South Carolina. November 2,

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South Carolina November 2, 2017 Amy_Quinn@ncci.com 803-356-0851 Jay_Rosen@ncci.

2 South Carolina State Advisory Forum Welcome Annual Issues Symposium (AIS): Bill Donnell Video Excerpt Countrywide Workers Compensation System South Carolina s Workers Compensation System Countrywide and South Carolina Labor Markets Legislative Issues Residual Market: Countrywide and South Carolina Emerging Issue: 2017 Medical Marijuana Update Q & A Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 2

5 Countrywide Workers Compensation (WC) System An Overview After five years of growth, premium is flat in the most recent year The combined ratio continues to show favorable results Lost-time claim frequency declined again Lost-time claim severity increased for both indemnity and medical Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 5

6 $ Billions WC Net Written Premium Private Carriers and State Funds State Funds ($B) Private Carriers ($B) p Calendar Year p Preliminary Source: NAIC s Annual Statement data; includes state insurance fund data for the following states: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, and UT Each calendar year total for state funds includes all funds operating as a state fund in that year Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 6

7 WC Direct Written Premium (DWP) Change by Component Private Carriers NCCI States Change in Direct Written Premium: 0.0% 2016 vs Payroll +4.0% Loss Cost and Mix -2.7% Carrier Discounting -1.4% State Fund Conversion to Private Carrier +1.0% Other Factors -0.8% Sources: DWP Change: NAIC s Annual Statement Statutory Page 14 for all states where NCCI provides ratemaking services Components: NCCI s Policy data Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 7

Increases in Payroll Continue to Drive Premium Growth Forecast Change 2015 2016 Payroll Wage Rate +4.5% Employment +2.5% +1.9% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% -1% Prof.

8 Increases in Payroll Continue to Drive Premium Growth Forecast Change Payroll Wage Rate +4.5% Employment +2.5% +1.9% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% -1% Prof. & Business Services Trade, Transport., & Utilities Education & Health Services Financial Activities Construction Manufacturing Construction Leisure & All Other Hospitality -1% Prof. & Business Services Trade, Transport., & Utilities Education & Health Services Financial Activities Manufacturing Leisure & All Other Hospitality Sources: Moody s Analytics and NCCI Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 8

9 Percent 5 WC Approved Changes in Bureau Premium Level By Effective Year for NCCI States p Calendar Year p Preliminary Source: NAIC s Annual Statement Statutory Page 14 Bureau premium level changes reflect approved changes in advisory rates, loss costs, assigned risk rates, and rating values, relative to those previously approved in NCCI states only IN and NC are filed in cooperation with state rating bureaus Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 9

10 Percent WC Impact of Discounting on Premium Private Carriers NCCI States p Policy Year p Preliminary Sources: NAIC s Annual Statement Statutory Page 14 and NCCI s Financial Call data NCCI benchmark level does not include a profit and contingency provision or expense constant Based on data for all states where NCCI provides ratemaking services, excluding TX Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 10

11 WC Impact of Discounting on Premium Private Carriers NCCI States Dividends Schedule Rating Rate/Loss Cost Departure p Policy Year p Preliminary Sources: NAIC s Annual Statement Statutory Page 14 and NCCI s Financial Call data Dividend ratios are based on calendar year statistics NCCI benchmark level does not include a profit and contingency provision or expense constant Based on data for all states where NCCI provides ratemaking services, excluding TX Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 11

12 Percent WC Combined Ratio Underwriting Gain Achieved Private Carriers 3% lower p Calendar Year p Preliminary Source: NAIC s Annual Statement data Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 12

13 WC Combined Ratio Components Private Carriers Percent Dividends 1 1 Underwriting Expense Ratio Loss Adjustment Expense (LAE) Ratio Loss Ratio p Calendar Year p Preliminary Source: NAIC s Annual Statement data Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 13

14 WC Net Combined Ratios Calendar Year vs. Accident Year As Reported Private Carriers Percent Calendar Year Accident Year p p Preliminary Source: NAIC s Annual Statement data Accident Year information is reported as of 12/31/2016 Includes dividends to policyholders Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 14

