To Members of the Governing Committee, WCIRB Members and All Interested Parties: This meeting is Open to the Public.

Transcription

1 Governing Committee Meeting Agenda Date Time Location Staff Contact September 6, :00 PM WCIRB California Eric S. Riley 1221 Broadway, Suite 900 Oakland, CA 1221 Broadway, Suite 900 Oakland, CA Fax Released: August 30, 2017 To Members of the Governing Committee, WCIRB Members and All Interested Parties: This meeting is Open to the Public. I. Approval of Minutes Meeting held August 9, 2017 II. Additions to the Agenda III. Ratification of Actions of WCIRB Committees A. Classification and Rating Committee Meetings held April 25, 2017 and June 1, 2017 (without attachments) IV. Unfinished Business A. January 1, 2018 Regulatory Filing (oral status report) B. January 1, 2018 Pure Premium Rate Filing V. New Business VI. Next Meeting Date: December 13, 2017 VII. Adjournment Antitrust Notice As members of the Workers Compensation Insurance Rating Bureau of California (WCIRB), you are bound, when involved in meetings or other activities of the WCIRB, to limit your actions (and discussions other than social ones) to matters relating to the business of the WCIRB California. Matters that do not relate directly to WCIRB California business should be avoided. Members should particularly avoid discussions or conduct that could be construed as intended to affect competition (or access to markets). Thus, as members, you should not discuss or pursue the business interests of individual insurers or others, including, in particular, the plans of individual members involving, or the possibility or desirability of (a) raising, lowering, or stabilizing prices (premiums or commissions); (b) doing business or refusing to do business with particular, or classes of, insurers, reinsurers, agents, brokers, or insureds, or in particular locales; or (c) potential actions that would affect the availability of products or service either generally or in specific markets or locales. 1 WCIRB California

2 Governing Committee Meeting Agenda for September 6, 2017 Released: August 30, 2017 Notice The information in this Agenda was developed by the Workers Compensation Insurance Rating Bureau of California (WCIRB) for the purpose of assisting the WCIRB Governing Committee. The WCIRB cannot make any guarantees if this information is used for any other purpose and the WCIRB shall not be liable for any damages, of any kind, whether direct, indirect, incidental, punitive or consequential, arising from the use of or reliance upon this information for any other purpose Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted in this copyright notice or by federal copyright law. No copyright is claimed in the text of statutes and regulations quoted within this work. Each WCIRB member company, including any registered third party entities, (Company) is authorized to reproduce any part of this work solely for the following purposes in connection with the transaction of workers compensation insurance: (1) as necessary in connection with Company s required filings with the California Department of Insurance; (2) to incorporate portions of this work, as necessary, into Company manuals distributed at no charge only to Company employees; and (3) to the extent reasonably necessary for the training of Company personnel. Each Company and all agents and brokers licensed to transact workers compensation insurance in the state of California are authorized to physically reproduce any part of this work for issuance to a prospective or current policyholder upon request at no charge solely for the purpose of transacting workers compensation insurance and for no other purpose. This reproduction right does not include the right to make any part of this work available on any website or any form of social media. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Connect, WCIRB Inquiry, X-Mod Direct, escad and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the WCIRB at customerservice@wcirb.com. 2 WCIRB California

3 Classification and Rating Committee Meeting Minutes Date Time Location Staff Contact April 25, :45 AM WCIRB California Brenda Keys 1221 Broadway, Suite 900 Oakland, CA 1221 Broadway, Suite 900 Oakland, CA Fax Released: May 2, 2017 Members Present National Union Fire Insurance Company of Pittsburgh PA Pacific Compensation Insurance Company Republic Indemnity Company of America Security National Insurance Company State Compensation Insurance Fund Travelers Indemnity Company Zenith Insurance Company Represented By Ellen Sonkin Christine Closser Reggie Fradkin Matt Zender John Gagan** Steve Carmassi Sarah Elston California Department of Insurance Patricia Hein** Brentley Yim WCIRB Brenda Keys, Chair David Bellusci Ward Brooks Brian Gray Kristen Marsh Tony Milano Bill Mudge Eric Riley Michelle Sheng* * Attended part of the meeting ** Participated via teleconference The meeting of the Classification and Rating Committee was called to order at 9:45 AM, with Ms. Brenda Keys, Senior Vice President and Chief Legal Officer, presiding. * * * * * Approval of Minutes The Minutes of the meeting held on March 14, 2017 were distributed to the Committee members in advance of the meeting for review. As there were no corrections to the Minutes, a motion was made, seconded and unanimously approved to adopt the Minutes as written. 1 WCIRB California

