VIA NOVEMBER 28, 2012 RATES & FORMS COMMITTEE MEETING AGENDA

Transcription

1 RATES & FORMS COMMITTEE BULLETIN Florida Workers Compensation Joint Underwriting Association, Inc. P.O. Box 48957, Sarasota, FL Tel (941) Fax (941) VIA TO: FROM: FWCJUA Rates & Forms Committee Laura S. Torrence, Executive Director DATE: November 20, 2012 RE: NOVEMBER 28, 2012 RATES & FORMS COMMITTEE MEETING AGENDA Enclosed for your review is the agenda for the Rates & Forms Committee teleconference meeting scheduled for 2:00 p.m. (Eastern Time) on November 28, Please contact me should you have any questions regarding the agenda for this meeting. Enclosure c: Board of Governors Tom Maida, General Counsel Jim Watford, Florida Office of Insurance Regulation FWCJUA Interested Parties (Please contact Kathy Coyne at to participate in this teleconference meeting.) BOARD OF GOVERNORS: Charlie Clary, Chair; Dan Dannenhauer, Vice Chair; Tom Koval; Claude Revels; Raquel Rodriguez; Steve Solomon; Brett Stiegel; James Ward; Robin Westcott

2 AGENDA FOR THE MEETING OF THE RATES & FORMS COMMITTEE OF THE FLORIDA WORKERS COMPENSATION JOINT UNDERWRITING ASSOCIATION, INC. TO BE HELD ON NOVEMBER 28, 2012 AT 2:00 P.M. VIA TELECONFERENCE I. CALL TO ORDER & OPENING REMARKS Claude Revels II. ANTI-TRUST PREAMBLE (Attachment A) Wes Strickland III. SUBPLAN D (Attachment B) Laura Torrence IV. OPERATIONS MANUAL FORM REVISION (Attachment C) Laura Torrence V RATE FILING (Attachment D) Laura Torrence VI. GENERAL ANNOUNCEMENTS Claude Revels VII. ADJOURNMENT & CLOSING REMARKS Claude Revels Page 1 of 9

3 NOVEMBER 28, 2012 FWCJUA RATES & FORMS COMMITTEE MEETING AGENDA ATTACHMENT A ANTI-TRUST PREAMBLE We are here to discuss and act on matters relating to the business of the Florida Workers Compensation Joint Underwriting Association (FWCJUA) and not to discuss or pursue the business interests of our individual funds or companies. We should proceed with caution and alertness towards the requirements and prohibitions of federal and state anti-trust laws. We should not engage in discussions either at this meeting or in private conversations of our individual fund s or companies plans or contemplated activities. We should concern ourselves only with the business of the Florida Workers Compensation Joint Underwriting Association as set forth in the agenda for this meeting. Only FWCJUA market matters may be discussed at the meeting and each fund s or company s voluntary market plans cannot be discussed. Page 2 of 9

