WSR 12-17-120

PROPOSED RULES

DEPARTMENT OF

LABOR AND INDUSTRIES

[ Filed August 21, 2012, 9:34 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 12-07-070.

Title of Rule and Other Identifying Information: Chapter 296-17B WAC, Retrospective rating for workers' compensation insurance.

Hearing Location(s): Center Place Regional Event Center, 2426 North Discovery Place, Spokane Valley, WA 99216, on September 26, 2012, at 10:00 a.m.; and at the Labor and Industries Building, Room S117, 7273 Linderson Way S.W., Tumwater, WA 98501, on September 28, 2012, at 9:00 a.m.

Date of Intended Adoption: October 15, 2012.

Submit Written Comments to: Tim Smolen, P.O. Box 44180, Olympia, WA 98504-4180, e-mail Tim.Smolen@lni.wa.gov, fax (360) 902-4258, by 5:00 p.m. on September 28, 2012.

Assistance for Persons with Disabilities: Contact office of information and assistance by September 21, 2012, TTY (360) 902-5797.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: This rule making is being proposed to make necessary changes in the retrospective rating rules following passage of EHB 2123 (chapter 37, Laws of 2011), specifically Part 1, creating the Washington stay-at-work program, and Part 3, claim resolution structured settlement agreements; and ESHB 1725 (section 3, chapter 290, Laws of 2011), concerning retrospective rating employers who pay for direct care providers for their injured workers. The department will also make other small housekeeping changes for clarification.

Reasons Supporting Proposal: Legislation passed in the 2011 session has direct impact on the retrospective rating (retro) program. This rule package provides clarity about how that legislation will affect retro participants, and updates and corrects several sections.

Statutory Authority for Adoption: RCW 51.04.020, 51.16.035, 51.16.100, 51.18.005, and 51.18.010(2).

Statute Being Implemented: RCW 51.18.010 and 51.04.020.

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: Diane Doherty, Tumwater, (360) 902-5903; Implementation: Tim Smolen, Tumwater, (360) 902-4835; and Enforcement: Beth Dupre, Tumwater, (360) 902-4209.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The agency is exempt from conducting a small business economic impact statement since the proposed rules set or adjust fees or rates to legislative standards described in RCW 34.05.310 (4)(f) and do not change current coverage options for employers and workers.

A cost-benefit analysis is not required under RCW 34.05.328. Since the proposed rules do not change any existing coverage options for employers or workers and adjust fees pursuant to legislative standards, they are exempted by RCW 34.05.328 (5)(b)(vi) from the requirement for a cost-benefit analysis.

August 21, 2012

Judy Schurke

Director

OTS-4929.1


AMENDATORY SECTION(Amending WSR 10-21-086, filed 10/19/10, effective 11/19/10)

WAC 296-17B-010   Introduction and overview.   Retrospective rating (retro) is a voluntary financial incentive program offered by the department of labor and industries to encourage improvements in workplace safety.

Chapter 296-17 WAC defines the standard method for determining the price of workers' compensation insurance for employers insured with the state fund. All employers insured with the state fund must pay the accident fund, medical aid fund, and supplemental pension fund premiums established in that chapter.

Employers who participate in retrospective rating bind themselves to the rules of the retrospective rating program found in this chapter. Under these sections, a participant's ultimate cost of workers' compensation insurance will be different than under chapter 296-17 WAC.

Employers participate in retrospective rating because it creates an opportunity to earn refunds of premiums they are required to pay under chapter 296-17 WAC. However, participation involves risk: Participants not successful in controlling losses can be assessed additional premiums.

Employers control losses by preventing workplace illnesses and injuries, and helping injured workers return to work.

Employers that participate in retro can enroll either individually or as members of a sponsored group. Enrollment is for a one-year coverage period, but it is possible for employers to join a sponsored group after the group's one-year coverage period has begun, at the beginning of a calendar quarter.

After a coverage period is over, the department evaluates premiums and claims losses and determines retro premiums according to these rules. If a retro group's or an individually enrolled employer's retro premiums are less than the standard premiums paid initially, that firm or group will receive a refund. If the retro premiums are more than the standard premiums initially paid, the firm or group will be assessed the additional amount. Calculation of retrospective premiums is defined further in this chapter. The department goes through this annual adjustment process three times for each coverage period.

The department will repeat the studies that resulted in the hazard group assignments and changes to retrospective plan tables that are shown in WAC 296-17-901, 296-17B-300, 296-17B-560, 296-17B-830, and 296-17B-910 through 296-17B-990. The repeated studies will determine whether the results are consistent with the expectation of improved fairness in the distribution of the retrospective rating refunds among participants. These repeated studies will be done by ((March 1, 2012)) April 1, 2014.

The department will evaluate and if necessary update the tables beginning at WAC 296-17B-910 every five years.

[Statutory Authority: RCW 51.16.035, 51.16.100, 51.04.020(1), and 51.18.010. 10-21-086, 296-17B-010, filed 10/19/10, effective 11/19/10.]


AMENDATORY SECTION(Amending WSR 10-21-086, filed 10/19/10, effective 11/19/10)

WAC 296-17B-500   Determining your standard premiums.   Employers are required to pay accident fund, medical aid((,)) stay-at-work and supplemental pension fund premiums according to chapter 296-17 WAC. ((Partial payments of premiums are applied first to the liability to the supplemental pension fund, then to the medical aid fund, and finally then to the accident fund.)) Standard premiums are the premiums an employer pays to the accident and medical aid funds under chapter 296-17 WAC for employment during the coverage period, and do not include either stay-at-work or supplemental pension fund premiums.

For an employer enrolled in a group after the start of a group's coverage period, we will only consider the employer's standard premiums for the calendar quarters for which the employer was enrolled.