4 Classification and Rating Committee Meeting Minutes for April 25, 2017 Released: May 2, 2017 Notice The information in these Minutes was developed by the Workers Compensation Insurance Rating Bureau of California (WCIRB) for the purpose of assisting the WCIRB Classification and Rating Committee. The WCIRB cannot make any guarantees if this information is used for any other purpose and the WCIRB shall not be liable for any damages, of any kind, whether direct, indirect, incidental, punitive or consequential, arising from the use of or reliance upon this information for any other purpose Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted in this copyright notice or by federal copyright law. No copyright is claimed in the text of statutes and regulations quoted within this work. Each WCIRB member company, including any registered third party entities, (Company) is authorized to reproduce any part of this work solely for the following purposes in connection with the transaction of workers compensation insurance: (1) as necessary in connection with Company s required filings with the California Department of Insurance; (2) to incorporate portions of this work, as necessary, into Company manuals distributed at no charge only to Company employees; and (3) to the extent reasonably necessary for the training of Company personnel. Each Company and all agents and brokers licensed to transact workers compensation insurance in the state of California are authorized to physically reproduce any part of this work for issuance to a prospective or current policyholder upon request at no charge solely for the purpose of transacting workers compensation insurance and for no other purpose. This reproduction right does not include the right to make any part of this work available on any website or any form of social media. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Connect, WCIRB Inquiry, X-Mod Direct, escad and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the WCIRB at customerservice@wcirb.com. 2 WCIRB California

5 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item II-A Self-Insured Data Reporting The Committee was reminded that payroll and loss experience developed by a legally self-insured California employer may be used to calculate an experience modification after the employer obtains insurance. 1 Self-insured data is not used for any purpose other than to calculate an experience modification for a specific employer. In order to improve the efficiency and accuracy of self-insured payroll and loss data submissions, at the March 14, 2017 Classification and Rating Committee meeting, WCIRB staff recommended that insurers be permitted to submit self-insured data electronically in WCSTAT format (either through the insurer s normal unit statistical report submission process or via the BEEP application). 2 The Committee members were advised that, in order to assess the impact of the proposed process changes, WCIRB staff reached out to the insurers that most frequently request the use of self-insured data in experience rating. These insurers indicated that submitting self-insured data electronically in WCSTAT format could be readily implemented and would not pose any significant issues. They also indicated that leveraging the expertise of their unit statistical reporting unit to obtain, validate and electronically submit self-insured data in WCSTAT format would be more efficient and more accurate than the current hard copy reporting process. To implement these changes, staff recommended revisions to the ERP to permit the electronic reporting of self-insured experience at the March 14, 2017 meeting. The Committee recommended additional changes to clarify that the required affidavit must be submitted in a format prescribed by the WCIRB and those clarifying changes were presented to the Committee at this meeting. Additionally, in response to the Committee s request, staff provided a draft of the form for the submission of hard copy and electronic selfinsured experience. Based on feedback provided by a Committee member prior to the April 25, 2017 meeting, the Committee was advised that further refinements would be made to the draft form. At the March 14, 2017 meeting, staff recommended that a fee be charged for each hard copy submission of self-insured data to help defray the cost of WCIRB staff time to process, review, validate and convert the data to an electronic format. Some Committee members expressed concern about having to use the BEEP application or build a separate system to electronically submit self-insured data. One Committee member also suggested that a fee only be charged if an insurer submits more than a minimal number of hard copy requests per year. The Committee was advised that staff evaluated the option of establishing a multi-tiered fee structure for reviewing and keying hard copy self-insured data submissions but ultimately concluded that such an approach would not meet the objectives of (1) accurately allocating the cost to those members that submit requests to use self-insured data for experience rating; (2) improving the accuracy and efficiency of the current process; and (3) encouraging members to adopt the best available process. Following staff s presentation, a motion was made, seconded and unanimously passed to recommend that the proposed ERP changes be included in the January 1, 2018 Regulatory Filing. 1 See California Workers Compensation Experience Rating Plan 1995 (ERP), Section III, Eligibility and Experience Period, Rule 5, Self-Insurers Data. 2 BEEP, the Bureau Entry and Edit Package, is a web-based service developed by the American Cooperative Council on Compensation Technology (ACCCT) for the Compensation Data Exchange, LLC (CDX), an entity responsible for electronic data interchange between data providers and Data Collection Organizations (DCO). BEEP is used by data reporters to enter, edit and submit unit statistical report data electronically in WCSTAT format (national reporting specifications for reporting unit statistical data) through the CDX system to the DCOs. 3 WCIRB California

