Rate Framework: Archive

Message from Chair and President & CEO

On November 14, the Workplace Safety and Insurance Board’s (WSIB) Board of Directors approved the Rate Framework. On behalf of the Board of Directors, we would like to thank you for your ongoing support as we look towards a targeted implementation in January 2019, at the earliest. This approval will allow the WSIB to move forward with the important work of implementation, including significant system modifications necessary for a 2019 implementation.
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Consultation Plan

The WSIB has initiated a review of its Employer Classification, Premium Rate Setting and Experience Rating systems. As part of this review, the WSIB has developed a proposed preliminary Rate Framework.
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Key Goals

The proposed preliminary Rate Framework is the product of discussion, options analysis and reflection. It considers the Pricing Fairness recommendations and goals against a set of Key Goals developed for the proposed preliminary Rate Framework that are identified below. In reviewing the papers, consideration should be given to the merits, potential variations and implications, and the proposed preliminary Rate Framework's Key Goals for the workers' compensation system as a whole.
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Glossary

Actuarial Predictability is a process where the WSIB determines the degree to which past claims cost can be relied upon to predict future outcomes and therefore fairly and accurately set premium rates. Also referred to as actuarial credibility.
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Stanley: Pricing Fairness Report

The WSIB has received Mr. Douglas Stanley's final report which contains recommendations related to the reform of the Rate Framework. The WSIB welcomes stakeholder input on the report via our Consultation Secretariat at consultation_secretariat@wsib.on.ca.
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Unfunded Liability

The unfunded liability (UFL) represents the shortfall between the money needed to pay the future benefits to workers for all established claims, and the money that is in the accident fund.
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Current Apportionment of UFL

Since 1999, the UFL charge has been determined for Schedule 1 employers as a collective whole. The charge has then been apportioned to rate groups based on their share of new claim costs.
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Analysis of UFL Apportionment

To determine how the UFL should be apportioned under the proposed preliminary Rate Framework, the WSIB conducted analysis on different apportionment methods, taking into consideration that the WSIB's updated Sufficiency Ratio projection is set at nearly 100% by 2022.
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Proposed Approach

While the NCC method does not consider past responsibility for the UFL, it is directionally consistent with Method 2 which strikes a more appropriate balance between reflecting past responsibility for the UFL and ensuring that classes do not experience unreasonable UFL charge increases in the majority of cases.

A Path Forward

Paper 5: A Path Forward provides stakeholders with information to support a discussion regarding the development of a transition plan towards a new Rate Framework that strikes a balance between premium rate stability and responsiveness.
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Guiding Principles

The WSIB recognizes that it may be difficult to achieve general consensus on a transition plan owing to the diversity of its stakeholders, and their particular circumstances. To support the discussion around an appropriate transition plan, the WSIB is proposing a set of key considerations for stakeholders' review and general acceptance. The WSIB commits to engaging stakeholders at a future point in time on the consideration of transitional features, of any potential Rate Framework reforms.
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Illustrative Example

The WSIB tested the premium rate outcomes of the proposed preliminary Rate Framework by using what employers are paying today as a starting point, and then projecting their Employer Target Premium Rates. In undertaking this work an estimated value for the UFL is required. While implementation timelines still need to be determined and the value of the UFL may fluctuate accordingly, for this illustrative example, a UFL balance of $5 billion was utilized to show premium rate implications. Alternate scenarios could be developed to test any UFL value, including a scenario where the UFL has been eliminated.
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Health and Safety

Supporting employers and their workplaces in understanding the importance of proactive occupational health and safety is a critical component of any transition plan. The proposed preliminary Rate Framework would act as an early warning for employers by providing target premium rates allowing employers to; better identify the future projected path of their premium costs; and take proactive health and safety actions (e.g. prevention; and return to work (RTW) to address the risks).
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Current State Analysis

The WSIB is undertaking a comprehensive review of its current employer classification structure, as well as the premium rate setting process that includes the current experience rating programs. Further to previous discussions with stakeholders, led by Professor Harry Arthurs and Mr. Douglas Stanley, the WSIB's on-going Rate Framework Reform Consultation will provide a range of opportunities for stakeholders to have their views heard, ensuring that any significant reform is implemented gradually and in a manner that fosters stability.
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Background

In September 2010, the WSIB appointed Professor Harry Arthurs to review a number of issues related to the financial situation of the WSIB. Professor Arthurs was assisted by four distinguished advisors from various backgrounds – Maureen Farrow, Buzz Hargrove, John O'Grady and John Tory – and by a small staff seconded from the WSIB. In addition, research support for the review was provided by the Conference Board of Canada and Morneau Shepell, a firm of consulting actuaries.
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Case for Change

As part of the previous phase of Rate Framework Reform Consultations, the WSIB published a paper entitled, WSIB Classification and Pricing System: The Case for Change (June 2013) (PDF). This document is a sample collection of real situations and issues brought forward to the WSIB's attention by individual employers or groups of employers in various industries.
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Review of Classification and Experience Rating

Following the release of the Case for Change, Morneau Shepell undertook a further analysis of the WSIB's current classification structure, premium rate setting process, and experience rating programs. The reviews revealed a compelling case for replacing the WSIB's current employer classification structure and experience rating programs.
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Need for Equity in Premium Rates

Further to Morneau Shepell's analysis on the current issues associated with the three experience rating programs, the WSIB assessed the impacts that today's premium rate setting process has had on employers. Specifically, the WSIB evaluated the number of employers who are paying too much or too little, to determine if more equity can be provided among employers.
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Conclusion

Each of the reviews highlighted present stakeholders with a detailed understanding of why change is now required to the WSIB's classification structure, premium rate setting processes, and experience rating programs. Together, they provide a telling story of the challenges faced by employers and workers in understanding the complexity in today's environment, as well as the administration of a system that is fair, predictable and transparent.
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Paper 3: Proposed Preliminary Rate Framework

Click on the three gears for more information on each Step of the proposed preliminary Rate Framework.
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Employer Classification

Objective: Transparent, consistent adaptable and responsive classification structure with fewer and larger groups for premium rate setting purposes, based on predominant business activity.
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Class Level Premium Rate Setting

Objective: A Class Target Premium Rate that reflects the collective experience of all employers within each class, setting the stage for a significant range of potential premium rates.
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Employer Level Premium Rate Adjustments

Objective: One prospective rate setting approach for all employers, acting as an early warning for employers with premium rate implications, supporting their efforts aimed at improving health and safety outcomes.
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Stakeholder Presentation