The Evolving World of Workers’ Compensation

May 19, 2015Ken Haffey, Skoda Minotti Mark Clendenin, Bureau of

Workers’ Compensation

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AGENDA• About BWC

• BWC Board of Directors

• BWC – What We’ve Accomplished

• BWC Updates and Overview of Prospective Billing

• Prospective Billing for Private Employers

• Destination Excellence

• Other States’ Coverage Project Update

• Q&A

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BWC – SIZE• 1,800 employees

• 250, 000 policy handlers

• Collect $2 billion in premiums

• Pay about $2 billion claims per year

• $25 billion in investable assets (depending on the day)

• 97,000 new claims per year

• Over one million active claims

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BWC – SIZE• If BWC was a private single-line carrier,

it would be the fifth or sixth largest workers’ comp carrier in the United States

• If BWC was a private company, it would be a member of the New York Stock Exchange

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BOARD COMPOSITION• Governor appoints 11 members; Senate confirms these

members. By law:

Two investment experts

One certified public accountant

One actuary

Three business representatives

Two union representatives

One injured worker representative and one representing the public

• Staggered three-year terms

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BOARD OF DIRECTORS• Current structure established in 2007• Has a fiduciary responsibility to the State Insurance Fund• Sets investment policy, premium and assessment rates, fee

schedules and overall operating policies• Five committees:

Committees required by law– Actuarial

– Audit

– Investment

Additional committees– Governance

– Medical Services & Safety

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BOARD OF DIRECTORS• Committees meet two days

every month

Consecutively on the first day

Full board meets on the second day

• All directors attend all committee meetings

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WHAT WE’VE ACCOMPLISHEDEmployer / Actuarial / Financial – Since 2011

• PA employer rates have declined 21.4 percent

• PEC rates are at lowest level in 30 years

• The Investment Division has generated $2 billion in rebates

• BWC’s budget is down 15 percent

• We’ve improved our image toward becoming a partner, rather than a barrier to economic growth

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WHAT WE’VE ACCOMPLISHEDClaims / Safety /Medical / Pharmacy – Since 2011

• Claims have declined below 100,000

• BWC has triple funding for safety and wellness grants

• Employer safety and risk program participation had increased by 20 percent

• Narcotics usage has declined by 27 percent

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BWC Updates and Overview of Prospective Billing

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Regional Connection

Regional Business Development ManagerThe Bureau of Workers’ CompensationNortheast Ohio

Mark Clendenin

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A BWC Ohio Partnership

• While making significant progress, there’s still more work to be done.

• BWC is an active partner in helping transform Ohio for growth.

• Our mandate from the Governor has been straight-forward: Improve Ohio’s workers’ compensation system so that it is no longer a barrier to economic growth.

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Stakeholders Involvement

• Through discussion and partnerships we have:

Made progress helping injured workers return to work with proper care

Streamlined internal business processesKept rates stable

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Private Employer Rate Cuts

• BWC has approved rate cuts in three of the past four years.

• Another rate cut of 10.8% will take effect July 1, 2015.

• At that time, rates will be down 21.4% from just five years ago.

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Ohio’s Workers’ Compensation Rates

Beginning July 2015, private

employer RATES WILL BE 21.4%

LOWER than the rates from

January 2011.

NATIONAL MEDIAN1

OHIO WORKERS’ COMP COSTS

$1.85

$1.74

1 2014 Oregon Premium Rate Ranking Study (per $100 of payroll)

Private employer rate reductions (2011 – 2015)

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Recent Rebates to Employers

• In 2013 and 2014, BWC returned $2 billion in rebates to Ohio employers.

• BWC to provide $1.2 billion transition credit to Ohio employers to ease the transition to a prospective billing system.

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Increased Commitment to Safety

• Last year, BWC awarded $15 million in safety grants to 535 employers.

• BWC approved another $15 million for this year.

• $15 million will be available to employers in fiscal years 2016 and 2017.

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Increased Commitment to Safety

• Expansion of Safety Council Program to include health and wellness

• Advanced workplace safety and health research-to-practice program

• Partnership with State Fire Marshall to fund additional training for firefighters

• Development of safety curricula and funding for skilled labor training program.

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Safety Intervention Grants• Purpose

Information gathering and sharing

• Who Is EligibleAny Ohio state-fund or public employer

• RequirementsPay into the Ohio State Insurance FundMaintain Active CoverageBe current on all monies owed BWCDemonstrate the need for safety intervention

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2003(18) 2004(95) 2005(108) 2006(33) 2007(96) 2008(73) 2009(45)0

100

200

300

400

500

600

124

519

447

118

497

184

9258

225195

71

184

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Pre Intervention Post Intervention

Num

ber o

f Cla

ims

Program Results

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Safety Grants

• Grants to assist employers in purchasing equipment that will substantially reduce or eliminate injuries

• 3-to-1 matching funds (up to $40,000)

• Last year, BWC awarded $15 million in grants to 535 employers

• Have you applied for your safety grant? If not … what are you waiting for?

