ohio bwc update paul flowers – director, self-insured department dave sievert – auditing...
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Ohio BWC Update
Paul Flowers – Director, Self-Insured Department
Dave Sievert – Auditing Supervisor
Ohio BWC Update
o General Updates
o Self-Insured Security Requirements
• Assessment Rates
• Current Status of Obtaining Security
• Next Steps for Determining Security Requirements
General Updateso Ohio Administrative Code 4123-19
• The biennial budget for the State of Ohio (H.B. 59) required two changes to the SI rules:
» The Administrator must establish a rule with provisions for waiver of the requirement that SI applicants have 500 employees in Ohio
» The Administrator must establish a rule with provisions for waiver of the requirement that SI applicants operate in Ohio for a minimum of two years
General Updateso The proposed rule requires the Bureau to waive the 500
employee requirement if the applicant meets the following requirements:
• The applicant meets all requirements established in ORC 4123.35 (B)(1)(c-h)
• The employer provides audited financial statements for the current year and four previous years
• The employer meets at least one of the following requirements:
» The employer has a substantial employee count outside of Ohio, as determined by the Bureau, or
» The employer has obtained excess insurance in an amount and with a retention level determined by the bureau to be appropriate.
SIEGF & Mandatory Assessment Rate HistoryYear Guaranty
FundMandatory Surplus
Combined Rate
2008 .0527 .0450 .09772009 .0527 .0935 .14622010 .1154 .0300 .14542011 .0527 .0300 .08272012 .0400 .0690 .10902013 .1138 .0100 .1238
Purpose of Assessmentso Self-insuring employers pay semiannual assessments based on
a percentage of the employers’ indemnity payments in claims.
o Fund various administrative costs and the self-insured employers’ guaranty fund (SIEGF) and the mandatory surplus fund.
o Should a self-insuring employer default on its future claim liabilities, the BWC will first pay these costs with any security on file for that employer.
o Once the additional security is exhausted any remaining costs are paid for out of the SIEGF and/or mandatory surplus funds.
SIEGF and Mandatory Assessment Rateso The combined assessment rate (SIEGF and
Mandatory) for 7/1/2013 has increased approximately 14 percent due to several reasons:
1) Increased costs paid out of the SIEGF
- Two large 2012 defaults (costs already exceeded security on hand and are
being paid out of the SIEGF and mandatory surplus funds)
Default Claim Disbursement HistoryYear Guaranty
FundMandatory Surplus
Total
2007 $17,547,888 $14,614,617 $32,162,559
2008 $16,972,818 $18,036,251 $35,009,069
2009 $19,911,292 $13,009,388 $32,920,680
2010 $16,249,212 $16,929,660 $33,178,872
2011 $13,637,481 $18,888,120 $32,525,601
2012 $21,551,411 $13,829,887 $35,381,298
2013 (proj.) $27,092,427 $10,405,341 $37,208,412
2014 (proj.) $28,083,733 $9,458,446 $37,542,179
SIEGF and Mandatory Assessment Rates
2) Projected increase of costs and claims in future years
- Approx 10% of all defaulted claims are the result of recent defaults
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
5
10
15
20
25
30
11 13
24
13
23
9
8 9
13
16
75
4 4
Number of Defaults By Year
Default History
Year Number of Defaults
Number of Default Claims
Pre - 2000 147 37,001
2000-2009 141 47,494
2010 7 3,861
2011 5 430
2012 4 10,368
2013 to date 2 117
Total 306 99,271
SIEGF and Mandatory Assessment Rates
3) Decline in reported paid compensation over the last several years
- 35% reduction in paid compensation from 2003 to 2012
Paid Compensation HistoryYear # SI-40
ReportedPaid Compensation
2003 1,356 $248,802,346
2004 1,361 $238,207,100
2005 1,343 $228,085,839
2006 1,360 $221,610,279
2007 1,377 $214,982,719
2008 1,395 $209,686,150
2009 1,392 $201,504,727
2010 1,414 $199,711,742
2011 1,477 $191,441,171
2012 1,420 $162,095,217
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
5,000
10,000
15,000
20,000
25,000
30,000
SF Lost Time Claims
SI Lost Time Claims
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
SF Total Benefits Paid
SI Total Benefits Paid
SIEGF and Mandatory Assessment Rates
4) Restatement of 2012 claim disbursements among the SIEGF and Mandatory funds
- Requirement to maintain 125% of prior years costs in the SIEGF
Projected Fund Balances
Fund Estimated Balance (12/31/14)
Estimated Disbursements (2013)
Ratio of Balance to Payments
Mandatory $9,967,000 $10,405,000 96%
SIEGF $40,603,000 $32,428,000 125%
Total $50,570,000 $42,833,000 118%
Security Backgroundo In January 2011, a new methodology was
implemented to determine the risk (claims liability) of a self-insuring employer
o A concept was developed that evaluated a combination of an employer’s financial performance, using Moody’s analytics, and its claims liability, using self-reported case reserves
o Based on this evaluation an employer may be required to supply additional security, at no more than 100% of the reserve total, as a condition of self-insured renewal
Current Security Status
Employer Risk Type
Number of Employers
Reported Reserves
Security Amount
High Risk 122 $165 million $178 million
Moderate Risk 115 $99 million $38 million
Low Risk 716 $430 million $11 million
Low Claims 248 $14 million $17 million
Total 1,201 $708 million $244 million
Next Stepso The continued refinement in determining financial
and claims risk will hopefully place less burden on the SIEGF
o Accurately identifying the full exposure an employer presents to the fund will lead to appropriate security requirements
o In an effort to achieve this objective, the current reserving methodology will be evaluated
Next Steps1) Request independent actuarial studies from
employers identified as having the most potential risk to SIEGFoHigh financial risk (Moody’s rating Ba3 or lower for 2
consecutive years), andoSignificant 2012 reported reserves ($1M or higher)
- Identified 25 active employers in this group (2% of active SI’s)
oActuarial studies will be required as part of the next renewal period
- If renewal March or after study will be required for 2014 (72%)
- If renewal prior to March study will be required for 2015 (28%)
Next Steps2) Upon receipt of studies, BWC actuarial/finance will
analyze to validate:
o Validation of self-reported case reserves- If reserves are validated, future studies will only be requested
every 3-5 years
- If reserves are not validated, studies may be requested more frequently and/or security may be increased
oThe full claims liability (including IBNR)
Next Steps3) Based on the results identified in #2, the BWC and
SI workgroup will collectively identify what appropriate adjustments, if any, should be made to current security model
4) Additional group of employers will be requested to provide actuarial studies in 2014 as a condition of 2015 renewal.