[Statutory Authority: RCW 51.16.035, 51.16.100, 51.04.020(1), and 51.18.010. 10-21-086, 296-17B-500, filed 10/19/10, effective 11/19/10.]


AMENDATORY SECTION(Amending WSR 10-21-086, filed 10/19/10, effective 11/19/10)

WAC 296-17B-520   Determining your losses.   We determine your losses at the time of an adjustment.

To determine your losses, we first determine the case incurred losses for your claims. To these, we apply discounted loss development((, discount)) and expected loss ratio factors and your single loss occurrence limit to determine your losses incurred for each claim, as explained in these rules. The sum of your losses incurred will be your loss incurred, unless your maximum or minimum loss ratios apply.

[Statutory Authority: RCW 51.16.035, 51.16.100, 51.04.020(1), and 51.18.010. 10-21-086, 296-17B-520, filed 10/19/10, effective 11/19/10.]


AMENDATORY SECTION(Amending WSR 10-21-086, filed 10/19/10, effective 11/19/10)

WAC 296-17B-530   Determining case incurred losses.   If a claim is closed, we will use the actual losses for the claim as defined in WAC 296-17-870(1). If the claim is open, we will use either the case reserve amounts or the actual losses, whichever are higher.

Where not in conflict with these rules, we will use the rules for valuing claims for experience rating found in WAC 296-17-870 (1), (5) through (7), and (10) through (12).

Employer reimbursements from the Washington stay-at-work program will not be included in the case incurred costs of claims.

[Statutory Authority: RCW 51.16.035, 51.16.100, 51.04.020(1), and 51.18.010. 10-21-086, 296-17B-530, filed 10/19/10, effective 11/19/10.]


AMENDATORY SECTION(Amending WSR 10-21-086, filed 10/19/10, effective 11/19/10)

WAC 296-17B-720   Prohibited conduct.   (1) Employers and group sponsors must not engage in claims suppression as defined in RCW 51.28.010(4).

(2) Employers and group sponsors must not pay medical service providers for medical services related to an industrial injury or occupational disease. Payment of monthly direct fees made on behalf of employees to qualifying direct primary care service providers as permitted by RCW 48.150.050 does not disqualify an employer or group sponsor from participation in the retrospective rating program.

(3) Unless disclosed to the member at the time of enrollment, group sponsors must not require members to pay dues, fees, or continue membership in the retrospective rating program beyond the last date of the coverage year in order to receive their share of refunds, if any.

If we determine that you have violated any of these provisions, we will remove you from retrospective rating effective the date we notify you, and permanently bar you from further participation in the retrospective rating program. You will remain liable for any additional premium assessments related to your participation prior to your removal, but you will forfeit any right to refunds for adjustments calculated after your removal.

[Statutory Authority: RCW 51.16.035, 51.16.100, 51.04.020(1), and 51.18.010. 10-21-086, 296-17B-720, filed 10/19/10, effective 11/19/10.]


AMENDATORY SECTION(Amending WSR 10-21-086, filed 10/19/10, effective 11/19/10)

WAC 296-17B-810   Discounted loss development factors.   At the time of adjustment, our actuaries determine discounted loss development factors by claim type. Loss development factors account for the fact that claims ultimately cost the state fund more than they have cost the state fund to date, and more than they are estimated to cost the state fund at any particular point in time.

Discounting accounts for the fact that benefits are not paid at once, but rather are paid over a period of time. Discounts vary for different types of claims based on when benefits tend to be paid.

Separate discounted loss development factors will be calculated by fund and also by enrollment period at the time of each annual retrospective rating adjustment.

[Statutory Authority: RCW 51.16.035, 51.16.100, 51.04.020(1), and 51.18.010. 10-21-086, 296-17B-810, filed 10/19/10, effective 11/19/10.]


AMENDATORY SECTION(Amending WSR 10-21-086, filed 10/19/10, effective 11/19/10)

WAC 296-17B-830   Expected loss ratio factors.   The expected loss ratio factor is a factor applied to case incurred loss amounts of claims and discounted loss development factors ((and discount factor)) so that the ratio of discounted developed loss to standard premiums for the entire state fund used in the actuarial calculations equals the expected loss ratios. By doing this, loss ratios will not be expected to change simply because the department changed the rates for one fund significantly more than the rates for another fund. The expected loss ratios are:


Accident Fund 81.2%
Medical Aid Fund 88.0%

Separate factors will be calculated by fund and also by enrollment period at the time of each annual retrospective rating adjustment.

[Statutory Authority: RCW 51.16.035, 51.16.100, 51.04.020(1), and 51.18.010. 10-21-086, 296-17B-830, filed 10/19/10, effective 11/19/10.]


AMENDATORY SECTION(Amending WSR 10-21-086, filed 10/19/10, effective 11/19/10)

WAC 296-17B-840   Claim types.   The following claim types are considered when calculating the discounted loss development factors ((and discount factors)):

(1) Fatality;

(2) Total permanent disability pension claim;

(3) Structured settlement claim with ongoing, lifetime payments;

(4) Structured settlement claim with fixed, periodic payments;

(5) Structured settlement claim with one-time, lump sum payments;

(6) Permanent partial disability claim;

(((4))) (7) Time-loss claim;

(((5))) (8) Miscellaneous accident fund claim;

(((6))) (9) Medical only claim.

[Statutory Authority: RCW 51.16.035, 51.16.100, 51.04.020(1), and 51.18.010. 10-21-086, 296-17B-840, filed 10/19/10, effective 11/19/10.]


REPEALER

     The following section of the Washington Administrative Code is repealed:
WAC 296-17B-820 Discount factors.