6 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-A 2019 Experience Rating Formula Changes At the meeting of May 10, 2016, the Committee reviewed the recommendations of the Working Group on the Reporting of Small Medical Only Claims, which was established at the Committee s recommendation in order to help address the issues surrounding the underreporting of small medical only claims. The Working Group recommendations included considering the elimination of the first $250 from each claim in the experience rating formula to reduce the incentive to not report small claims. This proposal was found to result in only a small loss of predictive accuracy and had a very modest impact on the distribution of experience modifications and the typical claim free experience modification. The Committee agreed that a change to the Experience Rating Plan to exclude the first $250 dollars of each claim could potentially significantly reduce the incentive to not report small claims without having significant detrimental effects and asked staff to study this further with an updated year of experience. Staff presented a summary of its review of a fifth projection period (policy year 2014), which confirmed that the findings for the most recent evaluable period were comparable to those found for the four prior years studied and reviewed by the Committee in The Committee was advised that the Actuarial Research Working Group reviewed staff s findings at its February 17, 2017 meeting and the Actuarial Committee reviewed these findings at its March 21, 2017 meeting. Based on these reviews, the Actuarial Committee unanimously recommended adopting the $250 exclusion of each claim for experience rating beginning with policy year The Committee discussed the proposed changes at length. It was noted that under the proposal all claims would be shown on the experience rating worksheet and that any claims less than $250 in cost would not count for the purpose of determining whether the 25% single claim limitation applies. One of the Public Members of the Governing Committee in attendance at the meeting suggested that in order for this change to achieve its desired impact of increasing the reporting of small medical only claims, the WCIRB should undertake a comprehensive educational outreach effort. Both the Committee and staff agreed with this recommendation. The Committee also discussed staff s proposed Plan changes intended to simplify the experience rating formula. The Committee was advised that implementation of the variable split formula in 2017 allows for a dramatic simplification of the formula by eliminating the Actual Excess Losses, Expected Primary Losses, Credibility Primary Value and Credibility Excess Value from the computation. However, it was noted that, for informational purposes, staff recommended continuing to show Expected Primary Losses on the Experience Rating Worksheet. A motion was made, seconded and unanimously passed to recommend that: (1) the first $250 of each claim be eliminated from the experience rating formula, (2) the experience modification formula be simplified, consistent with the variable split formula and (3) the Experience Rating Plan be clarified and simplified to conform to these proposed changes. The Committee also recommended that these changes to the Experience Rating Plan and Uniform Statistical Reporting Plan be included in the January 1, 2018 Regulatory Filing to be effective January 1, 2019 in order to permit the WCIRB sufficient time to conduct comprehensive outreach and education and to implement the necessary processing system changes. 5 WCIRB California

7 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-B Terrorism Premium and Exposure Data Reporting The Committee was advised that Section 111 of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2015 authorizes the Secretary of the Treasury to collect data on terrorism exposure from insurers. The Federal Insurance Office (FIO) and the National Association of Insurance Commissioners (NAIC) have separately requested insurer-specific workers compensation data related to terrorism premium from the Data Collection Organizations on behalf of their member insurers and intend to continue to collect this information on an annual basis. The Committee was reminded that, in California, the advisory pure premium rates approved by the Insurance Commissioner do not reflect a provision for terrorism losses. In addition, while some insurers workers compensation rate filings with the California Department of Insurance (CDI) reflect a specific premium charge for terrorism, the WCIRB does not require the reporting of specific premium adjustments related to insurer-filed rating plans. In order to be able to respond to FIO and NAIC s requests for certain terrorism premium and exposure data, the WCIRB recommended amendments to the California Workers Compensation Uniform Statistical Reporting Plan 1995, to require the reporting of the estimated policy exposure amount on a per classification level and the estimated policy premium amount utilizing statistical code 9740, Catastrophe Provisions for Terrorism, and to require the reporting of terrorism premium information utilizing statistical code 9740, Catastrophe Provisions for Terrorism. A motion was made, seconded and unanimously passed to recommend that the proposed changes be included in the WCIRB s January 1, 2018 Regulatory Filing. 27 WCIRB California

8 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-C Physical Audit Threshold The Committee was reminded that the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) requires that all policies that generate a final premium at or above a specific threshold amount are subject to physical audit. The threshold has historically been set at a level that corresponds approximately with eligibility for experience rating so that the vast majority of payroll reflected in the experience rating calculation is subject to physical audit. The physical audit threshold level is reviewed annually and was last changed to $13,000 effective January 1, The Committee was advised that WCIRB staff has reviewed the audit threshold in preparation for the January 1, 2018 Regulatory Filing using the two alternative bases of projection that have been used in prior analyses. Staff noted that the approximate average of the two indications for policies incepting on or after January 1, 2018 is $12,500. Since this indication is within $500 of the current premium audit threshold and the threshold is intended to be changed on a relatively infrequent basis and when there is a significant indicated change, the consensus of the Committee was to maintain the current premium audit threshold of $13, WCIRB California