15 Percent 5 WC Lost-Time Claim Frequency Change in Lost-Time Claims per $1M Pure Premium Private Carriers and State Funds NCCI States 0-5 Average Annual Change: 3.6% ( ) p Accident Year 2010 and 2011 adjusted primarily for significant changes in audit activity p Preliminary based on data valued as of 12/31/2016 Source: NCCI s Financial Call data, developed to ultimate, premium adjusted to current wage and voluntary pure premium level, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through 2011 Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 15

16 Severity ($ Thousands) WC Average Indemnity Claim Severity Private Carriers and State Funds NCCI States % +3% $23.2 $ p Accident Year p Preliminary based on data valued as of 12/31/2016 Source: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through 2007 Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 16

17 Relative Growth Rates Indemnity Severity vs. Wage Inflation Private Carriers and State Funds NCCI States +65% +33% Change in Indemnity Severity in Excess of Wage Inflation +34% +9% Change in Overall Indemnity Severity +32% Change in Wage Inflation +25% +7% +19% -12% 1995 to to to 2016p p Preliminary based on data valued as of 12/31/2016 Sources: Severity: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through 2007 US Average Weekly Wage: and , Quarterly Census of Employment and Wages; , NCCI; 2016p, NCCI and Moody s Analytics Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 17

18 WC Average Medical Lost-Time Claim Severity Private Carriers and State Funds NCCI States Severity ($ Thousands) % +5% $27.7 $ p Accident Year p Preliminary based on data valued as of 12/31/2016 Source: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through 2007 Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 18

19 Changes in Medical Lost-Time Claim Severity by Component Private Carriers and State Funds NCCI States +72% +56% Change in the Medical Utilization Component +47% +27% Change in Overall Medical Severity +16% Change in the Medical Price Component +20% +14% +2% +12% 1995 to to to 2016p p Preliminary based on data valued as of 12/31/2016 Sources: Severity: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through 2007 Centers for Medicare & Medicaid Services: Personal Health Care (PHC) Chain-Weighted Price Index Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 19

21 South Carolina s Workers Compensation System An Overview Written premium volume has continued to increase Combined ratios have recently improved Lost-time claim frequency declines have recently slowed Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 21

22 South Carolina Workers Compensation Premium Volume Direct Written Premium in $ Millions Source: NAIC s Annual Statement data Calendar Year Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved.

23 South Carolina Accident Year Combined Ratios by Component 104% 98% 107% 103% 99% 42% 37% 41% 42% 41% 62% 61% 66% 61% 58% Loss Ratio Expense Ratio Dividend Ratio Sources: NCCI s financial data and NAIC s Annual Statement data Accident Year Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 23

24 Impact of Discounting on Workers Compensation Premium in South Carolina 7.6% 5.9% 4.2% 3.0% 4.3% 3.2% 4.3% 2.4% 0.1% -3.6% -2.9% -5.7% -6.7% -6.1% p p Preliminary Based on data through 12/31/2016 Dividend ratios are based on calendar year statistics Policy Year Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 24

25 South Carolina WC Lost-Time Claim Frequency Percentage Change in Lost-Time Claims 4.7% 5.5% 1.6% 2.4% -1.2% -0.5% -0.1% -2.8% -5.7% -5.4% -5.8% -4.5% -4.3% -9.7% Policy Year Based on data through 12/31/2016, developed to ultimate and adjusted to a common wage level Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 25

26 South Carolina Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands 10.3% -5.6% 14.0% -2.2% 5.6% -2.9% -1.0% 1.4% -3.1% 0.0% 6.8% 0.7% 3.9% -0.5% $33.8 $33.9 $32.6 $32.4 $30.4 $30.4 $31.3 $30.9 $31.2 $32.1 $30.4 $31.1 $27.3 $28.9 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 26

27 South Carolina Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands 13.0% -2.0% 10.3% -1.7% 6.9% 5.7% -10.1% 2.4% -0.7% 14.3% 2.1% -11.8% 16.9% -1.5% $27.8 $31.5 $30.9 $27.0 $27.2 $26.6 $29.6 $28.0 $26.2 $26.6 $24.1 $24.6 $21.8 $22.1 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 27

28 South Carolina Filing Activity Voluntary Loss Cost Level Changes 1.1% 1.9% 2.5% No filing -6.2% -7.4% p p Pending Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 28