4 NOVEMBER 28, 2012 FWCJUA RATES & FORMS COMMITTEE MEETING AGENDA ATTACHMENT B SUBPLAN D The Rates & Forms Committee shall consider whether it is reasonable, at this time, to return the excess portion of the State s money pre-paid to eliminate the subplan D actuarial deficit. The 2012 Business Plan included the goal to close any remaining subplan D claims prior to year end such that the FWCJUA could consider finalizing the subplan D funding needs and return any excess funds to the State. Should the Board make the decision to return the excess portion of the State s money pre-paid to eliminate the subplan D actuarial deficit, it must recognize that the FWCJUA will then assume all future development risk within the confines of its own asset base and surplus. Occasionally, there are some old premium adjustments (and related servicing carrier fees and commissions) that result from collection efforts. These amounts should not be material going forward. All subplan D claims are now closed; however, there is some risk that closed claims may re-open as well as some potential for a late reported claim. Heretofore, largely as a result of tax issues no longer of concern, State funds received were only allocated to the subplan D financial deficit on a cash flow basis as such process generated subplan D income. However, the statute provided for deficit funding on an actuarial basis. Each year, Milliman performs a reserve review and determines, generally by accident year, an ultimate incurred loss amount. This amount less actual case losses recorded results in a remaining IBNR reserve. This IBNR is then proportionally allocated to the various rating plans within each accident year based upon incurred claims. Although there are no open claims remaining in subplan D, as of 9/30/12, net IBNR reserves of 681,115 remain allocated to subplan D based upon the 12/31/2011 Milliman reserve review. In addition, based upon this IBNR reserve, a 94,589 required Unallocated Loss Adjustment Expense Reserve remains. Regardless of the fact that all subplan D claims were closed in 2012 and there will be another year of presumably favorable development, it is very likely that the 12/31/2012 actuarial reserve review will continue to show IBNR & ULAE reserves for the accident years in which subplan D had exposure. Attached is pro-forma financial information for subplan D that identifies current financial information, proforma closing adjustments based upon current information and resulting balances after pro-forma adjustments and a presumed return of excess funds to the State. This pro-forma demonstrates the process staff would employ based upon 12/31/2012 financial results to determine the final amount to be returned to the State. Also attached for the Committee s review is the subplan D cash flow activity as of 9/30/2012. The Committee shall determine whether to recommend that the Board authorize staff to return the excess portion of the State s money pre-paid to eliminate the subplan D actuarial deficit based upon final financial information as of 12/31/2012. Page 3 of 9

5 FWCJUA - SubPlan D Proforma Financial Statements 11/20/ :17 Beginning Balances Closing Adjustment Refund State Money Proforma Balances Balance Sheet Assets: Bonds - - Cash 3,737,853 (2,965,386) 772,467 CD's less than 1 year - - CD's greater than 1 year - - Short-term investments - - Cash and invested assets 3,737,853 (2,965,386) 772,467 Premiums receivable 5,535 5,535 Premiums deferred - - Premiums EBUB - - Misc. Receivable - - Reinsurance Recovery - - Federal Income Tax Recoverable - - Deferred Tax Asset - - EDP equipment - - Interest income accrued - - Furniture and fixtures - - Computer software - - Leasehold improvements - - Prepaid expenses - - Security deposits - - Excess Deposits due Reins. - - Total assets 3,743,388 - (2,965,386) 778,002 Liabilities: IBNR reserves 681, ,115 Retroactive Reinsurance - - ULAE reserves 94,589 94,589 Servicing carrier fees payable 2,086 2,086 Commissions payable Subplan D State Funding Balance 3,731,000 10,090 (3,741,090) - Taxes, licenses and fees - - Unearned premiums - - Unearned producer fees - - Reins. premiums payable - - Provision for Reinsurance - - Federal income taxes - - Deposit premiums - - State authorization payable - - Advance Premiums - - Total liabilities 4,509,002 (3,741,090) 778,002 Surplus: Unassigned surplus (deficit) (765,614) (10,090) 775,704 - Assigned/Special surplus Total Surplus: (765,614) 775,704 - Total liabilities and surplus 3,743,388 - (2,965,386) 778,002 Page 4 of 9

6 FWCJUA - SubPlan D - Total Cash Flow Analysis Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Total Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec Cash Inflows Premiums Collected 0 0 2, ,918 Net Collections Activity , ,929 Interest Income 2,019 1,616 1, ,874 Reinsurance Recoveries Miscellaneous Income Dividend Recoveries Travelers Transfer , ,543 Total Cash Inflows 2,471 1,616 3,174 1, , ,663 1, ,264 Cash Outflows Loss and LAE payments 3, ,170 (30,337) 596, ,207 Underwriting expenses ,451 General & Administrative expenses (21) Taxes & Assessments Reinsurance Interest Expense (1) Investments (CP) Investments (LT) Investments (CD) (150,000) (150,000) Funds Transfer ,100,000 (3,503,457) ,543 Total Cash Outflows 3, ,810 (30,201) 4,697,006 (3,652,410) ,076,246 JP Morgan Chase Bank Beginning 4,200,834 4,199,870 4,201,485 4,146,850 4,178,630 (517,568) 3,732,600 3,733,306 3,736,743 3,737,852 3,737,852 3,737,852 4,200,834 Net Activity (964) 1,616 (54,636) 31,781 (4,696,198) 4,250, ,437 1, (462,982) Chase Ending 4,199,870 4,201,485 4,146,850 4,178,630 (517,568) 3,732,600 3,733,306 3,736,743 3,737,852 3,737,852 3,737,852 3,737,852 3,737,852 Deposit Liability 7,233 7,233 7,233 7,233 7,233 7,233 7,233 7,233 7, Available Cash 4,192,637 4,194,252 4,139,617 4,171,397 (524,801) 3,725,367 3,726,073 3,729,510 3,730,619 3,737,852 3,737,852 3,737,852 3,737,852 LT Investments, CP & CD 150, , , , , Total - Cash & Invested Assets 4,342,637 4,344,252 4,289,617 4,321,397 (374,801) 3,725,367 3,726,073 3,729,510 3,730,619 3,737,852 3,737,852 3,737,852 3,737,852 Page 5 of 9

