AN ACT Relating to the
entrance criteria for retrospective rating groups; amending RCW 51.16.035; and
adding a new chapter to Title 51 RCW.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF
WASHINGTON:
NEW SECTION. Sec.
1. The legislature finds
that the retrospective rating plan provided for in RCW 51.16.035 has proven to
be highly effective both in terms of improved workplace safety and injured
worker outcomes. As a result, the number of industrial insurance claims of
many employers participating in the retrospective rating plan have been reduced
through sound risk management strategies and enhanced cooperation with
department claims management activities.
The legislature further
finds that entrance criteria for the retrospective rating plan under RCW
51.16.035 should be clear and understandable to both the department and
potential retrospective rating plan participants.
The legislature
therefore declares that a new retrospective rating plan is needed in order to
protect and preserve the integrity and welfare of the retrospective rating
system.
NEW SECTION. Sec.
2. (1) The department shall
offer a retrospective rating plan to insure the workers' compensation
obligations of employers and groups of employers. The plan is to be made
available to any employer or group of employers who:
(a) Voluntarily elects
to participate in the plan; and
(b) Meets the
requirements of this chapter and rules adopted by the department under
subsection (2) of this section.
(2) The retrospective
rating plan shall be consistent with recognized insurance principles and shall
be administered according to rules adopted by the department. Rules adopted
under this section shall encourage broad participation by qualified employers
and sponsors of retrospective rating groups.
(3) Each retrospective
rating group approved by the department under this chapter shall select a
coverage period and may be renewed at the end of each coverage period. For the
purposes of this section, "coverage period" means a twelve-month
period provided by the department by rule.
NEW SECTION. Sec.
3. Prior to allowing initial
entrance into the state's retrospective rating plan, the department shall
review each proposed retrospective rating group to ensure that the following
criteria are met:
(1) The entity
sponsoring the retrospective rating group must have been in existence for at
least four years;
(2) The entity
sponsoring the retrospective rating group must exist primarily for a purpose
other than that of obtaining or offering insurance coverage or insurance
related services;
(3) The entity
sponsoring the retrospective rating group must have a written workplace safety
and accident prevention plan in place for the proposed retrospective rating
group and must propose methods by which the retrospective rating group will
cooperate with department claims management activities;
(4) All employers in
the retrospective rating group must be members of the sponsoring entity;
(5) All employers in
the retrospective rating group must have an industrial insurance account in
good standing with the department;
(6) Fifty percent of
the original employers in the retrospective rating group must have been members
of the sponsoring entity for one year prior to the group's entrance into the
retrospective rating plan;
(7) The retrospective
rating group must be composed of employers who are substantially similar
considering the services or activities performed by the employees of those
employers;
(8) The initial premium
level for the retrospective rating group must be at least one million five
hundred thousand dollars and shall be based on the standard premium of the
proposed group members' most current previous coverage period; and
(9) The formation and
operation of the retrospective rating group must seek to substantially improve
workplace safety and accident prevention for the employers in the group.
NEW SECTION. Sec.
4. (1) Entities which
sponsored retrospective rating groups prior to the effective date of this act,
may not sponsor additional retrospective rating groups in a new business or
industry category until the coverage period beginning January 1, 2003.
(2) For retrospective
rating groups approved by the department on or after the effective date of this
act, the sponsoring entity may not propose another retrospective rating group
in a new business or industry category until the minimum mandatory adjustment
periods required by the department for the first two coverage periods of the
last formed retrospective rating group are completed.
(3) Subsections (1) and
(2) of this section do not prohibit a sponsoring entity from proposing to:
(a) Divide an existing
retrospective rating group into two or more groups provided that the proposed
new groups fall within the same business or industry category as the group that
is proposed to be divided; or
(b) Merge existing
retrospective rating groups into one business or industry category provided
that the proposed merged groups fall within the same business or industry
category as the groups that are proposed to be merged.
(4) Under no
circumstances may a sponsoring entity propose retrospective rating groups in
multiple business or industry categories in the same application to the
department.
(5) An insurer,
insurance broker, agent, or solicitor may not:
(a) Participate in the
formation of a retrospective rating group; or
(b) Sponsor a retrospective
rating group.
NEW SECTION. Sec.
5. (1) In order to ensure
that all retrospective rating groups are made up of employers who are
substantially similar, considering the services or activities performed by the
employees of those employers, the sponsoring entity of a retrospective rating
group shall select a single, broad industry or business category for each
retrospective rating group. Once an industry or business category is selected,
the department shall allow all risk classifications reasonably related to that
business or industry category into that retrospective rating group.
