer eligibility requirements.

1.    The employer must be a PA employer or a 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; and

d.    Report actual payroll for the preceding policy year and pay any premium due upon reconciliation of estimated premium and actual premium for that policy year.

3.    The employer may not be a member of more than one retrospective rated group. Further, an employer cannot be a member of a group retrospective rating plan and a group experience rating plan in the same policy year.

4.    The employer’s group retrospective rating application will be rejected if the employer has been included on a group experience rating roster for the upcoming policy year.

5.    The employer must be homogeneous with the retrospective rated group. However, there are exceptions to the homogeneity requirement. These exceptions include an employer:

a.    Of a continuing retrospective rated group who initially met the homogeneity requirement. BWC will not disqualify such employer from participating in the continuing retrospective rated 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 classification codes has the option to participate in a retrospective rated group associated with another operating classification code.

i.      The standard exception classification codes 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.    Alternate employer organizations, professional employer organizations, and temporary service agencies are ineligible for the standard exception rule.

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 group retrospective rating 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 retrospective rating 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 retrospective rated 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 retrospective rated group’s application is applicable to one policy year. The retrospective rated group must reapply each year for group retrospective rating.

b.    Continuation of a retrospective rated 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 retrospective rating 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 retrospective rated group by submitting the U-152 to BWC.

iv.   Submit to BWC a U-153 for each employer participating in the sponsoring organization’s retrospective rated group.

a)    If the employer files a U-153 within sixty (60) days prior to the application deadline, the presumption is the latest filed U-153 indicates the employer’s intentions for group retrospective rating 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 is sufficient grounds for BWC to reject the application and deny the retrospective rated group’s participation.

4.    BWC evaluation of application:

a.    BWC takes the following actions upon receipt of an application for group retrospective rating:

i.      Determines the industry classification of the retrospective rated group based upon the composition of employers in the retrospective rated group;

ii.     Screens individual employers to ensure they fit within the retrospective rated group’s industry classification; and

iii.    If BWC determines an individual employer does not meet the eligibility requirements, BWC notifies the individual employer and the sponsoring organization. The retrospective rated group may continue its application for group retrospective rating 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. BWC uses the latest application form received in determining group retrospective rating participation.

c.     Any requests to be removed from the group retrospective rating roster must be completed in writing, signed by an officer of the sponsoring organization, and filed prior to the group retrospective rating application deadline.

D.   Operation of program.

1.    A retrospective rated group may not voluntarily terminate a group retrospective rating 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 retro policy year:

a.    Attend two hours of safety training; or

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 group retrospective rating may participate in other compatible BWC discount programs during its participation in group retrospective rating. Employer compatibility for group retrospective rating is outlined in OAC 4123-17-74, Appendix C.

4.    A retrospective rated 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 retrospective rated group, and the individual employers of the retrospective rated group, for all policy-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 retrospective rating participation.

6.    BWC will consider the retrospective rated group as one entity when calculating the group retrospective rating premium.

7.    The group retrospective rating 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 retro policy year.

a.    On the evaluation date, BWC will evaluate all claims with dates of injury during the retro policy year where the policy of record was a retrospective rated group member on the date of injury. The incurred losses and reserves for these claims will be captured. An LDF will be applied to the total incurred losses and reserves for the entire group. The retrospective rated group’s premium will be calculated based on the developed losses and reserves of the group.

b.    The group retrospective rating premium will be compared to the standard premium and all subsequent group retrospective rating refunds and assessments.

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

i.      Assessments are limited by the maximum premium ratio selected by the retrospective rated group at the time of application.

ii.     BWC does not apply any reserving method that suppresses any 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 fully distributes any net refund or assessment in the third evaluation period.

iv.   For claims of a retrospective rated 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 is included for indemnity paid.

d.    Refunds and assessments are 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 is multiplied by the refund or assessment and the resulting amount distributed or billed to the employer.

i.      BWC sends premium refunds within four months of the evaluation date to eligible participants.