29 South Carolina April 1, 2018 Voluntary Loss Cost Filing Overall Loss Cost Level Change: 6.2% Change in Experience: Change in Trend: Change in Benefits: Change in All Other: 5.0% 1.3% 0.8% 0.7% Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 29

30 South Carolina April 1, 2018 Filing Average Changes by Industry Group Overall Change: 6.2% Manufacturing: 5.3% Contracting: 5.6% Office & Clerical: 11.1% Goods & Services: 5.3% Miscellaneous: 7.1% Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 30

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31 Percent 15 Current NCCI Voluntary Market Loss Cost/Rate Level Changes Excludes Law-Only Filings OK NM CT OR AL NH MD IN CO TN NC IL NV WV LA UT FL IA AR AK VT MT TX KS NE AZ SC MS ID KY RI ME DC MO HI SD GA VA Approved Pending Reflects the most recent experience filing in each jurisdiction Due to the timing of the individual loss cost/rate filings, the figures shown may include changes from prior filing seasons Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 31

32 Current Voluntary Market Rates/ Loss Cost Level Changes Georgia 3/1/17 0.5% South Carolina* 4/1/18 6.2% Florida* 1/1/18 9.3% North Carolina* 4/1/ % Tennessee* 3/1/ % Alabama* 3/1/ % *Pending Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 32

Current Average Voluntary Pure Loss Costs Using South Carolina Payroll Distribution (in $) Pure Loss Cost All Classes 1.33 1.38 1.12 1.04 0.91 1.14 1.

33 Current Average Voluntary Pure Loss Costs Using South Carolina Payroll Distribution (in $) Pure Loss Cost All Classes SC AL GA NC TN Region Country Based on the latest NCCI approved rates and loss costs in the various states Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 33

36 National Economic Highlights and Their Impact on Workers Compensation National Economic Indicator Private employment growth is expected to continue to slow Wage growth is poised to accelerate Medical inflation is forecast to slow and then reaccelerate Interest rates are still low, but expected to increase Potential Impact on the Workers Compensation Market The impact on payroll and premium will also slow Upward pressure on payroll and premium as well as indemnity severity Increases in medical costs per claim Investment income will likely remain muted this year, but increase as interest rates rise Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 36

Change in Average Weekly Wages Average Weekly Wages Have Increased Percent 4 South Carolina United States 3 3.3 3.5 2 2.0 2.4 2.3 2.

37 Change in Average Weekly Wages Average Weekly Wages Have Increased Percent 4 South Carolina United States Q1 2016Q1 2017Q1 Year-on-year percentage change; wages are for Total Private Industry Frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 37

38 Percent 6 Private Industry Payroll Growth South Carolina s Payroll Growth Is Higher Than the Nation s +5.6% % +3.9% Payroll +2.1% AWW % +1.7% Employment 0 South Carolina United States 2017 Q1 year-on-year percentage change; AWW = Average Weekly Wage Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 38

39 Change in Employment by Industry Employment in Most Industries Has Increased in the Past Year Industrial Sector Trade, transportation, and utilities Manufacturing Education and health services Professional and business services Construction Government Financial activities Natural resources and mining Other services Information Leisure and hospitality Year-Over-Year Percent Change, 2017Q1 SC , ,500 US +1.0 SC , ,700 US +0.0 SC , ,500 US +2.4 SC , ,300 US +3.1 SC , ,500 US +2.8 SC , ,300 US +0.8 SC , ,600 US +2.2 SC , US 2.1 SC , US +1.0 SC , US 0.9 SC , US +1.9 Employment numbers are rounded to the nearest hundred Year-on-year percentage change; frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Moody s Analytics, and NCCI Sector Size % Share 1-Year Change Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 39

40 South Carolina s Payroll Growth Decomposition by Sector Employment Growth + AWW Growth Payroll Growth 5% 0 +5% +10% Government Trade, transportation, and utilities Manufacturing Professional and business services Education and health services Financial activities Construction Leisure and hospitality Other services Information Natural resources and mining 5% 0 +5% +10% 5% 0 +5% +10% 2017 Q1 year-on-year percentage change; AWW = Average Weekly Wage; sectors are in descending order by the volume of state payroll amounts Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 40

41 Percent 6 5 Headline Unemployment Rate The Unemployment Rate Is Lower Than the National Rate 4 US: 4.3% SC: 3.9% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Headline Unemployment Rate, seasonally adjusted Frequency of observation: monthly; latest available data point: July 2017 Source: US Bureau of Labor Statistics (BLS), Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 41