(2) The following broad
industry and business categories shall be used by the sponsoring entity and the
department in establishing retrospective rating groups:
(a) Agriculture and
related services;
(b) Automotive, truck
and boat manufacturing, sales, repair, and related services;
(c) Construction and
related services;
(d) Distillation,
chemical production, food, and related services;
(e) Facilities or
property management, maintenance, and related services;
(f) Government,
utilities, schools, health care, and related services;
(g) Health care,
pharmaceutical, laboratories, and related services;
(h) Logging, wood
products manufacturing, and related services;
(i) Manufacturing,
processing, mining, quarrying, and related services;
(j) Retail stores,
wholesale stores, professional services, and related services;
(k) Temporary help and
related services; and
(l) Transportation,
recycling, warehousing, facility maintenance, and related services.
(3) The industry and
business categories in subsection (2) of this section are not exclusive. In
response to significant changes in marketplace demographics or the discovery of
unique business or industry categories, the department may, by rule, include
additional broad industry or business category selections. The department may,
by rule, remove an industry covered within an industry or business category in
the event that the business or industry is no longer found within this state.
(4) Given the broad
nature of the industry and business categories in subsection (2) of this
section, the risk classification or classifications assigned to an individual
employer may appropriately fall into multiple business or industry categories.
(5) In order to
simplify administration and keep the administrative costs associated with
devising a different classification system for a retrospective rating plan to a
minimum, the state's retrospective rating plan shall follow the same
classification procedure established by the department to assign workers'
compensation insurance classifications to an employer.
(6) Employers who have
been a member of an existing, approved retrospective rating group prior to the
effective date of this act, may continue in that group even if they are not
substantially similar to the industry or business category selected pursuant to
subsection (1) of this section. However, new employers proposed for addition
to a retrospective rating group on or after the effective date of this act must
fall within the selected industry or business category.
NEW SECTION. Sec.
6. (1) Any retrospective
rating group required to pay additional net premium assessments in two
consecutive coverage periods shall be immediately placed on probationary
status. Once a group is placed on probationary status, the department shall review
the group's workplace safety and accident prevention plan and its methods for
cooperation with department claims management activities. Following the
review, the department shall make recommendations for corrective steps that may
be taken to improve the group's performance.
(2) If the same
retrospective rating group is required to pay an additional net premium
assessment in the third consecutive coverage period, that group shall be denied
future enrollment in the state's retrospective rating plan. In addition, the
sponsoring entity of the failed group may not sponsor another group in the same
business or industry category for five coverage periods from the ending date of
the failed group's last coverage period.
(3) This section
applies prospectively only and not retroactively. It applies only to net
assessments received by a retrospective rating group for plan years beginning
after the effective date of this act.
NEW SECTION. Sec.
7. All retrospective rating
groups approved by the department prior to the effective date of this act,
under RCW 51.16.035 as it existed prior to the effective date of this act,
remain approved and, with the exception of section 3 of this act, are subject
to the provisions of this chapter.
Sec. 8. RCW 51.16.035 and 1989 c
49 s 1 are each amended to read as follows:
(1) The
department shall classify all occupations or industries in accordance with
their degree of hazard and fix therefor basic rates of premium which shall be
the lowest necessary to maintain actuarial solvency of the accident and medical
aid funds in accordance with recognized insurance principles. The department
shall formulate and adopt rules and regulations governing the method of premium
calculation and collection and providing for a rating system consistent with
recognized principles of workers' compensation insurance which shall be
designed to stimulate and encourage accident prevention and to facilitate
collection. The department may annually, or at such other times as it deems
necessary to maintain solvency of the funds, readjust rates in accordance with
the rating system to become effective on such dates as the department may
designate.
((The department may
insure the workers' compensation obligations of employers as a group if the
following conditions are met:
(1) All the
employers in the group are members of an organization that has been in
existence for at least two years;
(2) The organization
was formed for a purpose other than that of obtaining workers' compensation
coverage;
(3) The occupations
or industries of the employers in the organization are substantially similar,
taking into consideration the nature of the services being performed by workers
of such employers; and
(4) The formation
and operation of the group program in the organization will substantially
improve accident prevention and claim management for the employers in the
group.))
(2) In providing
((an employer group)) a retrospective rating plan under ((this))
section 2 of this act, the department may consider ((an employer))
each individual retrospective rating group as a single employing entity
for purposes of dividends or premium discounts.
NEW SECTION. Sec.
9. Sections 1 through 7 of this
act constitute a new chapter in Title 51 RCW.
NEW
SECTION. Sec. 10. If any provision of this
act or its application to any person or circumstance is held invalid, the
remainder of the act or the application of the provision to other persons or
circumstances is not affected.
