OHIO STATE BAR ASSOCIATION 2012 ANNUAL CONVENTION WORKERS COMPENSATION UPDATE MAY 4, 2012

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1 OHIO STATE BAR ASSOCIATION 2012 ANNUAL CONVENTION WORKERS COMPENSATION UPDATE MAY 4, 2012 KEVIN R. ABRAMS CHIEF OF EMPLOYER SERVICES OHIO BUREAU OF WORKERS COMPENSATION

2 I. BWC UPDATE AND ACCOMPLISHMENTS OVER THE LAST YEAR Understands its efficient operation is key to supporting Governor John Kasich s plan for economic growth. Saved Ohio s private and public employers more than $167 million in premiums and administrative costs by reducing base rates and agency budget. Created and expanded programs to help employers increase safety and save money: Helped new business through Grow Ohio, a new program that offers ways to cut rates up to 50 percent for two years. Established a one time forgiveness program that waives penalties the first time an employer s coverage lapses. Created a new wellness grant program that encourages employers to focus on the health and well being of employees. Promoted workplace safety by expanding the safety council rebate program, which rewards employers for reducing workplace accidents. Created Destination: Excellence, a new ratings/discount plan that rewards employers for focusing on workplace safety and embracing transitional work plans and vocational rehabilitation to get the injured healthy and back to work sooner. Components include Lapse Free, Claim Free, Go Green, Transitional Work, Voc Rehab, Industry Specific Safety. March 2012 Ohio Safety Congress & Expo; great event with educational sessions (many offer CLE credit) and dynamic informative speakers. April 2012 Administrator Buehrer conducted statewide meetings with business owners and CEOs which provided an opportunity to discuss frustrations and challenges they see with the current system and give feedback in areas where opportunities might exist. II. CHALLENGES AHEAD: Over the last four years, our return to work rate has fallen from 75% to below 69%. Ohio claims are active longer than surrounding states; eight years from the date of injury, BWC still has nearly 49% of total claim costs left to pay out, compared to the nationwide average of 17%. Reform must focus on return to work! BWC will be working with: BWC stakeholders to improve return to work performance. providers to change their mindset from telling us what injured workers cannot do to telling us what they can do. pharmacies to ensure injured workers issues are not compounded by overmedication. MCOs to reward them on getting the injured worker healthy and back to work sooner. employers to establish safer workplaces and to find ways to get injured workers back on the job through vocational rehab and transitional work plans.

3 III. NEW FACES IN EMPLOYER SERVICES DIVISION Ron Suttles, Director, Business Analysis and Employer Programs Michael Sendelbach, Supervisor, Employer Programs Paul Flowers, Director, Self Insured David Sievert, Auditing Supervisor John Jester, Underwriting Supervisor IV. EMPLOYER SERVICES UPDATE SELF INSURED PEOS: SECURITY REQUIREMENTS & ASSESSMENT GUIDELINES General Guidelines: Self Insuring status for a PEO requires placement with BWC of 100% security or such higher amount as required by BWC, for claims liability as additional security, evaluated quarterly. A PEO that has been granted self insuring status is required to provide BWC with an actuarial study from an independent certified actuary every two years in order to validate claims reserves. A PEO that has been granted self insuring status is required to provide BWC with GAAP audited financial statements on an annual basis, in support of a renewal application. Partial leases are not permitted. Unlike provisions for state fund PEOs, the financial disclosure and security requirements of ORC and the rules promulgated thereunder do not contemplate partial self insurance for an Ohio employer. Therefore, an SI PEO must agree to accept all of the client employer s exposure. Strict compliance with reporting requirements for enrollment and termination of client employers is required. A retroactive termination of a client employer will not result in a transfer of liability from the self insuring PEO to the state insurance fund. Manipulation of claims or policies to avoid any of the obligations imposed on selfinsuring employers will provide grounds for nonrenewal of the PEO s self insuring policy. Material changes in the administration of the employer s self insuring program or the number of employees included in such program may result in the reevaluation of self insuring status, the contribution to the SIEGF, and the need for additional security. Assessments: New Guaranty Fund Assessment: Applied when PEO is initially granted self insuring status, as a policy holder or as a subsidiary to an existing self insuring policy holder, or when a subsidiary is added to a self insuring PEO policy Calculated by taking a snapshot of base rate premium as reported on payroll report for the last full year of participation in the state insurance fund times 6%