42 South Carolina s Labor Market South Carolina s unemployment rate is below the US rate Payroll growth in South Carolina is higher than the nation, driven mostly by faster growth in average weekly wages Payroll has grown in all sectors Construction posted the fastest growth, driven by strong gains in both average weekly wages and employment Average weekly wages have grown in most sectors Employment growth is above the US rate Trade, Transportation, and Utilities added the most jobs Three other sectors added more than 6,000 jobs Construction added 4,500 jobs and grew at the fastest rate Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 42

2017 Countrywide Overview Countrywide, legislative

management, claim handling, and effectuating enacted

Year to date, there have been fewer workers

Republicans in state government, where they now

44 2017 Countrywide Overview Countrywide, legislative activity has increased over prior years both in volume and content. Regulation changes thus far concern medical cost management, claim handling, and effectuating enacted legislation. Year to date, there have been fewer workers compensation-related cases at the state supreme court level than there were in The 2016 general election resulted in a net gain for Republicans in state government, where they now control both chambers of the legislature and the governor s office in 26 states. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 44

45 2017 Workers Compensation Legislative Activity CA OR WA NV ID UT MT WY CO ND SD NE KS MN IA MO WI IL MI IN OH KY WV PA VA NY ME VT NH MA CT NJ DE MD DC RI AZ NM OK AR TN SC NC MS AL GA AK TX LA FL HI 0 10 Bills Introduced Bills Introduced Bills Introduced More Than 30 Bills Introduced As of 7/1/2017 Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 45

46 Key Countrywide Workers Compensation-Related Themes in Introduced Legislation First Responder Presumptions Indemnity Benefits Medical Cost Management Definitions Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 46

47 Federal Legislative and Regulatory Issues Impacting the Workers Compensation System NCCI engages Congress and federal agencies regarding issues impacting the state-based workers compensation system NCCI provides insights and information on the system to several agencies, including: US Department of Labor (USDOL) National Institute for Occupational Safety and Health (NIOSH) Government Accountability Office (GAO) US Department of the Treasury Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 47

48 Federal Emerging Issues Regulation of Air Ambulance Services Sen. Jon Tester (MT) introduced legislation to provide state authority Federal Aviation Administration Reauthorization Social Security Disability Insurance (SSDI) Reform SSDI Solutions Initiative recommendations Trump Administration SSDI Reverse Offset Proposal Medicare Set-Aside (MSA) Reform Legislation to be introduced to bring greater efficiency to the MSA Process Congressional Budget Office scoring Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 48

49 South Carolina Judicial and Legislative Update Notable Court Decision Clemmons v. Lowes Legislative Change Effective May 10, 2017, the maximum burial expense increased from $2,500 to $12,000 Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 49

51 Where Does NCCI Provide Residual Market Services? As of January 2017, NCCI provides Plan Administration services in the following states: AK, AL, AR, AZ, CT, DC, GA, IA, ID, IL, KS, MS, NH, NM, NV, OR, SC, SD, TN, VA, VT, and WV Other Plan Services: DE, IN, and NC As of January 2017, NCCI provides Pool Administration services in the following states: National Pool: AK, AL, AR, AZ, CT, DC, DE, GA, IA, ID, IL, KS, NC, NH, NJ, NV, OR, SC, SD, TN, VA, VT, and WV New Mexico Pool Tennessee Reinsurance Mechanism Financial and Actuarial Services: MA and MI Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 51

53 South Carolina Total Residual Market Plan Estimated Premium Volume Premium in $ Millions as of 12/31/2016 $41M $28M $23M $32M $33M $33M $33M $18M $16M $15M Policy Year Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 53

54 South Carolina Residual Market Share Plan Premium as a Percentage of Direct Written Premium 5.6% 5.8% 5.5% 6.4% 4.4% * Calendar Year *Preliminary Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 54

16,768 South Carolina Total Residual Market Plan Policy Counts As of 12/31/2016 13,815 11,213 10,217 9,690 9,691 10,293 11,136 11,690 12,416

55 16,768 South Carolina Total Residual Market Plan Policy Counts As of 12/31/ ,815 11,213 10,217 9,690 9,691 10,293 11,136 11,690 12, Policy Year Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 55