oModerate to high risk (Moody’s rating Ba2 or lower), and
oSignificant claim reserves
Overturned Claims Reimbursement• What is the Claims Surplus Reimbursement
Fund?
• How does Sysco effect the Self-Insured Employer?
• Sysco Application Process
• Covered Compensation
What is the Sysco Claims Reimbursement Fund?
• Sysco Food Service v. Industrial Commission – Employer able to be reimbursed for costs due to overturned decisions
• Kokosing Construction v. Ohio BWC- Clarified that a certified claim later found to be fraudulent is also reimbursable to participating employers
• Extendicare v Ohio BWC- Employer right to be reimbursed if you were in the fund when the compensation was paid
What is the Sysco Claims Reimbursement Fund?
o Ohio Revised Code (O.R.C.) 4123.51 • A participating self-insuring employer must be able to
document a final administrative or judicial determination. The employer must show documentation that compensation and benefit payments should not have been made payable to the injured worker.
How does Sysco effect the Self-Insured Employer?o Assessments
• Calculated by the established rate times the paid compensation. Reimbursements can be credited
o Program Options-
• Surplus Claims Reimbursement is not mandatory
• Opt Ino Continue to be assessed semi-annually
• Opt outo No assessmentso Irrevocable
Application Processo Sysco application submitted
o Copy of any and all relevant Hearing Orders. Including the hearing order authorizing payment and the order that was overturned (final determination).
o Detailed information showing what benefits were paid. Including payment screens, fee bills and all copies cancelled checks.
o Notification if employer took a credit on the SI-40.
o Positive proof of medical benefits (fee bills) and indemnity payments (check copies) which are being requested.
Application Process Cont.o Email to [email protected]
o Fax to 614-621-1246
Mail to
Ohio Bureau of Workers’ Compensation
Attn: Self Insured Claims Reimbursement administrator
30 W. Spring St
Columbus, OH 43215
What is Reimbursable
Covered Expenses TT PTD PP WL Medical
What is Reimbursable
Non-Covered Expenses
Lump Sum
DWRF
Attorney Fees(otherwise specified in the hearing order)
Deposition Fees(otherwise specified in the hearing order)
Investigation Fees
Level 1 Audits
o Scope• All active and Cancelled Self Insuring employers• Aggregate Reserves• Last Three SI 40 paid compensation reports
Level 1 Audits – Information that may be requestedo SI 40 Backup reports- Paid compensation sorted
by Payment types, with individual claim payments documented. Require beginning with 2012 Si 40 submission
o Claim Loss Run
o Information to explain anomalies in PTD, Death, Recoveries and total amount of compensation reported each year
Level 1 audits- Process
o SI Department will send out instructions for SI 40 reporting at the end of the calendar year
o Employer reports paid compensation on line and provides a copy of the backup information to the [email protected] address
o After February 28 deadline, SI department will identify employers who have not submitted SI 40 or backup report and request
Level 1 audits process (cont.)o Aggregate Reserve Review
• SI department will compare aggregate reserve to total paid for a high level determination if reserves are sufficient.o Reserves are evaluated to ensure that claims are not being
suppressed o Properly evaluate required securityo Provides insight into employer’s financial practices and stability.
Level 1 audits process (cont.)o If there is a question about the aggregate
reserve BWC will request a loss run to include paid to dates , total outstanding (reserve) and total incurred
o Employer may provide other information which will help understand the aggregate reserve.• For Example: Several claims recently settled below
reserve• Plant closure
Level 1 audits process (cont.)o SI 40 review
• Review total paid comp, PTD, Death and Recoveries• May look at TT paid• If there is a significant drop in these categories from
the previous two years BWC will request explanation for the drop
• Seeking explanation that may be as simple as location closing, fewer claims reported due to new safety initiative, PTD recipients passed away….
SI Department Updates
o Self Insured section of WWW.BWC.ohio.gov will be redesigned on 11/14/13. Intent is to be more efficient. Please provide feedback to [email protected]
o Renewals must be submitted electronically, no paper renewal applications will be accepted.
General Updateso C-84 policy
• If BWC receives a C-84 and the SI employer does not indicate what action is being taken, the BWC will send a letter requesting clarification
• If the SI employer does not respond it will be referred to the Industrial Commission as a disputed matter
o SI-7 submission
Sensitive Datao Effective November 1, 2013 BWC Will use
Zixmail to secure sensitive data
o BWC will send out instructions and notification for the initial email to a recipient.
o Recipient will need to set up login and password in ZixMail to access the email.
o Once logged into ZixMail, the message can be addressed essentially as it is now.
Ohio BWC Update
Paul Flowers – Director, Self-Insured Department
Dave Sievert – Auditing Supervisor