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Prospective Billing for Private Employers

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Why Transition to Prospective Billing?• Industry standard

• More flexible payment options

• Decrease in base rates by 2% for private employers

• Increased ability for us to detect non-compliance and fraud

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Private Employer (PA) Transition Overview

• Implement PA prospective payment effective July 1, 2015

• Will move to annual policy period

• To avoid employers needing to make a double payment, BWC will provide an eight-month transition credit. This credit covers the August 2015 payroll report (for January-June) and

the first two months of the 2015 policy year.

• With the eight-month transition credit, employers will make their first prospective payment at the time they normally make their retrospective payment, by Aug. 31.

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PA Ending Retrospective Billing (2014-2015)

• BWC will apply the transition credit to cover the Jan. 1, 2015 – June 30, 2015, premium due, when the employer files its payroll report in August 2015. Actual payroll is critical data in our rate calculations.

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Implementing PA Prospective Billing

• BWC will always use the most recently reported policy year to estimate an individual employer’s premium obligation.For example, BWC will use the July 1, 2013 - June 30,

2014, payroll for policy year 2015.

• In May of each year:Employers will receive a notice of estimated annual

premium along with their annual certificate of coverage.

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Notice of Estimated Annual Premium

Sample: Notice of Estimated Annual Premium

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Implementing PA Prospective Billing

• In the first year, every employer except minimum payers will be on a bi-monthly plan, with the option of selecting a different installment plan by July 15, 2015.The first installment (covering July and August) will be

paid with transition credit.BWC recommends staying with the bi-monthly default,

at least in the first year.

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Installment Options

Annual (1);Semi-annual (2);Quarterly (4);Bi-monthly (6);Monthly (12).

• Minimum payers will not receive installment options.

• Minimum premium increasing to $120 due by June 30 each year.

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Implementing PA Prospective Billing (First Year Only)

• Employers will receive an invoice for the second installment in early August.

• This invoice will be due by Aug. 31.

• Premium security deposits (PSD) will post as credits to the account in this time frame.

• BWC will mail invoices 30 days prior to the due date of each installment.

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Payroll True-up Report• Prospective requires an annual payroll report true-

up. BWC will send a reminder in July of each year.

• The employer must report actual payroll for the previous policy year.Online or over the phone onlyIf additional premium is calculated, it is also due by

Aug. 15.If credit calculated, it will be released in normal

process.Employers must pay online to be eligible for the Go-

green discount.

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Payroll True-up Report

• Actual payroll information is critical for rate setting. For that reason, an outstanding payroll true-up report will result in immediate disqualification from rating plans and programs for that current policy year.

• Also, employers must complete* all true-ups to be eligible for programs going forward.*Complete = reporting and paying (if necessary).

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Rating Plan and Program Deadline

• Group-experience rating – Monday prior to Thanksgiving

• Group retro, One Claim Program, Deductible, Individual retro – Last business day in January

• Destination: Excellence programs – Last business day in May

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Destination: EXCELLENCEIntroduction and overview

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Overview

• Destination: ExcellenceIntroductionProgram listIndividual program details

‒ Program description‒ Program benefits (not only about the financial incentives)‒ Enrolling and getting the most out of the programs (strategy)

Compatibility, compliance and enrollment deadlines

• Goal – Provide enough information to help your company decide which individual programs make the most sense to enroll into.

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Overview• What is Destination: Excellence?

Bundling of risk- and claims-management programs to attack cost drivers of workers’ compensation

‒ Programs bundle BWC services and strategies Financial incentives to use BWC services, and to implement

sound safety and claims-management strategies. If implemented properly, reduction in premiums should far

outweigh any program rebates earned.

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Introduction• Why BWC created Destination: Excellence

To reduce costs, so that we can lower premiums rates, to make Ohio more competitive for jobs‒ Safety programs to prevent accidents‒ Return-to-work programs to help injured workers transition

back to work‒ Savings programs to reduce BWC administrative costs

Lower costs lower rates = Destination: Excellence

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Destination: Excellence - Eligibility

• Current on all undisputed premiums

• Active status as of application deadline

• No cumulative lapses greater than 40 days in the last 12 months

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Destination: Excellence Program

• Savings options Go-greenLapse-free

• Safety optionsIndustry-Specific Safety ProgramSafety councilsDrug-Free Safety Program

• Return-to-work optionsTransitional work bonus/grantVocational rehabilitation

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• We will mail notice of estimated annual premium in May.• Policy year begins July 1, with us paying first two months.• Employer will receive first invoice at the beginning of August installment due Aug. 31.• Payroll report due/no money due by Aug. 31.