4 Premium based on payroll of PEO employees, and the aggregate premium of client employers at the time snapshot is taken Billed for three year period, subject to a $5000 minimum each year General SIEGF Assessment: Based on paid compensation Total amount assessed sufficient to maintain a minimum balance equal to one and a quarter times prior year s payments from the fund. Administrative Assessments Based On Paid Compensation: Safety and Hygiene Fund Administrative Cost Fund, BWC and IC Surplus Fund Paid Compensation Defined: Amounts paid in self insured claims; includes nearly all forms of compensation unless offset by reimbursements to self insuring employer. Includes, for the first five years of self insurance, compensation paid in the previous year for state fund claims attributable to employer prior to becoming self insured. Includes amounts paid by the State Insurance Fund in state fund claims of the PEO and its client employers, including any client employers added during the five year period; possible exception when there is a material change in the administration or number of employees in the self insuring program. DWRF reimbursements: Self Insuring PEO must reimburse BWC for DWRF benefits paid in its own state fund and self insured claims, and for DWRF benefits paid in the client employer state fund claims. DWRF liability follows the state fund claim: if client employer moves to another Self Insuring PEO, that Self Insuring PEO will become responsible for reimbursement of DWRF paid in the state fund claims of the client employer. If the client employer returns to the State Insurance Fund, the Self Insuring PEO is no longer responsible for the DWRF liability in the state fund claims of its former client.

5 BWC S NEW AUDIT PLAN FOR SELF INSURING EMPLOYERS Current audit process comprised almost entirely of on site visits by BWC auditors to the employer location or TPA that has been approved to house claim files. Objectives of the new audit process allow for greater efficiency, effectiveness and service; more streamlined, easier to understand. Minimize bureaucracy; less interference with employer s administration of workers compensation claims. Modifying audits from a gotcha mentality to more of a consultative approach Reaching the maximum number of employers each year with limited staff by bringing audit functions in house and utilizing electronic files via TPAs Tiered auditing: Levels 1, 2 and 3 Level 1: currently implemented behind the scenes. Reviewing reserve reporting, actuarial studies, SI 40 paid compensation trends, complaint history, program administration Level 2 & Level 3: Under construction! Self Insured Department working with members of OSIA, OMA and other external stakeholders; researching audit processes in other states and other insurance plans. Both levels will focus on more specific claim administration practices and SI 40 reporting accuracy NON COMPLYING EMPLOYERS BEWARE! Gray Container: BWC obtained an injunction to shut down a business for operating without workers' compensation coverage apparently the first time BWC has taken such an action. Fairness to the company's employees and to the 250,000 other Ohio businesses who have to pick up the tab when a worker for an uninsured company is injured. Gray Container ignored repeated efforts by BWC to find a workable solution, even as multiple claims were filed by its workers. PEO UPDATE Compliance with OAC Late Payment Warning Letters for failure to report payroll and make estimated premium payments. Payments due by 5 th of the month or risk forfeiture of the advance payment option; requiring security in the form of a bond or letter of credit; fpotential revocation of PEO registration.

6 FIVE YEAR RULE REVIEW CHAPTER CODE : GENERAL PROCEDURES FOR STATE INSURANCE FUND; SELF INSURING EMPLOYERS Paragraph (A)(2) of the rule , adds new, distinct standards for BWC to waive financial requirements for public employers seeking self insurance. The rule currently contains waiver language for private employers. Paragraph (H) of the rule contains a slight change relating to parent corporations and a contract of guaranty. The change includes 50% ownership; previously the rule required more than 50% ownership. Amendments to Paragraph (N) of the rule clarify that a self insured public employer is responsible to self insure volunteer and probation claims, if the employer elects to have such employees. The amendments to rules and are similar. The amendments clarify the requirement that the bureau shall mail a notice of hearing to the employer and its representatives by regular mail,. The amendments remove the redundant language, by regular mail. The amendments to rule relate to assessments for the self insuring employers' guaranty fund. Paragraph (C)(2) is amended to indicate that BWC may require of a high risk employer appropriate security instead of the six per cent assessment.