7 NOVEMBER 28, 2012 FWCJUA RATES & FORMS COMMITTEE MEETING AGENDA ATTACHMENT C OPERATIONS MANUAL FORM REVISION The Rates & Forms Committee shall consider a revision to the Employer Affidavit form that simplifies the quarterly reporting requirements of our insured contractors. It is proposed that the Employer Affidavit form be revised to permit an insured with up to three covered entities on a single policy to complete one Affidavit rather than separate Affidavits for each of the covered entities on the policy. Currently, the FWCJUA requires a separate Affidavit be submitted for each of the insured s related entities covered under a single policy, regardless of whether the insured has contractor exposure for each of the covered entities. Given a significant majority of the policies issued by the FWCJUA cover three or less entities, the proposed form revision merely simplifies the paperwork for our insured contractors with up to three covered entities on a single policy. Attached for the Committee s review is a copy of the proposed revision to the Employer Affidavit. The modifications are highlighted in yellow. If adopted, the revised form will be formatted for insertion into the Operations Manual and filed for approval with OIR. The Rates & Forms Committee shall determine whether to recommend that the Board adopt the proposed revision to the Employer Affidavit to be filed for OIR approval as soon as practicable. Page 6 of 9

8 FLORIDA WORKERS COMPENSATION JOINT UNDERWRITING ASSOCIATION, INC. EMPLOYER AFFIDAVIT EMPLOYER S RESPONSIBILITIES Under section , Florida Statutes, you are required to submit payroll information each quarter to verify your Workers Compensation policy premium. In order to keep your coverage in force, you must fully complete this affidavit, sign and return it by the due date specified. In addition, please be advised that by signing this affidavit, you attest that you understand the following aspects of the FWCJUA plan and section , Florida Statutes: 1 You are responsible for reporting the payroll of both employees and uninsured subcontractors. If you fail to provide this information, you may be held liable for claims filed in subsequent quarters by or on behalf of unreported employees, uninsured subcontractors or employees of uninsured subcontractors, unless you can prove that the claimant was hired after filing of the quarterly report. 2 The penalty for acts that result in underpayment of premium is 10 times the amount underpaid (plus any attorney fees incurred by the FWCJUA). Therefore, you should not: a) understate or conceal payroll; b) misrepresent employee duties so as to avoid proper classification for premium calculations, or; c) misrepresent or conceal information pertinent to the computation and application of an experience rating modification factor. 3 Your policy will be charged for subcontractor exposure unless you can furnish us with the following: a) a valid certificate of insurance showing proof of Florida workers compensation insurance for said subcontractor, OR b) a valid certificate of exemption (form DWC-250) for the contracted trade or occupation AND a notarized statement from the subcontractor attesting to not having any employees or subcontractors. NOTE: A sole proprietor or owner-operator with no employees, working as a subcontractor, will cause all the payroll of the Construction Executive Supervisor or Construction Superintendent to be assigned to the highest rated construction classification code applicable to the policy. If a subcontractor has an employee leasing arrangement providing workers compensation insurance, you must furnish a valid certificate of insurance for the leasing company showing proof of Florida workers compensation insurance, as well as an affidavit from the subcontractor attesting that the subcontractor understands that its contract with the leasing company limits its workers compensation coverage to enrolled worksite employees only and does not cover uninsured subcontractors, or casual labor exposures. The subcontractor must further attest that 100% of its workers are covered as enrolled worksite employees with the leasing company and that it does not hire any casual or uninsured labor outside of the employee leasing arrangement. The subcontractor must also attest that in the event the subcontractor does hire workers not covered under the leasing arrangement, the subcontractor will notify you before any non-enrolled workers are permitted onto the worksite. 