9 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-D Payroll Remuneration The Committee was reminded that each year, WCIRB staff reviews current wage and payroll limits in the California Worker s Compensation Uniform Statistical Reporting Plan 1995 (USRP) in light of projected wage inflation. The Committee was advised that the WCIRB is projecting that wage inflation for 2018 will be approximately 4.8% based on the UCLA Anderson wage forecast for all industries as of March Based on this projection of wage inflation, WCIRB staff recommended a number of revisions to the USRP related to wage and payroll limitations. The Committee reviewed the recommended changes to the maximum and minimum payroll limits and the per taxicab minimum that were included in the Agenda materials and voted unanimously to approve the following recommendations for inclusion in the WCIRB s January 1, 2018 Regulatory Filing 32 WCIRB California

10 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-E Anniversary Rating Date Changes The Committee was reminded that California Insurance Commissioner s regulations set forth in the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP), California Workers Compensation Experience Rating Plan 1995 (ERP), and Miscellaneous Regulations for the Recording and Reporting of Data 1995 (Miscellaneous Regulations) (collectively the Plans) are typically revised on an annual basis as a result of the Commissioner s Decision on the WCIRB s Regulatory Filing. The Plans each contain a rule specifying when the regulations and any changes apply to individual policies or risks. The rules for establishing the Anniversary Rating Date (ARD) are contained in the ERP. While in most cases the ARD is controlled by the effective date of the preceding policy, there are numerous circumstances in which a risk s ARD differs from one or more of the policy effective dates for that risk. Thus, there are instances when applying the USRP rules to a particular policy is complicated by the need to apply one set of rules to a portion of the policy period and a different set of rules to the remainder of the policy period. This is most common when a risk s policies are not consecutive one-year terms or when a risk has one or more concurrent policies that do not have common policy dates. The Committee was advised that those instances when the ARD does not correspond to the policy effective date have created underwriting, auditing and data reporting complexities. Further, the rules can be confusing for employers, agents and brokers who question why rates and classifications may change midway through a policy period. It is for these reasons that other jurisdictions recently eliminated the use of the ARD to indicate when the data reporting rules, classifications and rates applied to an individual policy and that WCIRB staff recommended revising the USRP to indicate that its provisions apply as of the policy effective date. The Committee was further advised that, with respect to the ERP, the WCIRB must determine, at a risk level, the date an experience modification is to be effective. This effective date is used to determine the appropriate eligibility threshold, experience period and rating procedure. It is important to note that since an experience modification is based on the experience of all the combinable entities within the risk, a single experience modification frequently applies to multiple policies having non-concurrent policy dates. Therefore, the ERP is applied at the risk level as opposed to the policy level. This requires that the rules in the ERP and any subsequent changes be based at the risk level. Currently, the ERP defines the date upon which an experience modification is to be effective as the Anniversary Rating Date (ARD) and details the process for determining the ARD. Staff indicated that while there is no need to revise these rules, in the interest of clarity and consistency with other jurisdictions, staff recommended that the term Anniversary Rating Date be replaced with the term Rating Effective Date. This change is solely for editorial purposes and has no impact on the administration of the ERP. WCIRB staff recommended other clarifying changes to the ERP consistent with the WCIRB s processes in determining the ARD. Since the rules in the Miscellaneous Regulations primarily apply to coverage, WCIRB staff also recommended that the Miscellaneous Regulations be applied to an individual policy as of the policy effective date, similar to the USRP. Since none of the rules in the Miscellaneous Regulations involve the aggregation of data at the risk level for experience rating purposes, there is no reason for the Miscellaneous Regulations to apply as of the Rating Effective Date. Following the Committee s discussion, a motion was made, seconded and unanimously passed to recommend that these proposed changes be included in the WCIRB s January 1, 2018 Regulatory Filing. Staff informed the Committee that if these proposed changes are approved by the Insurance Commissioner, the Experience Rating Worksheet explanatory page and any Standard Forms that reference the ARD will be reviewed and, as appropriate, amended to replace the phrase Anniversary Rating Date with Rating Effective Date. 38 WCIRB California

