I s the WS IB head ing fo r bank ruptcy?

March 1, 2012Terri Bimm & Rosanne Madio

What is the issue• The WSIB (Worker’s Safety Insurance Board) has control over our

employer paid safety insurance premiums, programs and benefits for Ontario. There are groups that claim the WSIB is mismanaging this system which will create a huge debt for future employers to compensate. This debt known as the Unfunded Liability (UFL) has ballooned its highest amount ever approximately $12 billion. The Unfunded Liability is essentially the difference between its assets and what it needs to satisfy the estimated lifetime costs of all claims

• After several unsuccessful action plans and reviews, it has become apparent to all that there is a real problem on how the system and the fund is being managed and a scramble to find out how to fix it.

• Organizations like the Canadian Federation of Independent Businesses, Ontario Network of Injured Workers Groups and the Auditor General etc. have all called for more responsible management and answers to why the board is in such disarray, especially when other provinces seem to handle the task with success.

Background• In 1915 the Worker’s Compensation Board (WCB)

was created to administer the Worker’s Safety Insurance Act of Ontario (WSIA). It became known as the Worker’s Safety Insurance Board (WSIB) in 1998 following a revision to the WSIA.

• The WSIB is funded entirely by the premiums paid by the employers of Ontario and receives no government funding.

• There are currently 237,300 registered employer accounts, classified in 154 rate groups covering approximately 4.5 million (approx.70% of) workers in Ontario.

The WSIB The WSIB Worker’s Safety Insurance Board is a no-fault workplace insurance for employers and their workers.

Provides:• Disability benefits & survivor benefits• Monitoring of the quality of health care • Assists in early, safe return to work for workers injured on

the job or who contract an occupational disease.

• Employers - are provided no-fault collective liability insurance and access to industry-specific health and safety information

• Workers - are provided loss of earnings benefits and health care coverage

Continued…….• Most businesses in Ontario that employ workers

(including family members and sub-contractors) must register with the WSIB within 10 days of hiring their first full or part-time worker. It's the law.

• Even if your company is in one of these categories, you can still choose to insure your workers through the WSIB.

• Private Insurance - for all firms and sub-contractors working in industries that have mandatory coverage under the Workplace Safety and Insurance Act, private insurance coverage is not a substitute.

Determining the premiums• Every year the WSIB sets one premium rate for

each rate group know as the “standard rate.” • WSIB premium rates for employer rate groups are

made up of three key components:

1. Costs of new injuries and illnesses2. Administrative costs, including legislated

obligations (Occupational Health and Safety Act, etc.)

3. Unfunded liability amortization charge

43%

40%

11%

6%

Explanation of the 2011 premium rate components

New Claims Past Claims Overhead Legislative Obligations

Maximum Insurable Earnings Ceiling• a worker’s average earnings for workplace

insurance purposes cannot exceed 175% of the Ontario average industrial wage for the year.

• the WSIB to calculate this yearly “Maximum Insurable Earnings Ceiling” based on the most recent Ontario average industrial wage on July 1 of the preceding year.

• the WSIB uses a standard formula to calculate calculate the Maximum Insurable Earnings Ceiling

$([average weekly earnings aggregate] x 365)/7 x 1.75

History of Change ….

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

2

4

6

8

10

12

14

2.59 2.42 2.29 2.13 2.13 2.19 2.19 2.19 2.26 2.26 2.26 2.3 2.35

7.0986.402

5.675 5.6576.591

7.1356.42 6.51

5.997

8.094

11.469 11.75112.355

UFL vs. Average Premium

Premium in Dollars UFL in Billions

Checks and Balances• On March 4, 2004, the board of the WSIB

approved the charter of the Fair Practices Commission.

• The Commission provides an independent, neutral and confidential service for injured workers, employers and service providers with complaints about the service they receive at the WSIB.

• The charter (revised in 2007) protects the Commission’s independence by stating that the commissioner can be fired only for just cause.

The rest of the story• Lack of intervention by Association of Worker’s

Compensation Boards of Canada (AWCBC) and interference by the Ontario Government

• The WSIB says that the investment crash in 2008 as well as Health Care costs rising at 7% are reasons for huge increase in UFL.

• The ONIWA (Ontario Network of Injured Worker’s Association) believe that the government directed WSIB to keep the premium rates low as a platform to gain popularity with business owners for their own political gain.

Jurisdictional comparison

*The recalculated new claim cost based on latest estimate of projected 2011 assumptions including 6% discount rate not published in the Association of Worker’s Compensation Boards of Canada (AWCBC).

Impact on Payroll• Although premium rates fluctuate depending on

classification or rate group, the maximum insurable earning ceiling continually increases

(earnings that premium rates are based upon)

• New claims costs and Experience Rating (ER) will effect premium rates

• Compliance: not paying premiums on time or at all, can incur undue penalties and fines

Impact on Organizations• a company that previously has not paid WSIB

premiums, will have a huge impact with the exposure to the new expense.

• it may make it marginally more difficult to remain competitive in the national labor market.

• companies may choose to enforce stricter guidelines on work place safety awareness, employee incentives and introduce new procedures to keep claims minimized and improve their experience ratings.

Possible Solutions…..WSIB

2011-2013 Plan

• Will rely on the “Independent Funding Review” to determine how best to achieve sufficient funding

• Optimize its premium and investment revenue

• Reduce benefit costs through reduction of incidents with better education – including early return to work

• Increase efficiency in their administration

• Best customer satisfaction ever

Public Opinion

• It’s simple – there are only 3 ways to address the liability

1. Raise premiums2. Reduce benefits3. Increase investment

funds• Need to stick to mandate

and not be influenced by political agendas

• Reduce the number of claims and promote early return to work

Conclusion• It is our belief that the WSIB has a long way to go

to correct the situation they have gotten themselves (and us) into.

• For certain then need to improve the financial position by eliminating the UFL and move toward a fully funded system. This will secure future benefits and ensure employer premiums are lower. A properly managed and funded system means a fair system for all who rely on it.

• It will help maintain Ontario’s reputation as being one of the best places in the world to live, work and succeed in business.

Q & AMarch 1, 2012

Terri Bimm & Rosanne Madio