WSR 10-16-132

PROPOSED RULES

DEPARTMENT OF

LABOR AND INDUSTRIES

[ Filed August 4, 2010, 8:17 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 10-10-106.

Title of Rule and Other Identifying Information: WAC 296-15-225 Self-insurance second injury fund assessment.

Chapter 296-15 WAC governs employers who are permitted to self-insure their workers' compensation obligation pursuant to Title 51 RCW. The department is proposing a change to WAC 296-15-225, which provides the calculations used to determine the individual self-insured employer's second injury fund experience rating and assessment rate.

Hearing Location(s): Department of Labor and Industries, Room S119, 7273 Linderson Way S.W., Tumwater, WA 98501-5414, on September 8, 2010, at 1:30 p.m.

Date of Intended Adoption: October 5, 2010.

Submit Written Comments to: Margaret Conley, P.O. Box 44890, Olympia, WA 98504-4890, e-mail Mcgm235@Lni.wa.gov, fax (360) 902-6977, by September 8, 2010, 5:00 p.m.

Assistance for Persons with Disabilities: Contact Margaret Conley by August 25, 2010, TTY (800) 833-6388 or (360) 902-6723.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: This proposal will modify WAC 296-15-225 Self-insurance second injury fund assessment. The current rule indicates that the department will experience rate fifty percent of the second injury fund assessment charged against individual self-insured employers. The modification will require the department to experience rate one hundred percent of the second injury fund assessment. The change will affect the final assessment rate for each self-insurer, but it will not affect how their experience rating is calculated, or the overall amount collected from all self-insured employers for the second injury fund.

Reasons Supporting Proposal: The Washington Self-Insurers Association supports this change.

Statutory Authority for Adoption: RCW 51.44.040.

Statute Being Implemented: RCW 51.44.040.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: Department of labor and industries, governmental.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: AnnaLisa Gellermann, 243 Israel Road S.E., Tumwater, WA 98501, (360) 902-6907.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Chapter 296-15 WAC applies only to businesses that are certified to self-insure in Washington state. Per RCW 19.85.020(1), a business must have fifty or fewer employees to qualify as a small business under the Regulatory Fairness Act. The department reviewed the number of worker hours reported by each employer currently certified to self-insure, and no self-insured business has fewer than fifty employees. Therefore, no small business economic impact statement is required.

A cost-benefit analysis is not required under RCW 34.05.328. WAC 296-15-225 describes a new method of calculating individual employers' contributions to the preexisting self-insurance second injury fund assessment. Under the new methods an employer's assessment for the second injury fund might increase, decrease or stay the same. The rule does not change the methods of calculating the total amount of the assessment required to sustain the self-insured second injury fund. Therefore, this rule change does not represent an increased cost to the business community as a whole.

August 4, 2010

Judy Schurke

Director

OTS-3282.3


AMENDATORY SECTION(Amending WSR 09-13-018, filed 6/5/09, effective 7/6/09)

WAC 296-15-225   Self-insurance second injury fund assessment.   (1) The second injury fund assessment is based on anticipated second injury fund costs. The fund is used to relieve employers' costs related to pensions that result from the combined effects of the industrial injury and another prior injury, preferred worker claims, and job modifications. ((Fifty percent of all self-insurers' second injury fund assessment rate is based on the self-insurers' estimated expenditures from the second injury fund. The other fifty percent is)) The second injury fund assessment is experience rated based on ((each self-insured employer's)) a self-insurer's actual ((expenditures from the fund)) usage of the second injury fund in the previous three fiscal years. See RCW 51.44.040 for more information about experience rating. The department may estimate claims cost data when actual data from an employer has yet to be provided.

The department determines a self-insurer's second injury fund assessment rate annually for each fiscal year. The ((second injury fund)) assessment is paid by active and inactive self-insurers quarterly at the same time a self-insurer submits its quarterly report.

(2) Self-insurers' relief from and contributions to the second injury fund will be recorded in an account separate from the state fund account. The self-insurers' second injury fund must maintain a two hundred thousand dollar minimum balance.

(3) ((The second injury fund assessment rate is determined annually for each fiscal year.)) The department uses the following process to determine the second injury fund assessment.

Definitions:

"A" = Individual self-insurer's total second injury fund costs (usage) for the previous three fiscal years.

"B" = All self-insurer's total second injury costs (usage) for the previous three fiscal years.

"C" = Individual self-insurer's claim costs for the previous three fiscal years.