56 South Carolina Average Size Accounts for Residual Market Policies and Estimated Premium As of 12/31/2016 Premium Range Policy Count % of Policies Total Premium % of Premium Average Policy Size $0 $2,499 10, % $10,258, % $999 $2,500 $4,999 1, % $3,700, % $3,517 $5,000 $9, % $4,198, % $6,938 $10,000 $19, % $3,665, % $13,626 $20,000 $49, % $5,182, % $30,131 $50,000 $99, % $2,266, % $66,674 $100,000 $199, % $1,539, % $128,315 $200, % $1,706, % $341,239 Total 12, % $32,518, % $2,619 Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 56

57 Policy Year South Carolina Residual Market Reinsurance Pool Net Operating Results Estimated Net Operating Gain/(Loss) Projected to Ultimate as of 12/31/ ($3,746) 2015 ($4,166) 2014 $1, ($5,058) -$6,000 -$5,000 -$4,000 -$3,000 -$2,000 -$1,000 $0 $1,000 $2,000 Operating Gain/(Loss) (000's) Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 57

58 Residual Market Summary National Stable residual market share Manageable operating results Residual market premium declined slightly in 2016 High levels of customer service satisfaction South Carolina Consistent premium volume Relatively stable residual market share Please visit ncci.com for additional state and countrywide information. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 58

59 Emerging Issue: The Legalization of Marijuana and Its Impact on Workers Compensation Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved.

Washington, DC have legalized recreational marijuana Copyright

60 State Activity Medical Marijuana Recreational Marijuana 29 8 Plus Washington, DC have legalized medical marijuana Plus Washington, DC have legalized recreational marijuana Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 60

61 Federal Activity US Drug Enforcement Administration Federal funds will not be used to prevent state implementation of medical marijuana laws Controlled Substances Act Unclear as to what will happen August 2016 May 2017 Currently 2017 and Beyond Will not reclassify marijuana House Resolution 244 Marijuana is an illegal Schedule I drug Current Administration Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 61

62 Colorado Supreme Court Coats v. Dish Network (2015) Employers can lawfully terminate workers for using marijuana outside of work hours even though the drug is LEGAL in the state. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 62

An insurer MUST reimburse a qualified workers comp claimant for the cost of medical marijuana to treat low back pain Appealed to NM New Mexico Court of Appeals Vialpando v.

63 An insurer MUST reimburse a qualified workers comp claimant for the cost of medical marijuana to treat low back pain Appealed to NM New Mexico Court of Appeals Vialpando v. Ben s Automotive Services and Redwood Fire & Casualty (2014) Supreme Court: Certiorari denied Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 63

64 New Mexico Court of Appeals Maez v. Riley Industrial (2015); Lewis v. American General Media (2015) An employer is required to reimburse a qualified claimant for medical marijuana if the drug is reasonable and necessary medical care for treatment of a work injury. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 64

65 Connecticut Workers Compensation Commission Decision Petrini v. Marcus Dairy, Inc. and Gallagher Bassett Service (2016) Upheld decision that the claimant s use of medical marijuana for pain management of his debilitating condition constitutes reasonable and necessary medical treatment. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 65

66 Maine WC Board Decisions (2016) Maine WC Board: Noll v. Lepage Bakeries, Inc. and Cannon Cochran Management Services Bourgoin v. Twin Rivers Paper Co.

66 66 Maine WC Board Decisions (2016) Maine WC Board: Noll v. Lepage Bakeries, Inc. and Cannon Cochran Management Services Bourgoin v. Twin Rivers Paper Co., LLC and Sedgwick CMS A self-insured employer is to reimburse costs for reasonable and proper use of medical marijuana under the state s WC and medical marijuana law. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 66

67 Other Activity At least five states (Connecticut, Maine, Minnesota, New Jersey, and New Mexico) have allowed reimbursement for WC under certain circumstances Florida and North Dakota passed legislation in 2017 prohibiting payment of WC benefits for medical marijuana New Mexico Adopted a fee schedule to provide for reimbursement of medical marijuana to injured workers effective January 1, 2016 Introduced legislation (SB 371/HB 527) in 2017 requiring employers and carriers to pay for medical marijuana for injured workers; the legislation did not pass Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 67

