Canadian HR Reporter

CANADIAN HR REPORTER October 2, 2017 8 NEWS industry you were in. Under the new program, everybody follows the same model, so the rules are the same for everybody, the vari- ables are the same for everyone — it's much simpler." e rates under the new model will also be much more reflective of the risk individual employers and industries actually bring to the system, he said. And the clas- sification structure is also being simplified. "We used to use an older struc- ture that's fallen out of favour and isn't really used by most govern- ment agencies anymore." ere have been a number of issues with the WSIB's old system when it came to classification and experience rating, according to David Marchione, an occupa- tional health and safety specialist at Fasken Martineau in Toronto. "e thought is generally the system is underfunded, that there are employers that are not part of the WSIB experience rat- ing program that should be, that generally employers aren't held as accountable as they should be for their own experience rating." It was definitely in need of an upgrade, he said. "e system itself is, I guess, antiquated; it's based on a way of looking at claims and claim costs that don't make a lot of sense. And our current system, the majority of employers I would say are in a retrospective experience rating system which means that they're experiencing either rebates or surcharges for past experience, but they don't get timely feedback on their experience, and that's something that the new system is looking to change." e system has been in turmoil for several years as the board has tried to balance its finances with the ins and the outs, and has been in a pretty serious underfunded scenario for quite some time, said Anna Aceto-Guerin, president and owner of Clear Path Employer Services in Cambridge, Ont. "Now, employers are going to see a completely different system." e basic changes The new premium rate setting model "has a clear and simple classification method and struc- ture" for determining premium rates, according to the WSIB, with a three-step approach: clas- sification, class level rate setting, and employer level premium rate adjustments. With step one, the WSIB will be moving from its current clas- sification structure to one based on the North American Industry Classification Structure system or NAICS. is is already used by government bodies and is a North American standard. As a result, 155 rate groups at WSIB will drop down to 34 classes or subclasses. "We're still using the very de- tailed NAICS structure under- neath those 34 classes, and that's the codes that individual employ- ers are already accustomed to reporting to the CRA (Canada Revenue Agency), for example, when they report their payroll, or to Statistics Canada or Industry Canada — lots of other organiza- tions use those, so I suspect most employers already know their NAICS code," said Baird. This allows for greater con- sistency since employers are al- ready using the NAICS code, said Marchione. "The WSIB is using the SIC (Standard Industrial Classifica- tion) code — it's antiquated, no- body uses that system anymore, so for consistency purposes for employers, especially who oper- ate across different provinces, that will help as far as their clas- sification. It does allow for a more standardized type of system." It's good the WSIB is now using a bona fide system used in other areas, said Aceto-Guerin. "It's going to be easier for peo- ple to understand where they are. (e WSIB) had to do something because some of them were so outdated, some industries were just not represented at all." With the second step, employ- ers will be assigned to a predomi- nant class that is generally based on the class that represents their largest percentage of insurable earnings. The "class projected premium rate" will represent the collective experience of all of the employers within that class or subclass. Classes will have a premium rate themselves, so a hospital, for example, will have an indus- try rate and then an employer rate, said Marchione, "based on a number of things including their own past experience and the rate for that particular class, as well as their payroll." If, for example, the number of claims and cost of claims for hos- pitals spike over a few years, the base rate for that class is going to go up, and if the experience rating goes down, the base rate should go down, he said. "What it allows employers to do is actually look at what they're actually going to be spending on WSIB insurance… and when they get their letter from the WSIB every year, it will tell them what direction they're headed in, so it allows for predictability, it allows for better budgeting and use of your resources." As a third step, the rate frame- work also takes a prospective rate setting approach with "projected premium rates." In addition to an- nual rates, employers will be given the future direction their premi- um rate is going (up or down), and the changes will be capped so they are spread over time. Having projected rates in ad- vance of the actual rate is meant to help mitigate future risk early on, said the WSIB. Under the old system, employ- ers either get a rebate or surcharge, but that's not until two years after they had that claims experience, said Baird. "Going forward… it's going to be a prospective system, so instead of rebates or surcharges, those adjustments to their rates will be baked in each year, so at the end of each year, we will recalculate what that individual employer's rate is going to be, and we'll com- municate that to them. And we'll also recalculate for them what their long-term trajectory looks like, what their projected rate is, to help give a bit of an early warn- ing indicator as to whether or not they're moving in the right direc- tion or the wrong direction." Risk bands are an element of the system, putting employers into a series of categories, he said. e central band is the midpoint for a particular industry, with em- ployers moving up or down the bands depending on their claims experience. "We built some stability mea- sures into the model," said