11 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-F Classification Study Installation, Service and Repair of Building Security Systems, Audio/Video Systems, Office Machines, Computer Systems, Telephone Systems and Instruments 7605(1), Burglar Alarm and Security Alarm Systems Installation, Service or Repair 7605(2), Fire Alarm Systems Installation, Service or Repair 7605(3), Audio/Video Systems Installation, Service or Repair 9516(1), Television, Video, Audio and Radio Equipment Installation, Service or Repair 9516(2), Automobile or Truck Radio, Alarm and Electronic Equipment Installation, Service or Repair 7606, Cable Television Companies 5191(1), Office Machine Installation, Service or Repair 5191(2), Computer or Computer System Installation, Service or Repair 5191(3), Telephone or Telephone System Installation, Service or Repair 5128, Instrument professional or scientific The Committee reviewed a draft WCIRB report regarding classifications applicable to the installation, service and repair of a variety of security, communication and similar systems that utilize low voltage wiring or wireless communication. These systems included but were not limited to security alarm systems, fire alarm systems, audio and video systems, office machines, computer systems, telephone systems, telecommunication and satellite antennas, medical and non-medical professional instruments, integrated circuit chip and wafer processing equipment, building automation systems and programmable industrial controls. Specifically, the WCIRB reviewed: 1. How advances in technology and the development of multi-function systems and devices have eroded the distinctions among some of these classifications. 2. How to clarify and strengthen the distinctions among these classifications and provide direction about their application. 3. Identifying and analyzing distinct subgroups within each classification to clarify or restore the intended scope of each classification such that each reflects the risk of loss common to those employers. 4. Whether there was clear differentiation between alternate wordings, whether each phraseology was reflective of current industry usage and whether any of the subject classifications should be revised, consolidated and/or eliminated to ensure that employers in the affected industries are classified appropriately. 5. Whether there were significant constituents within these classifications for which underlying operations or loss and payroll experience were not compatible with existing classifications and, to the extent the underlying loss and payroll experience is statistically credible, assigning these constituents to another existing classification or a newly established classification. The Committee was provided an overview of the scope of operations assigned to the classifications at issue and, based on the study results, WCIRB staff recommended the following: 1. Combining fire alarm installation, service or repair with security alarm installation, service or repair in a single Classification 7605 phraseology, rather than maintaining separate alternate phraseologies for fire and security alarms. 2. Consolidating operations for audio/video installation, service or repair by eliminating Classification 7605(3) and reassigning its constituents to Classification Establishing a separate Construction or Erection classification for the cellular and telecommunication antenna and equipment installation, service or repair industry. 47 WCIRB California

12 Classification and Rating Committee Meeting Minutes for April 25, Establishing a Construction or Erection classification for the cellular and telecommunication antenna and equipment installation, service or repair industry (see item 3 above) and include an alternate wording applicable to the installation, service or repair of satellite antenna systems for television and internet. The WCIRB also recommends amending Classification 7606, Cable Television Companies, to clarify that it applies to satellite television and internet service providers that are licensed by the Federal Communications Commission. 5. Establishing a new Automotive Industry Group classification for automobile or truck radio, alarm and electronic equipment installation, service or repair operations and eliminating the Classification 9516(2) alternate wording. 6. Defining Classification 5191 with a single phraseology for office machine installation, service or repair, and establishing a separate classification to encompass both computer system and telephone system installation, service or repair. 7. Restoring Classification 5128 to its original intended scope of professional and scientific instruments with the clarifying addition of medical instruments. In addition, the WCIRB recommends that a new classification be established for the installation, service or repair of integrated circuit chip and wafer manufacturing and processing equipment and establishing a new Construction or Erection classification with alternate phraseologies for the installation, service or repair of building automation systems and programmable industrial controls. The Committee discussed the draft report and proposed changes contained in the Agenda materials at length. The Committee suggested several refinements to the proposed changes. Following the Committee s discussion, a motion was made, seconded and unanimously passed to recommend that the proposed changes to the California Workers Compensation Uniform Statistical Reporting Plan 1995, as amended by the Committee, be included in the WCIRB s January 1, 2018 Regulatory Filing. 1 1 Following the Committee meeting, staff realized that amendments to Appendix 1, Construction and Erection Classifications, of the USRP had not been included in the Agenda for four classifications. Accordingly, the updated draft report and proposed changes to Appendix 1 will be resubmitted to the Committee for review at the June 1, 2017 meeting. 48 WCIRB California