4 Based on specific criteria outlined in the FWCJUA Manual, you are assigned to one of three tiers; each tier is subject to a specific surcharge applied to the voluntary comparable premium and is subject to FWCJUA minimum premiums. Refer to your policy information page for your tier assignment and surcharge. In addition, if you are assigned to Tier 3 you will be subject to the Assigned Risk Adjustment Program (ARAP), if applicable. The tier surcharge also applies to any premiums that may develop because you employ uninsured subcontractors. 5 If you are assigned to Tier 3, your policy is assessable. This means that if the FWCJUA is unable to pay its obligations, you will be required to contribute on a pro-rata-earned-premium basis the money necessary to meet any assessment levied for a Tier 3 deficit. Legal Business Name Federal ID # ( ) Business Phone Insured Entity #1 Insured Entity #2 Insured Entity #3 (if more than three entities, please complete additional affidavit as needed.) A) Do you have any full or part-time employees? A) Do you have any full or part-time employees? A) Do you have any full or part-time employees? Yes - Attach last quarter's 941 and UCT-6 for all employees Yes - Attach last quarter's 941 and UCT-6 for all employees Yes - Attach last quarter's 941 and UCT-6 for all employees No No No B) Is any part of your work performed by Subcontractors? B) Is any part of your work performed by Subcontractors? B) Is any part of your work performed by Subcontractors? Yes - Complete the following schedule. Provide last quarter's actual Yes - Complete the following schedule. Provide last quarter's actual Yes - Complete the following schedule. Provide last quarter's actual expense for all subcontract labor as well as an estimate for the full 12 expense for all subcontract labor as well as an estimate for the full 12 expense for all subcontract labor as well as an estimate for the full 12 month period covered by this policy month period covered by this policy month period covered by this policy No - Explain how who performs the work is performed: No - Explain who performs the work: No - Explain who performs the work: C) Do you lease employees? C) Do you lease employees? C) Do you lease employees? Yes - Provide PEO's Name: Yes - Provide PEO's Name: Yes - Provide PEO's Name: Annual payroll for leased workers: Annual payroll for leased workers: Annual payroll for leased workers: No No No You are obligated to inform the FWCJUA of whether you currently lease any employees from an employee leasing company or through any employee leasing arrangement. You are responsible for completely and accurately reporting to the FWCJUA the names, social security numbers, relevant job duties and payroll information regarding any leased employees, as well as providing the FWCJUA with a copy of any employee leasing agreement which is in effect at any time while your FWCJUA insurance coverage is in effect. In addition, while your FWCJUA insurance coverage is in effect, you are obligated to notify the FWCJUA within three (3) business days after you lease employees from an employee leasing company, enter into an employee leasing arrangement, cease leasing employees from an employee leasing company or terminate any employee leasing agreement. Regardless of whether an employee leasing company provides workers compensation and employer s liability insurance for the employees you lease, the FWCJUA will include the leased employees payroll in determining your premium. You will be obligated to pay the FWCJUA any additional premium resulting from the inclusion of the leased employees payroll in the determination of your premium. I hereby attest that the information provided in this affidavit is accurate. In addition, I certify that I have read and understand the above statements regarding my responsibility under the Florida Workers Compensation Statue and the FWCJUA rules. Applicant's/Employer's Name (Print) State of County of Date Applicant's/Employer's Signature (must be an owner, member of an LLC, partner or officer) Sworn to (or affirmed) and subscribed before me this day of, 20, by: Personally known OR Produced identification Type of identification produced: Notary (Signature) Notary (Print, typed or stamped commissioned name) FWCJUA-EA-Rev01/1101/13 Page 7 of 9