Baird. "One area of concern we've had in the past from employers is it's not always easy to predict when they're going to get a rebate or a surcharge, or how much that's go- ing to be. Whereas under the new model, we're limiting the amount that an employer's rate can move year over year — they're only al- lowed to move up to three risk bands per year. So I think it helps in providing a bit of stability to employers, and predictability about where their rates are going to be in the coming years." Employers can journey towards a target rate that's hopefully lower than where they're at right now, said Aceto-Guerin. "(e WSIB) put some param- eters around it, three steps up or three steps down, so they try to limit the risk that an organization can have so you can't go way off the chart… so that's a completely dif- ferent concept for employers," she said. "ere's some advantages to those employers that are really health and safety conscious, and they're doing really well — they might be below that industry rate." Currently, the WSIB uses three experience rating programs: the New Experimental Experience Rating program (NEER), the Merit Adjusted Premium (MAP) program for smaller employers and the CAD-7 (Council Amend- ment to Draft #7) for construction employers. With the new changes, all three programs are going away, which is going to be hard for many employ- ers to wrap their heads around, said Aceto-Guerin. "If you've finally figured out NEER, it's now going to go, which is unfortunate for a lot of employers." Employers will need to under- stand the triggers under the new system and, ultimately, return to work is a big one, she said. "e less time off someone has, so that reduced severity of acci- dents, is going to be really impor- tant for employers. at length of time someone's off, that's really what (the WSIB is) focusing on with this new system." Six-year window As part of the changes, the expe- rience rating window used to set premium rates will be six years, instead of three or four. "We wanted it to be long enough that it showed a sustained im- provement over time," said Baird. "You don't want an employer to have one good year, one bad year and have that dramatically reflect their rate going forward. If an employer is outperforming their peers, we want them to show us that that is sustained and they can maintain that over the long-term." However, the WSIB is giving a higher weighting to the first three years and a lower rating to the last three years, said Marchione. "e thought behind that is that the initial three years are more in- dicative of an employer's health and safety program and practices as such in the recent past, whereas if you're going back six years, a lot of things may have changed in that time." e WSIB is going to give em- ployers credit for things they're doing right now that might be helpful to their situation, said Aceto-Guerin, "so whatever you're doing currently is going to be more heavily weighted. Whereas in NEER, all four years are weighed the same… ultimate- ly, I think they've tried to make it a bit more fair in terms of the sys- tem but, in a lot of ways, it's more complicated." Preparing for changes With the new program launch- ing in 2020, the next few years are very important, said Baird. "ose are going to be a very recent part of the claims window, so the experience employers have this year and the next couple of years, those are going to stay with them for a significant amount of time, and they're going to be dou- ble-counted for the first few years of the program." Number one, employers should be doing as much as they can to prevent injuries, said Marchione. "Number two, (they should) minimize the costs of any WSIB claims by managing them prop- erly, because when the WSIB rolls out this new program, the new rate framework, they're go- ing to need to set base rates for current employers, and those base rates are going to be based on their most recent accident experience. So they should take whatever steps they can to pro- actively manage claims and mini- mize claim costs, in order to put their best foot forward when the new system rolls out." Employers should also become familiar with their NEER state- ments, said Aceto-Guerin. "Make sure that you are doing the best you can to get yourself in a good position under NEER be- cause they are going to use your NEER results to put you into the new system… So we're really try- ing to encourage employers to beef up their return-to-work pro- grams, look at their health and safety programs to reduce the number of accidents, but also be aware of returning people back to work and reducing that length of time off to keep their costs low." e WSIB is also communicat- ing out to all employers, via mail, about the new model and their business activity classification, said Baird. "We're asking them to take a look at that, and take a look at the website it directs them to to better understand what changes we're making, and also to confirm with us if they have any concerns or questions about how we're clas- sifying their business activity." In 2018, the WSIB will be com- municating project rates for every individual employer, said Baird, so it's important to get the clas- sification right so the board can communicate accurate rates for the next year. And in 2019, the WSIB will convey the actual rates for implementation purposes, for the launch on Jan. 1, 2020. The WSIB has also released policies for consultation until Oct. 13, said Marchione. "(e policies) seem to make sense — they're consistent with the information that's in the framework, and the policies will allow the employers to under- stand exactly what's required and they're what the WSIB is held to." 'Greater consistency' with use of NAICS code WSIB < pg. 1 "With the new model, we're limiting the amount that an employer's rate can move year over year — they're only allowed to move up three risk bands per year." Credit: Google Street View The offices of the Workplace Safety and Insurance Board (WSIB) in Toronto, which has released policies for consultation until Oct. 13.

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