13 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-G Classification Study Athletic and Fitness Instruction, Exercise Facilities, Clubs and Baths 8868, Colleges or Schools private not automobile schools professors, teachers or academic professional employees 9101, Colleges or Schools private not automobile schools all employees other than professors, teachers, or academic professional employees including cafeterias 9053(1), Baths N.O.C all employees including restaurant employees and receptionists 9053(2), Exercise or Health Institutes all employees including restaurant employees and receptionists 9053(3), Swimming Pools commercial all employees including restaurant employees and receptionists 9053(4), Clubs swimming including front desk employees, lifeguards and restaurant or tavern employees 9053(5), Clubs tennis or racquetball including front desk employees and restaurant or taverns employees The Committee was reminded that, at its request, the WCIRB is conducting a comprehensive multi-year review of Classifications 8868, Colleges or Schools private not automobile schools professors, teachers or academic professional employees, and 9101, Colleges or Schools private not automobile schools all employees other than professors, teachers, or academic professional employees including cafeterias. As part of the first phase of the study, the WCIRB reviewed the operations of employers assigned to Classification 8868 that provide athletic or fitness instructional programs, including but not limited to martial arts, gymnastics, dance, yoga and tennis instruction, and compared them to employers assigned to Classification 9053(2), Exercise or Health Institutes. The WCIRB also evaluated whether the constituents of Classification 9053 comprise a homogenous group and whether any of the alternate wordings for Classification 9053 should be revised, consolidated and/or eliminated to ensure each phraseology is reflective of current industry usage and clearly differentiated from other classifications. The Committee was provided an overview of the scope of operations assigned to the classifications at issue and, based on the study results, WCIRB staff recommended: 1. Establishing a new classification, Classification 8870, Fitness Instruction or Studios all employees including receptionists, for employers engaged in operating fitness instruction programs or studios. 2. Revising the phraseology for Classification 9053(2), Exercise or Health Institutes, to better define its scope and direct how related operations shall be classified and reclassifying a number of employers from Classification 9053(2) to the proposed Classification 8870 as Classification 8870 better describes the operations of these employers. 3. Monitoring the Classification Relativities of Classifications 8870 and 9053 on an annual basis to review if these classifications should be combined for ratemaking purposes. 4. Amending Classification 9053(1), Baths, to establish a unique classification code and clarify its intended application for employers engaged in the operation of spa or bath facilities. 5. Consolidating the alternate wordings for Classifications 9053(3), Swimming Pools, and 9053(4), Clubs swimming, to Classification 9053(3), Swimming Pools or Swimming Clubs. 6. Amending Classification 9053(5), Clubs tennis or racquetball, for consistency and to provide direction as to how related operations should be classified. The Committee discussed the draft report and proposed changes contained in the Agenda materials at length. The Committee suggested several refinements to the proposed changes, including changing the 65 WCIRB California

14 Classification and Rating Committee Meeting Minutes for April 25, 2017 phraseology of Classification 9053(5), Clubs tennis or racquetball, to clarify that this classification applies to all sports involving a racquet or paddle. Following the Committee s discussion, a motion was made, seconded and unanimously passed to recommend that the proposed changes to the California Workers Compensation Uniform Statistical Reporting Plan 1995, as amended by the Committee, be included in the WCIRB s January 1, 2018 Regulatory Filing. 66 WCIRB California

15 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-H Classification Study Retail Video Media, Audio Media and Book Stores 8070, Stores video media retail 8071, Stores books retail 8017(1), Stores retail N.O.C. The Committee reviewed a draft WCIRB report on staff s study of retail video media, audio media and book stores that was initiated because the reported exposure in Classification 8070, Stores video media retail, had rapidly declined and the classification no longer developed sufficient data to produce a statistically credible advisory pure premium rate. The WCIRB studied this classification to determine whether it should be eliminated and its constituents reassigned to one or more existing classifications. Additionally, while Classification 8071, Stores books retail, was currently marginally credible, its credibility had also been rapidly decreasing with evolving practices in that industry. The WCIRB reviewed whether Classifications 8070 and 8071 had sufficiently similar operations to be combined, or whether one or both of these classifications should be combined with similar recorded audio media retail store operations that are currently assignable to Classification 8017(1), Stores retail N.O.C. The Committee was provided an overview of the scope of operations assigned to the classifications at issue and, based on the study results, WCIRB staff recommended: 1. Eliminating Classification 8070, Stores video media retail, and reassigning its constituents to Classification 8071, Stores books retail. 2. Reassigning the operations of recorded audio media retail stores from Classification 8017(1), Stores retail N.O.C., to Classification 8071, Stores books retail. 3. Amending Classification 8071, Stores books retail, to specify that it applies to the retail sale or rental of books, video media and recorded audio media. The WCIRB also recommended amending Classification 8071 to remove its current requirements that (a) the sale of books and magazines equals or exceeds 75% of gross receipts and (b) not less than 75% of the square footage devoted to the display and sale of merchandise is dedicated to specified merchandise. The Committee discussed the draft report and the proposed changes contained in the Agenda materials. Following the Committee s discussion, a motion was made, seconded and unanimously passed to recommend that the proposed changes to the California Workers Compensation Uniform Statistical Reporting Plan 1995 be included in the WCIRB s January 1, 2018 Regulatory Filing. 88 WCIRB California