PA Timeline – First Prospective Year Jan. 1, 2015 to Jan. 31, 2016

May 29, 2015Destination: Excellence enrollment

May 31, 2015Notice of estimated

annual premium for policy year

2015 mailed

Nov. 23, 2015Group

enrollment for July 1,

2016 to June 30, 2017

July 1,2015

Transition credit

Aug. 1, 2015Invoice mailed

for 2nd installment

June 1, 2015BWC pays 1st

installment; no invoice

Aug. 31, 2015 Installment due

and payroll report due for

previous six months (no $ due for payroll report)

Sept. 30, 2015EM Snapshot

For July 1, 2016

July 15, 2015LSS Filing Deadline To

Impact EM for July 1, 2016

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July 1, 2016

• Invoice mailed June 1 – first installment due June 30• Payroll true-up report notice sent July 1; due Aug. 15

Private Employer Policy Year – May 1, 2016 and Beyond

July 1, 2016

Payroll true-up report notice sent

Aug. 15, 2016

Payroll true-up report

due

June 1, 2016

Invoice mailed for

July 1, 2016 to June 30,

2017 period

May 1, 2016Notice of

estimated annual

premium sent

May 31, 2016Destination: Excellence enrollment

Jan. 29, 2016 Group retro, One

Claim Program, Individual retro, and Deductible

enrollment

June 30, 2016 - 1st

installment due

MCO open enrollment

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Lapsing Coverage

• BWC will lapse any employer who does not pay their installment on time.

• BWC will not lapse an employer who does not true-up.BWC will estimate the true-up by adding an additional

10% to the premium due and bill the employer.If the employer still does not report their true-up, then

BWC will certify it to the Ohio Attorney General’s office for collections.

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Web Resources

For more information, visit www.bwc.ohio.gov

• Overview document (with key dates)

• Frequently asked questions document

• Webinars

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• Prospective Billing mailboxbwcprospectivebilling@ohiobwc.com

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What you Learned

Q: What was the final retro premium due date?

A: Private: February 2015

Q: Prospective Premium Implementation Date?

A: July 1st 2015-Private

Q: What is the initial payment plan set to?

A: Private: Bi-monthly

Q: Will my policy lapse if I don’t complete the True-Up?

A: No, but you will be removed from all programs

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In Fiscal Year 2013, approximately 17,000 claimants missed more than seven days of work.

Of these 17,000 lost-time claims, nearly 50 percent missed more than 45 days of work and approximately 32 percent missed more than 100 days.

The average cost per lost-time claim was 30-40 times greater than the average cost of a medical-only claim.

Nearly one in five lost-time claimants was physically dependent on opiates.

Total lost productivity was nearly 2 million days.

The Current State of BWC’s Healthcare Delivery System

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Wellness Grants

Awards employers up to $15,000 over four years• $300 an employee

$100 the first year$ 75 the second year$ 75 the third year$ 50 the fourth year

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2000

Obesity trends among U.S. Adults

(*BMI 30, or about 30 lbs. overweight for 5’4” person)

2010

1990

No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30%

Source: CDC

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1990

Source: CDC

2004 2008

Obesity

Obesity trends among Ohio Adults

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Source: CDC

2004 2008

Diabetes

Diabetes trends among Ohio Adults

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WC cost: Obesity & aging effects

Weight Category BMI Claims*Lost

Days* MedicalCost ($)*

Indemnity Cost ($)*

Underweight <18.5 5.5 41.9 $7,109 $3,924

Rec. Weight 18.5 – 24.9 5.8 14.2 $7,503 $5,396Overweight 25 – 29.9 7.1 60.2 $13,338 $13,569

Obese (Class I) 30 – 34.9 8.8 75.2 $19,661 $23,633Obese (Class II) 35 – 39.9 10.8 117.8 $23,373 $34,293

Obese (Class III) ≥40 11.7 186.6 $51,091 $59,178

Source: Ostbye et. al.

Obesity and Workers’

Compensation. Arch Intern

Med. 2007; 167(8).

Age Group (yrs)

Claims*Lost

Days* MedicalCost ($)*

Indemnity Cost ($)*

15-34 7.4 35.3 $9,810 $7,820

35-54 7.3 53.7 $15,578 $17,517>55 7.0 100.5 $20,443 $23,991

*Cum. per 100 FTEs over the 7-yr study period

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Other States’ CoverageProject Update

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Ohio’s Extraterritorial Coverage• BWC will generally cover claims of Ohio

employees temporarily working out of state as long as the claim is filed in Ohio.

• Ohio’s Extraterritorial Coverage is not intended to cover employees who are regularly performing work outside the state.

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Jurisdictional Risk to Employers• BWC cannot respond to claims filed in other

states.

• Some states require coverage (other than BWC’s coverage) for any work in the state, no matter how brief.

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House Bill 493, 130th General Assembly

• This bill grants BWC the authority to contract with an insurer licensed in other states to provide coverage to eligible Ohio employers for out-of-state exposures.

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Exposure Types

• Limited Other-States’ Coverage — For Ohio employers who have employees temporarily working outside the state

• Other-States’ Coverage — For Ohio employers who have regular or full-time employees working outside the state

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How would it work?

• Employer would apply directly to BWC

• BWC would determine eligibilityEmployer in good standingEM under 280% payroll in Ohio

• Vendor will issue a policy to cover out-of-state exposures

• Vendor will respond to any claims filed out of state

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RFP Process

• Currently in drafting process

• RFP issued — April 28, 2015

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QUESTIONS?Ken HaffeyCPA, CVA, CGMAPartnerSkoda Minotti

440-449-6800khaffey@skodaminotti.com

Mark ClendeninNE Regional Business Development ManagerBureau of Workers’ Compensation

330-312-4713Mark.Clendenin@ohiobwc.com