"D" = Total self-insured claim costs for the previous three fiscal years.

"E" = Individual self-insurer's experience factor.

"F" = Individual self-insurer's claim costs for the previous fiscal year.

"G" = Total self-insured claim costs for the previous fiscal year.

(a) ((Each self-insurer uses one of two rates for the fifty percent of the second injury fund assessment rate that is based on total estimated expenditures.

(i) The base second injury fund assessment rate is based on fifty percent of)) The department calculates the preliminary base rate necessary to ensure collection of adequate funds. The preliminary base rate is the estimated usage of the second injury costs for the coming fiscal year divided by the total estimated claims costs. ((This)) The preliminary base rate is ((used by any self-insured employer)) assessed to self-insurers certified after the fiscal year used for calculation.

(((ii))) (b) The department calculates the preliminary adjusted ((second injury fund assessment)) rate ((includes the base rate with adjustments)), by adjusting the preliminary base rate for over or under collections from prior periods. This rate is ((used by any self-insured employer)) assessed to any self-insurer certified during or prior to the fiscal year used for calculation((. This rate is also used by)), and to any self-insurer who has voluntarily surrendered its self-insurance certificate.

(((b) The second fifty percent of the second injury fund assessment is experience rated for each self-insurer based on each self-insurer's actual use of the second injury fund in the previous three fiscal years.


Note: The department may estimate claims cost data when actual data from an employer has yet to be provided.

Each self-insurer's experience rating will be calculated using the following steps:

(((i) A self-insurer's total second injury fund expenditures for the previous three fiscal years
Total second injury fund expenditures for all self-insurers in the previous three fiscal years
(ii) A self-insurer's self-insured claims costs for the previous three fiscal years
Total self-insured claims costs for all self-insurers in the previous three fiscal years
(iii) [The result of (b)(i) of this subsection] + [The result of (b)(ii) of this subsection]
2


(iv)

The result of (b)(iii) of this subsection


=

the self-insurer's experience rate

The result of (b)(ii) of this subsection))
(c) Each self-insurer's final combined second injury fund assessment rate is calculated using the following formula:


(((i) 1/2 x [the appropriate base or adjusted rate]
(ii) [The result of (c)(i) of this subsection] x [the self-insurer's experience rate]
(iii) The result of (c)(i) of this subsection] + [The result of subsection (c)(ii) of this subsection] = the final combined second injury fund assessment rate.))

(4))) (c) The department determines an experience factor for each self-insurer.

(i) The department calculates the self-insurer's second injury fund usage share by dividing the self-insurer's total second injury fund costs (usage) for the previous three fiscal years by the total second injury fund costs (usage) for all self-insurers in the previous three fiscal years.


Second injury fund usage share = A/B
(ii) The department calculates the self-insurer's claims cost usage share by dividing a self-insurer's claim costs over the previous three fiscal years by the total claim costs for all self-insurers in the previous three fiscal years.


Claims cost usage share = C/D
(iii) The department calculates the self-insurer's experience factor by adding the second injury fund usage share to the claim cost usage share and dividing by 2, then dividing this total by the claims cost usage share.


Self-insurer's experience factor (E) = [((A/B) + (C/D))/2] / (C/D)
(d) The department calculates the weighted average factor to determine what adjustments to the preliminary base and adjusted rates may be necessary because of prior over or under collection for the fund. The weighted average factor is the sum for all self-insurer's of each self-insurer's experience factor multiplied by their self-insured claim cost for the previous fiscal year, divided by the total self-insured claim costs for the previous fiscal year.


Weighted average factor = [(E x F) sum all self-insurers] / G
(e) The department determines the final base rate and the final adjusted rate for the fiscal year by dividing the preliminary base rate and the preliminary adjusted rate ((a) and (b) of this subsection) by the weighted average factor.

(f) The department determines the second injury fund assessment rate for each self-insurer by multiplying the self-insurer's experience factor by either the final base rate or the final adjusted rate.

(g) The total ((second injury fund)) assessment due each quarter is calculated by multiplying the self-insurer's ((final combined)) second injury fund assessment rate by the self-insurer's total claims costs during that quarter.

[Statutory Authority: RCW 51.14.077, 51.14.150, 51.14.160, 51.44.040, 51.44.070, and 51.44.150. 09-13-018, 296-15-225, filed 6/5/09, effective 7/6/09.]

Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.

Washington State Code Reviser's Office