16 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-I Classification Enhancements to the California Workers Compensation Uniform Statistical Reporting Plan 1995 The Committee was informed that, as part of a multi-year project to enhance the standard classifications contained in the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP), staff recommended enhancement changes to 20 classifications, and changes for consistency to an additional 21 classifications. In general, the proposed changes are to clarify the intended application of each classification and to provide direction as to how related operations are classified. The Committee reviewed the changes recommended by staff and, in the process, recommended additional clarifying changes, which are summarized below. The Committee recommended clarifying changes to Classification 9016(1), Amusement or Recreational Facilities N.O.C. all employees other than those engaged in the operation or maintenance of merrygo-rounds, swings, roller coasters or other amusement devices and ticket collectors connected therewith, to specify that the classification also applies to the operation of golf driving ranges that are not operated by golf courses or country clubs. The Committee also recommended a clarification to Classification 9182, Athletic Teams or Parks all employees other than players or umpires, to specify that the classification applies to athletic facilities. The WCIRB agreed to add the recommended amendments as well as any required conforming changes. The Committee reviewed the proposed changes to Classification 5183(1)/5187(1), Plumbing, and recommended additional review of the proposed language using pipe that does not exceed 6 in diameter that was added at the end of an existing sentence that reads: This classification applies to the installation, service and repair of plumbing systems, including but not limited to piping, valves, faucets, toilets, sinks, showers, bathtubs and water heaters within the property line of commercial or residential properties. The Committee advised that, in some cases, plumbers may use a minor amount of pipe that exceeds 6 in diameter and recommended that the classification allow for such operations. The WCIRB agreed to withdraw this proposed change to Classification 5183(1)/5187(1) pending further review. Following the Committee s discussion, a motion was made, seconded and unanimously passed to recommend that the proposed changes, as amended, be included in the WCIRB s January 1, 2018 Regulatory Filing. 101 WCIRB California

17 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-J Non-Substantive Amendments The Committee was advised that the WCIRB proposed several non-substantive changes for clarity and internal consistency to the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) and the California Workers Compensation Experience Rating Plan 1995 (ERP). Staff noted that some of the non-substantive changes impact the same rules for which substantive changes have been proposed as part of various studies previously presented to the Committee and that staff will integrate all of the approved changes before submitting the Regulatory Filing. The Committee concurred with the proposed non-substantive amendments. A motion was made, seconded and unanimously passed to recommend that the proposed changes to the USRP and ERP be included in the WCIRB s January 1, 2018 Regulatory Filing. 130 WCIRB California

18 Classification and Rating Committee Meeting Minutes for April 25, 2017 Item III-K Study of Dual Wage Thresholds The Agenda materials included a draft report analyzing the current dual wage classification thresholds with recommended adjustments to many of those thresholds to be effective January 1, The report included an analytic review of all dual wage classifications based on several alternative approaches and information sources as well as an analysis of wage survey information obtained for select classifications in order to help validate the results of the analytic approach. Staff summarized the goals of the study as well as the methodologies used and detailed in the draft report. Staff presented the results of the study for each pair of classifications and noted that for all but one pair of classifications, the analytic approach produced clear indicated thresholds for the classifications. Staff also noted that the wage survey method for the five selected classifications produced results consistent with those of the analytic approach. The Committee was advised that the dual wage thresholds proposed by staff for 2018 in the draft report reflected application of the analytical methodologies as well as some informed judgment, particularly in instances when there were minor variations in the indication produced by the primary analytical methodology compared to those produced by the supplemental methodologies. For Classifications 5467/5470, Glaziers, staff advised the Committee that no clear indicated threshold could be derived from the analytical approaches. Staff noted that wage inflation for these classifications has been very volatile and the loss to payroll ratio differentials between the low wage and high wage classifications has been volatile and sometimes below 100%. As a result, staff recommended further study of this classification based on wage surveys and a review of the applicability of the dual wage program to this classification. Staff recommended that this review take place within the next year with any proposed changes to the classification to be included in the January 1, 2019 Regulatory Filing. Staff advised the Committee that they had met with a number of employer and worker representatives and that their feedback on the methodology was reflected in the draft report. While supportive of the overall approach, one participant representing carpentry unions requested additional time to review the threshold indications for Classifications 5403/5432, Carpentry, and 5632/5633, Steel Framing. The Committee was advised that staff plans to meet with this representative within the next several weeks and report back to the Committee regarding these classifications at the June 1, 2017 meeting. Given that the new analytical approaches are working well and are based on data that can be obtained from data reported to the WCIRB and published governmental sources, staff recommended the next comprehensive review of the dual wage classification thresholds take place in two years rather than four years under the current schedule. The consensus of the Committee was that this would be appropriate to ensure the thresholds remain up to date and to minimize the potential for sharp movements in the threshold that could be disruptive to the affected employers. A motion was made, seconded and unanimously passed to recommend that the dual wage classification threshold changes proposed by staff be included in the January 1, 2018 Regulatory Filing, with the exception of the threshold for Classifications 5403/5432, Carpentry, and 5632/5633, Steel Framing, which were deferred to the June 1, 2017 meeting. 149 WCIRB California