68 Questions Raised by WC Stakeholders Is marijuana a safer alternative to opioids for pain management? Is it a less expensive alternative to other drugs? When a state legalizes marijuana, what is the potential impact on neighboring states? Should states consider fee schedules for marijuana (like New Mexico)? How are appropriate dosage levels determined? What is the impact on Medicare Set-Aside Allocations since marijuana is still illegal under federal law? Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 68

69 Legalization of Marijuana Summary States are increasingly legalizing marijuana in some form for medical use. Courts are increasingly dealing with contested cases of medical marijuana in the work environment. Marijuana is still illegal under federal law and remains a Schedule I drug. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 69

73 Indemnity Benefits Constitute the Majority of Total Benefit Costs in South Carolina 52.0% 48.0% 45.9% 54.1% 41.6% 58.4% Indemnity Medical Regional states are AL, GA, NC, and TN Based on NCCI s financial data Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 73

74 Loss Ratio South Carolina Indemnity and Medical Loss Ratios Indemnity Policy Year Medical Based on NCCI s financial data at current benefit level and developed to ultimate Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 74

75 What Drives Indemnity and Medical Loss Ratios? Frequency (Claims/ Premium) Indemnity Severity (Loss/Claim) Indemnity Loss Ratio (Loss/Premium) Frequency (Claims/ Premium) Medical Severity (Loss/Claim) Medical Loss Ratio (Loss/Premium) Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 75

76 Frequency per Million of On-Leveled Premium South Carolina Claim Frequency Policy Year Based on NCCI s financial data Frequency of lost-time claims adjusted to a common wage level Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 76

77 Average Indemnity Claim Severity ($ '000s) South Carolina Average Indemnity Claim Severity Policy Year Adjusted to Common Wage Level Actual Based on NCCI s financial data for lost-time claims at current benefit level and developed to ultimate 77 Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 77

78 Average Medical Claim Severity ($ '000s) South Carolina Average Medical Claim Severity Policy Year Adjusted to Common Wage Level Actual Based on NCCI s financial data through 12/31/2016 for lost-time claims at current benefit level and developed to ultimate Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 78

South Carolina Average Claim Frequency Frequency per 100,000 Workers All Claims TN 821 2,801 Total 3,622 NC 660 2,021 Total 2,681 GA 698 2,151 Total 2,849 AL 661 2,523 Total 3,184 SC 820 2,031 Total

79 South Carolina Average Claim Frequency Frequency per 100,000 Workers All Claims TN 821 2,801 Total 3,622 NC 660 2,021 Total 2,681 GA 698 2,151 Total 2,849 AL 661 2,523 Total 3,184 SC 820 2,031 Total 2, ,000 1,500 2,000 2,500 3,000 3,500 4,000 Lost-Time Medical-Only Based on NCCI s Statistical Plan data Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 79

Average Indemnity Claim Severity in the Region Lost-Time Claim Severity in $ Thousands 33.8 36.5 33.4 21.3 16.

80 Average Indemnity Claim Severity in the Region Lost-Time Claim Severity in $ Thousands SC AL GA NC TN Based on NCCI s financial data for lost-time claims Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 80

Average Medical Claim Severity in the Region Lost-Time Claim Severity in $ Thousands 44.1 27.8 35.2 28.8 34.

81 Average Medical Claim Severity in the Region Lost-Time Claim Severity in $ Thousands SC AL GA NC TN Based on NCCI s financial data for lost-time claims Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 81

South Carolina Distribution of Claims by Injury Type 72% 14% 14% 0% 77% 14% 9% 0% 75% 15% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Medical Only Temporary Total Permanent Partial Fatal &

82 South Carolina Distribution of Claims by Injury Type 72% 14% 14% 0% 77% 14% 9% 0% 75% 15% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Medical Only Temporary Total Permanent Partial Fatal & Permanent Total Regional states are AL, GA, NC, and TN Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 82

AL, GA, NC, and TN Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which

83 South Carolina Indemnity Loss Distribution by Injury Type 39% 57% 1% 3% 41% 54% 3% 2% 33% 57% 4% 6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Temporary Total Permanent Partial Permanent Total Fatal Regional states are AL, GA, NC, and TN Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 83

