8 Steps to Employers' Assessment Rates in 2010

What is Experience Rating?

Experience rating means that all employers share in the costs needed to pay the claims of injured workers and the cost of running the WCB system but firms will pay more or less depending on their own claims record (experience) and the claims record (experience) of their industry.  The goal of the Rate Setting Model (RSM) is to assign rates that are based fairly upon claims experience, encourage employers to prevent accidents from happening in the first place and promote efficient and appropriate return to work programs.

The Rate Setting Model at a Glance

An employer’s claims experience will determine where they fit in accordance with the rate range applicable to their industry.  The following 8 Steps detail how to arrive at an employer’s assessment rate in 2010.

How is an Employer's Rate Calculated?

Step 1. Restated Rate
A firm’s prior year rate is the starting point to determine their rate for the following year.  The prior year rate is “restated” when there is a change to the WCB average rate for all employers.  The WCB overall average rate is set annually.  The firm’s restated prior year rate becomes the new starting point to calculate the assessment rate for the following year. 

The average rate for 2010 remains unchanged at $1.60.   Therefore, there is no restatement of rates for 2010. 

Step 2. Establish a "Target Rate" for Each Firm
The target rate is the key factor in determining if a firm is eligible for a rate increase or decrease.  It considers a firm’s own injury costs over a one year period - October 1, 2008 to September 30, 2009.  A firm will move from their 2009 rate toward their 2010 target rate, but subject to certain limits that are described in the subsequent steps.

To illustrate, if an employer’s 2010 target rate is above their 2009 assessment rate, the employer should receive a rate increase to a maximum of their target rate.

Note that employers with no claim costs or minimal costs would have a target rate of zero, or close to zero.  An assessment rate would still apply because of industry costs and the shared WCB costs.

To evaluate an employer’s injury costs, we compare their injury costs to the injury costs of an average firm with a comparable payroll history.   The comparison determines how much of the collective WCB costs should be assigned to each firm.  The result is the firm’s Target Rate.

Target Rate Calculation:

1. Actual Costs include benefits paid between October 1, 2008 and September 30, 2009 on behalf of your workers who were injured between January 1, 2005 and September 30, 2009. T he ongoing costs of claims older than 5 years are not calculated in individual firm experience rating but are part of the collective WCB costs.
   
   
2. Average Costs are the average claim costs for all employers over the same time period – October 1, 2008 and September 30, 2009 (with adjustments for payroll size).  This does not take into account the risk of the industry.  That risk is considered in step 5.
   
   Note:  Removal of limit on insurable earnings has impacted the RSM.  In 2006, new legislation removed the cap on the level of wage loss benefits that could be paid to injured workers.  To measure injury cost records fairly between older and newer claims, the historical claim payments and historical payrolls used to determine the 2010 target rate have been restated for some of the years considered by the model.
   
   
3. WCB Average Rate is arrived at by dividing the overall WCB revenue needs by the total workers’ earnings reported by the general pool of employers that pay into the workers compensation system and multiplying the result by 100.  In 2010, the Average Rate is $1.60.

Step 3. Apply the Basic Change Limit
Once the target rate is set, the rate model then determines how close a firm can move to that target rate.  The Basic Change Limit prevents a firm's rate from increasing or decreasing too quickly toward their target rate.  Consistent claims costs over the years will move an employer more quickly toward their target rate, whereas a random event in one year will have more a limited impact. 

The maximum annual rate change percentage that applies to each employer depends on the number of years in a row their rate has been moving in the same direction.

*First means the first year that a firm changes from a rate increase to a rate decrease or vice versa.


Step 4. Apply the Claim Duration Change Limit
The Claim Duration Change Limit can move an employer an additional 5% toward their target rate – increase or decrease or there may be no change.  The 5% applies when both the firm’s number of time loss injuries (measured by duration) and claims costs support moving closer to the 2010 target rate.  If support is inconsistent, the Claim Duration Change Limit will not apply and the Basic Change Limit remains as determined in step 3.

The claims costs used in this step of the model are the same as used to determine the target rate in Step 2.  For the number of injuries, the rate setting model considers severity measured by duration.  Points are assigned each time a claim reaches a certain stage within the rate setting period, October 1, 2008 to September 30, 2009.

Both the costs and numbers of injuries are measured against the average for all employers and then weighed against the firm’s prior year rate to determine if a further rate increase toward the target rate is warranted.

Step 5. Apply the Category Rate Range
All firms are assigned to an industry based on their business activities. Each industry is assigned to one of nine risk categories based on claim costs experience trends over a period of several years.  Each risk category has a rate range from 40 percent below to 200 percent above the category average rate.

Once an employer’s rate has been moved toward its target rate (Step 4) Step 5 ensures that an employer’s rate stays within the appropriate category rate range. The average rate for each category is a fixed percentage of the overall Average Rate. For 2010, the Average Rate is $1.60. The category details follow:

2010 Average Rate = $1.60

Every year, each industry's injury cost experience is examined. Based on long term history, an industry may be moved from one category to another. If an industry moves to a different category, some individual firms may not be within their category rate range because of maximum increase and decrease rules set annually.


Step 6. Apply the Additional Increase for a Fatal Accident
Employers that have fatalities in their workplaces will be assigned $250,000 per fatality to their injury cost record.  This replaces the actual cost of the fatality.  The $250,000 is used to calculate the firm’s target rate.

An additional 25% from their prior year rate will be added to the annual rate change limits determined in steps 3 and 4. T he upper category rate range will not restrict the rate of an employer which has had a worker that suffered a compensable fatal injury.  However, the rate increase will be restricted by the firm’s target rate.


Step 7. Apply the Balancing Adjustment to All Employers
Before running the 2010 rate setting model, the WCB budgeted to determine how much revenue would be needed for claim costs and to operate the WCB system.  Because of the limits, the model may not generate enough or may generate too much revenue.  To ensure the WCB meets its 2010 revenue requirement, a final balancing adjustment is applied equally to all employers in the general pool.  Note that the balancing adjustment can move an employer’s rate outside of the category rate range.

In 2010, the Balancing Adjustment is +2.89%.


Step 8. Apply the Safety Association Charge for Represented Industries
Independent associations representing certain industries provide safety programs.  As a service, the WCB collects revenue for the associations from the affected employers to support the safety programs.  The amount to fund the safety program is the last item added to the employer’s rates.  The participating industry codes are as follows:

Note: The addition of the safety program charge may also move an employer outside of the category rate range.

The WCB has approved an opportunity for a 5% discount for firms in the construction industry.  To be eligible for the discount, construction firms must receive safety accreditation through the above noted construction Safety Program.  Please contact your Safety Program representative for further information.

For More Information
If you require more detailed information about how these 8 steps apply to your firm, please call the Assessment Services Department at 954-4505, or toll free outside of Winnipeg at 1-800-362-3340.