19 Classification and Rating Committee Meeting Minutes for April 25, 2017 The meeting was adjourned at 2:03 PM. Note to Committee Members: These Minutes, as written, have not been approved. Please refer to the Minutes of the meeting scheduled for June 1, 2017 for approval and/or modification. 164 WCIRB California

20 Classification and Rating Committee Meeting Minutes Date Time Location Staff Contact June 1, :45 AM WCIRB California Brenda Keys 1221 Broadway, Suite 900 Oakland, CA 1221 Broadway, Suite 900 Oakland, CA Fax Released: June 9, 2017 Members Present National Union Fire Insurance Company of Pittsburgh PA Pacific Compensation Insurance Company Republic Indemnity Company of America Security National Insurance Company State Compensation Insurance Fund Travelers Indemnity Company Zenith Insurance Company Represented By Ellen Sonkin* Christine Closser Reggie Fradkin* Matt Zender* Randy Hogan* Steve Carmassi* Sarah Elston California Department of Insurance Patricia Hein* Brentley Yim WCIRB Brenda Keys, Chair Bill Mudge David Bellusci Brian Gray Kristen Marsh Eric Riley Tony Milano *Participated via teleconference The meeting of the Classification and Rating Committee was called to order at 9:45 AM, with Ms. Brenda Keys, Senior Vice President and Chief Legal Officer, presiding. * * * * * Approval of Minutes The Minutes of the meeting held on April 25, 2017 were distributed to the Committee members in advance of the meeting for review. As there were no corrections to the Minutes, a motion was made, seconded and unanimously approved to adopt the Minutes as written. 1 WCIRB California

21 Classification and Rating Committee Meeting Minutes for June 1, 2017 Released: June 9, 2017 Notice The information in these Minutes was developed by the Workers Compensation Insurance Rating Bureau of California (WCIRB) for the purpose of assisting the WCIRB Classification and Rating Committee. The WCIRB cannot make any guarantees if this information is used for any other purpose and the WCIRB shall not be liable for any damages, of any kind, whether direct, indirect, incidental, punitive or consequential, arising from the use of or reliance upon this information for any other purpose Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted in this copyright notice or by federal copyright law. No copyright is claimed in the text of statutes and regulations quoted within this work. Each WCIRB member company, including any registered third party entities, (Company) is authorized to reproduce any part of this work solely for the following purposes in connection with the transaction of workers compensation insurance: (1) as necessary in connection with Company s required filings with the California Department of Insurance; (2) to incorporate portions of this work, as necessary, into Company manuals distributed at no charge only to Company employees; and (3) to the extent reasonably necessary for the training of Company personnel. Each Company and all agents and brokers licensed to transact workers compensation insurance in the state of California are authorized to physically reproduce any part of this work for issuance to a prospective or current policyholder upon request at no charge solely for the purpose of transacting workers compensation insurance and for no other purpose. This reproduction right does not include the right to make any part of this work available on any website or any form of social media. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Connect, WCIRB Inquiry, X-Mod Direct, escad and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the WCIRB at customerservice@wcirb.com. 2 WCIRB California

22 Classification and Rating Committee Meeting Minutes for June 1, 2017 Item II-A Study of Dual Wage Thresholds The Committee reviewed staff s Draft Study of Dual Wage Thresholds at the April 25, 2017 meeting and adopted staff s recommended thresholds for inclusion in the January 1, 2018 Regulatory Filing for all dual wage classifications with the exception of Classifications 5403/5432, Carpentry, and 5632/5633, Steel Framing. For these classifications, staff advised the Committee that a representative of carpentry unions requested additional time to review the threshold indications for these classifications. As a result, the Committee s decision on the threshold for these classifications was deferred until the June 1, 2017 meeting. Staff informed the Committee that following the April 25, 2017 meeting staff met with the representative of the carpentry union and received feedback that was incorporated into the updated Draft Study of Dual Wage Thresholds report. For the reasons detailed in the Draft Report, staff recommended an increase in the threshold for Classifications 5403/5432, Carpentry, and Classifications 5632/5633, Steel Framing, from $30 to $32. Following staff s presentation a motion was made, seconded and unanimously passed to recommend that the dual wage classification threshold changes proposed by staff for Classifications 5403/5432, Carpentry, and 5632/5633, Steel Framing, be included in the January 1, 2018 Regulatory Filing. 3 WCIRB California