84 South Carolina Medical Loss Distribution by Injury Type 35% 53% 4% 8% 0% 32% 48% 8% 11% 1% 30% 47% 9% 13% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Temporary Total Permanent Partial Permanent Total Medical Only Fatal Regional states are AL, GA, NC, and TN Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 84

86 Glossary Assigned Risk Adjustment Program (ARAP) An assigned risk market program that surcharges residual market risks based on the magnitude of their experience rating modification. Calendar Year (CY) Experience of earned premium and loss transactions occurring within the calendar year beginning January 1, irrespective of the contractual dates of the policies to which the transactions relate and the dates of the accidents. Calendar-Accident Year (AY) The accumulation of loss data on all accidents with the date of occurrence falling within a given calendar year. The premium figure is the same as that used in calendar year experience. Claim Frequency The number of claims per unit of exposure; for example, the number of claims per million dollars of premium or per 100 workers. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 86

87 Glossary Claim Severity The average cost of a claim. Severity is calculated by dividing total losses by the total number of claims. Combined Ratio The sum of the (1) loss ratio, (2) expense ratio, and (3) dividend ratio for a given time period. Detailed Claim Information (DCI) An NCCI Call that collects detailed information on an individual workers compensation losttime claim basis, such as type of injury, whether or not an attorney was involved, timing of the claim s report to the carrier, etc. Direct Written Premium (DWP) The gross premium income adjusted for additional or return premiums, but excluding any reinsurance premiums. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 87

88 Glossary Indemnity Benefits Payments by an insurance company to cover an injured worker s time lost from work. These benefits are also referred to as wage replacement benefits. Loss Ratio The ratio of losses to premium for a given time period. Lost-Time (LT) Claims Claims resulting in indemnity benefits (and usually medical benefits) being paid to or on behalf of the injured worker for time lost from work. Medical-Only Claims Claims resulting in only medical benefits being paid on behalf of an injured worker. Net Written Premium (NWP) The gross premium income adjusted for additional or return premiums and including any additions for reinsurance assumed and any deductions for reinsurance ceded. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 88

89 Glossary Permanent Partial (PP) A disability that is permanent but does not involve a total inability to work. The specific definition and associated workers compensation benefits are defined by statute and vary by jurisdiction. Policy Year (PY) The year of the effective date of the policy. Policy year financial results summarize experience for all policies with effective dates in a given calendar year period. Schedule Rating A debit and credit plan that recognizes variations in the hazard-causing features of an individual risk. Take-Out Credit Program An assigned risk program that encourages carriers to write current residual market risks in the competitive voluntary marketplace. Temporary Total (TT) A disability that totally disables a worker for a temporary period of time. Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 89

91 NCCI s Workers Compensation Resources Financial Aggregate Calls Used for aggregate ratemaking Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan) Used for class ratemaking Detailed Claim Information In-depth sample of lost-time claims Policy Data Policy declaration page information Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 91

92 Financial Aggregate Calls Collected Annually Policy and calendar-accident year basis Statewide and assigned risk data Premiums, Losses, and Claim Counts Evaluated as of December 31 Purpose Basis for overall aggregate rate indication Research Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 92

93 Policy Year Financial Aggregate Data Policy Expiration Date Policy Year 2014 Policy Year 2015 Policy Year /1/2014 1/1/ /31/2015 1/1/ /31/2018 Policy Effective Date Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 93

94 Calendar-Accident Year Financial Aggregate Data Policy Expiration Date Calendar- Accident Year 2015 Calendar- Accident Year 2016 Calendar- Accident Year /1/2015 1/1/ /31/2016 1/1/ /31/2019 Policy Effective Date Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 94

95 Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan) Data Experience by Policy Detail Exposure, premium, and experience rating modifications Individual claims by injury type Purposes Classification relativities Experience Rating Plan Research Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 95

96 Valuation of Statistical Plan Data 1st Report Valuation 2nd Report Valuation 3rd Report Valuation 4th Report Valuation 5th Report Valuation Policy Effective 18 Months 30 Months 42 Months 54 Months 66 Months Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 96

Florida. September 19,

Florida. September 19, Florida September 19, 2017 Jeff_Eddinger@ncci.com 561-893-3133 Jay_Rosen@ncci.com 561-893-3062 Florida State Advisory Forum Welcome Annual Issues Symposium: Bill Donnell Video Excerpt Countrywide Workers