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

iii.    If an employer has an outstanding balance with BWC, BWC deducts such monies from the refund. BWC refunds the difference, or if a premium balance is still due, sends a bill for the balance.

iv.   Effective with policy years beginning on or after January 1, 2022, premium refunds or premium rebates provided to group retrospective rating employers for a policy year may not exceed, in their cumulative total, one hundred percent of the actual premium following reporting of actual payroll and reconciliation of estimated premium and actual premium.

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 retrospective rated group.

2.    The sponsoring organization may request the employer be removed from the retrospective rated group after the application deadline only for the employer’s gross misrepresentation on its application to the retrospective rated group.

3.    The sponsoring organization must notify the employer of its request to remove the employer from the retrospective rated group for gross misrepresentation.

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

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

F.    BWC removes an employer from the Group Retrospective Rating Program for the current policy year for failure to report actual payroll for the preceding policy year and pay any premium due upon reconciliation of estimated premium and actual premium for that policy year. 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. If an employer fails to comply with this paragraph, the following applies:

1.    Claims costs for all injuries incurred from the beginning date of the retro policy year through the date of removal from the program are included in the group retrospective rating calculation, and

2.    Only premium paid from the beginning date of the retro policy year through the date of removal is included in the group retrospective rating calculation for the retro policy year.

G.   Resolution of complaints.

1.    Employer complaints are processed under the General Employer Complaint Policy.

2.    The following are examples of extenuating circumstances BWC applies to the Group Retrospective Rating Program:

a.    A new employer is not homogeneous with the retrospective rated group to which it applied.

i.      Extenuating circumstance: An employer, having no reported payroll and premium during the period specifically mentioned in the group retrospective rating rules, is rejected because the employer is not homogeneous with the retrospective rated group to which it applied. BWC may permit the employer to participate in a retrospective rated group that is homogeneous with the employer’s operation as long as the retrospective rated group is with the same sponsoring organization. The employer, sponsoring organization, and TPA must  agree with the decision.

ii.     Supporting documentation required:

a)    The employer has no reported payroll;

b)    All appropriate group retrospective 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 retrospective 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 group retrospective 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 group retrospective rating 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 retrospective rating if all of the following requirements are met.

a)    The employer, group experience rating sponsoring organization, and group retrospective rating sponsoring organization provide BWC with a written request to remove the employer from group experience rating and add the employer to group retrospective 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 group retrospective rating.

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 Retrospective Rating Program.

H.   Successorship, coverage cancellation, and bankruptcy; as set forth in OAC 4123-17-73(S).

1.    Rights and obligations.

a.    Successor wholly succeeds predecessor: The successor is responsible for all existing or future rights and obligations stemming from predecessor’s current or past participation in group retrospective rating, as outlined in OAC 4123-17-02(C).

b.    Successor partially succeeds predecessor: If predecessor has any retro policy years in the evaluation period, predecessor retains rights, liabilities, and obligations set forth in OAC 4123-17-73.

2.    Program participation.

a.    Successorship involving a newly-established successor.

i.      A single, newly-established successor wholly succeeds predecessor: Predecessor’s eligibility for group retrospective rating transfers to successor.

ii.     A single, newly-established successor partially succeeds predecessor: Predecessor’s eligibility for group retrospective rating transfers to successor; successor determines whether it will participate.

iii.    A single, newly-established successor wholly succeeds predecessor during the current policy year, or sixty (60) days prior to the application deadline: The successor may be considered a member of group retrospective rating 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.

b.    Successor participation is dependent on meeting group retrospective rating eligibility requirements.

c.     Successorship involving an already established successor that wholly or partially succeeds predecessor: Predecessor’s eligibility for group retrospective rating does not transfer to successor. Predecessor’s group retrospective rating plan(s) terminate as of the ending date of the evaluation period.

3.    Employer cancels coverage: The employer’s premium and losses remain with the retrospective rated group. The resulting refunds or assessments are disbursed to or collected from the remaining members of the retrospective rated group. The sponsoring organization and its authorized representative have the right to represent the interest of the cancelled employer on behalf of the retrospective rated group for claims which occurred during the year(s) the cancelled employer was in the sponsoring organization’s retrospective rated group.

4.    Employer files bankruptcy: If a current or past group retrospective rating employer with retro policy years in the evaluation period 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.