April 15, 2014
Latest WSIB recommendation reduces rate group numbers
If the Ontario government accepts many of the recommendations in the Doug Stanley Report, there will be a consolidation of rate groups, from the current 155 down to 20 to 25.
The WSIB has released the long-awaited Doug Stanley Report, entitled Pricing Fairness: A Deliverable Framework for Fairly Allocating WSIB Insurance Costs. The document recommends broad changes to the current WSIB funding system.
Consultation on the report will continue until April 30 of this year. It is expected that the WSIB will develop the details of the proposals and consult on them in 2015. After that, the new system will be phased-in, starting in 2016.
The classification system suggested by the report is modelled on the North American Industrial Classification System (NAICS). It proposes a significant consolidation of rate groups from the current 155, and that employers be assessed on predominant business activity, with no distinction for size of employer or the ability to segregate earnings for both classification and rate setting purposes.
The report also recommends that a new model include a “risk adjusted premium rate setting.” Employers would be grouped by risk and accident costs in low, average, or high risk bands. Based on the employers’ class rate, the class premium rate would be the average premium rate for the employer. Individual employers would move up or down from the average premium rate based on their own accident experience.
Stanley wrote, “I recommend the WSIB introduce a transition process so that changes in premium rates are spread over a number of years to ensure a smoother process for employers. However, it is important to ensure that a balance is maintained between rate increases and decreases for this transition period. Otherwise, the WSIB will affect its revenue objectives and lead to further unfunded liability and deterioration of its funding position.”
The report also suggests that the WSIB could establish a set of rules whereby premium rates would increase or decrease no more than a set percentage for each year of the transition period. “This could provide a fair and equitable distribution of costs without disruption to a great degree to the current Schedule One employers,” says the report.
The report suggests that in the actual design of a working model, it will require a tremendous amount of work by the WSIB. “That work will involve technical analysis and modelling of design features to ensure objectives are met and that undesirable outcomes do not also result. The transition to a new system will be a technical and administrative challenge for the WSIB,” says Stanley. He also says there needs to be extensive consultation with stakeholders who have a right to be assured that this is a secure and efficient system for raising the necessary funds.
The government has legislated a three-stage plan for reaching 100 per cent funding. The WSIB must achieve at least a 60 per cent funding level by 2017; 80 per cent funding level by 2022, and 100 per cent funding by 2027.
The Doug Stanley Report may be accessed online at http://gfl.me/x24b.
The WSIB has released the long-awaited Doug Stanley Report, entitled Pricing Fairness: A Deliverable Framework for Fairly Allocating WSIB Insurance Costs. The document recommends broad changes to the current WSIB funding system.
Consultation on the report will continue until April 30 of this year. It is expected that the WSIB will develop the details of the proposals and consult on them in 2015. After that, the new system will be phased-in, starting in 2016.
The classification system suggested by the report is modelled on the North American Industrial Classification System (NAICS). It proposes a significant consolidation of rate groups from the current 155, and that employers be assessed on predominant business activity, with no distinction for size of employer or the ability to segregate earnings for both classification and rate setting purposes.
The report also recommends that a new model include a “risk adjusted premium rate setting.” Employers would be grouped by risk and accident costs in low, average, or high risk bands. Based on the employers’ class rate, the class premium rate would be the average premium rate for the employer. Individual employers would move up or down from the average premium rate based on their own accident experience.
Stanley wrote, “I recommend the WSIB introduce a transition process so that changes in premium rates are spread over a number of years to ensure a smoother process for employers. However, it is important to ensure that a balance is maintained between rate increases and decreases for this transition period. Otherwise, the WSIB will affect its revenue objectives and lead to further unfunded liability and deterioration of its funding position.”
The report also suggests that the WSIB could establish a set of rules whereby premium rates would increase or decrease no more than a set percentage for each year of the transition period. “This could provide a fair and equitable distribution of costs without disruption to a great degree to the current Schedule One employers,” says the report.
The report suggests that in the actual design of a working model, it will require a tremendous amount of work by the WSIB. “That work will involve technical analysis and modelling of design features to ensure objectives are met and that undesirable outcomes do not also result. The transition to a new system will be a technical and administrative challenge for the WSIB,” says Stanley. He also says there needs to be extensive consultation with stakeholders who have a right to be assured that this is a secure and efficient system for raising the necessary funds.
The government has legislated a three-stage plan for reaching 100 per cent funding. The WSIB must achieve at least a 60 per cent funding level by 2017; 80 per cent funding level by 2022, and 100 per cent funding by 2027.
The Doug Stanley Report may be accessed online at http://gfl.me/x24b.