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Policy decisions finalized at the September and October 1999 WCB Panel of Administrators meetings on changes to the Assessment System
The following is a summary of policy decisions on changes to the Assessment System that were finalized by the WCB Panel of Administrators in September and October 1999. For information about the function and mandate of the Panel, please see Governing Structure.
Changes to the Assessment System
The Panel approved two significant changes to the Board’s assessment system, effective January 1, 2000.
First, the Panel approved a new classification system. Employers and independent operators will now be grouped into classification units and rate groups (subclasses) based on new criteria. This is designed to reduce the cross-subsidization between different industries which occurs under the current classification system. This should result in improved equity for employers and better application of incentive programs aimed at reducing injuries and the cost of injuries. Corresponding changes have been made to sections 36 and 37 of the Workers Compensation Act.
As part of the resolution, the Panel approved provisions for eliminating the current subclass account balances when the Board moves to the new classification system. Deficits will be written-off and surpluses will be credited back to the employers in those subclasses over a period of up to five years.
You may examine the complete resolution.
Second, the Panel approved a new experience rating plan, which applies to all employers and independent operators. Again, the primary goals are to improve equity for employers and create greater financial incentives for reducing claims and claim costs. To promote these goals, the new plan increases the maximum experience rating merit and demerit from 33 1/3% to 50% for discounts (merits) and 100% for surcharges (demerits). This will make employers more individually responsible for their compensation costs. The new plan also introduces other changes, such as a participation factor, which limits how much a firm’s assessment rate can change each year in response to changes in its cost experience, and per claim limits, which limit the impact of high cost claims on experience rating. The Panel’s resolution also requires the Board to develop and implement proposals to address claims avoidance activities and to provide rate modification programs that consider factors other than claims costs.
You may examine the complete resolution.
A related Panel resolution entitles employers who have not had claims in 1996, 1997 and 1998 to receive the greater of the discount under the new experience rating plan or the existing experience rating plan until such time as a wage loss claim occurs or the discount under the new plan is equal to or better than the discount under the old plan, whichever comes first. When a wage loss claim occurs, the experience rating adjustment will be calculated under the new plan, commencing when the injury falls within the experience rating window.
You may examine the complete resolution.
The Panel also approved a transition plan for the new assessment system. A number of employers will see significant changes in their assessment rates when the new assessment and experience rating systems are implemented January 1, 2000, and the transition plan provides that any rate increases greater than 40% will be phased in over several years.
You may examine the complete resolution.
In determining assessment rates every year, the Board must collect sufficient funds to establish capitalized reserves sufficient to meet all future payments of compensation on injuries occurring in the current year. The Board can use various actuarial methods to estimate the amount of these reserves. One of these methods is the establishment of "average actuarial abstracts", which might appear to establish reserves on a per claim basis. The Panel passed a resolution which says none of the information produced for the purpose of calculating the reserves, including any figures calculated as average actuarial abstracts, will be considered relevant to or used in any way in the adjudication of individual claims.
You may examine the complete resolution.
As of January 1, 2000, the Board will have new classification and experience rating systems which will affect all assessment rates, except for deposit classes. The Finance Division is now able to calculate the new base assessment rates for the year 2000, but it is not able to calculate the experience rated adjustments until mid-year 2000. The Panel of Administrators passed a resolution to allow the Board to set provisional assessment rates for employers for the first and second quarters of 2000 and advise them of those rates in the fall of 1999, and then calculate the final net (experience-rated) assessment rates for 2000 in mid-2000 and advise employers of those rates at that time. The total annual remittance for all firms for the year 2000 will be based on their final net assessment rate.
You may examine the complete resolution.
For further information on these issues, please contact Meg Brighton at 604 244-6354 or toll free within B.C. at 1 888 922-2768, local 6354.