9 FLORIDA WORKERS COMPENSATION JOINT UNDERWRITING ASSOCIATION, INC. EMPLOYER AFFIDAVIT Legal Business Name Policy Number Quarter Being Reported (Quarter & Year) Insured Entity # from Page 1 Subcontractor's Legal Business Name and Mailing Address Subcontractor's FEIN Type of Work Performed # of Employees Amount You Paid to Subcontractor for Labor - Actual Last Qtr Amount You Paid to Subcontractor for Labor - Full Policy Estimate CHECK THE BOX OF APPLICABLE DOCUMENTS & ATTACH COPIES (See #3 on reverse side) IMPORTANT INFORMATION REGARDING THE USE OF OUT-OF-STATE SUBCONTRACTORS: In accordance with Florida Administrative Code Rule 69L-6.019, every employer who is required to provide workers' compensation coverage for employees engaged in work in Florida shall obtain a Florida policy or endorsement for such employees that utilizes Florida class codes, rates, and manuals that are in compliance with and approved under the provisions of Chapter 440, F.S., and the Florida Insurance Code, pursuant to Sections (1)(g) and (7), F.S. IMPORTANT INFORMATION REGARDING LICENSING: Chapter (2), F.S., states: No person who is not certified or registered shall engage in the business of contracting in this state. If you are a contractor licensed by or under the authority of the Department of Business and Professional Regulation (DBPR), you are required to hire and pay the subcontractors directly. Pulling permits for others, who are not licensed to engage in the business of contracting is prohibited. NOTE: Subcontractors must be paid directly by the qualified business entity that pulls the permits. NOTE: Acceptable subcontractor Affidavit and Letter samples may be found at under EMPLOYER, Sample Forms. Page 8 of 9

10 NOVEMBER 28, 2012 FWCJUA RATES & FORMS COMMITTEE MEETING AGENDA ATTACHMENT D 2013 RATE FILING On November 14, 2012, at the direction of the Board of Governors, FWCJUA revised rates were filed to effectuate an overall average premium level increase of 6.8% effective January 1, 2013, applicable to new and renewal business. Given the FWCJUA utilizes the voluntary market rates, the FWCJUA filed to implement the approved January 1, 2013 voluntary market rate increase of 6.1%. The estimated premium effect of the January 1, 2013 voluntary market rates on the FWCJUA book is an increase of 6.4%. Thus, the additional premium level change after the implementation of the January 1, 2013 voluntary market rate increase is an additional increase of 0.4%. As in prior filings, the constraint was imposed that the Tier 1 surcharge would not be less than 10%. To achieve the overall premium change of 6.8% after this constraint, the Tier 2 and Tier 3 surcharges were recalculated, maintaining the relativity indicated between the two unconstrained surcharges. Accordingly, the FWCJUA adopted the January 1, 2013 voluntary market rates and rating values for Tiers 1, 2 and 3, exclusive of minimum premiums, effective on that date applicable to new and renewal business. Further, the FWCJUA shall apply surcharges for Tier 1 and Tier 2 of 10% and 49%, respectively, to voluntary comparable premium. With regard to Tier 3, the FWCJUA shall apply a surcharge of 76% to be applied to the voluntary comparable premium and the Assigned Risk Adjustment Program (ARAP), if applicable. The minimum premium for each classification code, including the per capita codes, shall be subject to a maximum minimum premium for all three rating tiers of 2,100. The selected maximum minimum premium of 2,100 represents an increase of 200 from January 1, The calculation of the minimum premium multiplier incorporates the January 1, 2012 state average weekly wage, as the January 1, 2013 state average weekly wage was not available when the rate analysis was done. The minimum premium multiplier increases from the current 203 to 209. Further, with the maximum minimum premium for the Tiers being established at 2,100 effective January 1, 2013, the deposit premium threshold will increase from 3,500 to 4,000. Additionally, the revised FWCJUA Operations Manual pages to reflect the aforementioned rates and surcharges for the three rating tiers were filed separately to reflect a change in the FWCJUA s Plan of Operation. No Committee action is required on this item. Page 9 of 9