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Your worker had a WCB claim - What will you pay

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Your worker had a WCB claim - What will you pay

  1. 1. Your worker had a WCB claim. What will you pay? A closer look at Workers’ Compensation pricing in Alberta By Russell Vasseur–Director,Analytics – Matrix ConsultingGroup April 27, 2015 Ever wonder how a WCB claimcould impact your business? Are you looking at a modified role for an injured worker to reduce claims costs, and wondering what the premium savings would be? Or maybe premiums are the least of your concerns. If your ability to bid successfully depends in part on your WCB discount or surcharge, a WCB claim could potentially be the difference between feast and famine, for several years to come. Whatever the scenario, understanding the WCB impact from claims is essential – so you can implement solutions that produce best outcomes for injured workers, and your business as a whole. Unfortunately, there is no general answer that applies to every employer and every situation. Provincial jurisdictions employ different pricing rules, and within each jurisdiction, the rules can change based on employer size, industry, claims history, and other factors. Because my 15 year WCB background is exclusively with the Alberta Workers’ Compensation Board, this discussion is limited to just those situations that impact an Alberta WCB account. As with so many things in Alberta - including WCB pricing - size matters. When we talk about size, we are specifically talking about payroll – or at least that portion that is insured by the WCB (your “insurable earnings”). Larger payroll means larger accountability for claims and their associated costs. There is good rationale for this: Large employers have more injuries, and can afford to do more about them. They retain safety and disability management staff, and can offer workers more options, such as a return to work on modified duties – on a temporary or permanent basis. Small Employers – paying up to$5,000 inpremiums per year, on average When you pay less than $15,000 in premiums over three years, your discounts and surcharges are limited to a max of 5%. The premium impact of claims for Small Employers is minimal. How it works: You start with the industry or “base” rate. After five consecutive years without any “lost time” claims, you earn a 5% discount. On average, small employers have a claimevery 10 years or so. FYI, “no lost time” means the worker did not miss time from work beyond the day of accident. As soon as you have a claimwith lost time, you are back to the base or industry rate, and if you reach five or more lost time claims within five years, you will receive a maximum 5% surcharge.
  2. 2. Large Employers – paying $5,000 or more per year, on average When “industry rated premiums” across three years reaches $15,000, pricing gets complicated. The WCB now looks at your claims costs, and compares this to an amount “expected” for you (for an employer of your payroll size, and operating in your industry). Depending on several factors, your discounts can reach 60%, and surcharges can reach all the way up to 260%. Premium impacts for Large Employers can vary - from minimal, to enormous. How it works: If your costs over a three year period are lower than the expected “industry average” amount, you earn a discount. If higher, you receive a surcharge. Here are several factors that influence the size of your discounts and surcharges: 1) The size of your insurable earnings (larger payrolls influence multiple factors) 2) The industry you are classified in (average costs and pricing rules vary by industry) 3) The # of years you have been active in that industry (1, 2, or 3+ years) 4) The ratio between your claimcosts and the expected “industry average” claimcosts 5) The # of consecutive years you have had very high claims costs (1, 2, 3, 4, or 5+ years) NOTE: As of 2015, costs are not included from claims with no lost time, and where costs remain under $1,000. As soon as lost time occurs and/or costs reach $1,000 on any claim, the costs from that claim will be included in the Large Employer discount/surcharge calculation. There is significant complexity in the above factors, which we won’t discuss here (but for those of you that are interested, I will be breaking them down in more detail in future articles). Fundamentals of Large Employer pricing – Rule of Three’s: A) Your discount or surcharge in any rate year depends on claims costs from three prior years, with a “lag year” between. For example, certain costs paid during 2010, 2011, & 2012 (but only from claims that originated during those three years) will be used to set your discount or surcharge for your 2014 rate. B) Any claimwill impact your rates for three future years, with a “lag year” between. For example, certain costs from a 2010 claim will impact your rates in 2012, 13, & 14. C) Only those claims costs paid within the first three years of an accident are used to set discounts and surcharges. For example, only those costs from a 2010 claimthat are paid during 2010, 11, & 12 are used, while costs paid in 2013 (and later) are not used. While the above is a good framework for large employer pricing, we still can’t answer the main question of this article. While calculating what Large Employers pay due to a claimis indeed complicated, I have good news: I’ve completed an Excel calculator that will do that for you, with accurate results. Connect with me on LinkedIn to get your free copy (see the demo PDF on my profile page), and reach out if you have any questions. The mathematics of WCB pricing is very complex, but using the calculator is simple, so you get the answers you need. Stay tuned for more info on WCB pricing in future. Next: Cost Development & “MPCC”