3063A (11/98) ISBN #

Transcription

1 NEER User Guide

2 This brochure is designed to help you understand the New Experimental Experience Rating (NEER) plan. This brochure does not replace the Workplace Safety and Insurance Act as final authority for the Ontario workers compensation system. For exact descriptions of the law concerning the workers compensation system in Ontario, refer to the Workplace Safety and Insurance Act. 3063A (11/98) ISBN #

3 Table of Contents I n t r o d u c t i o n SECTION I Basic Princip les 3 A. Actual Claims Costs 4 B. Expected Claims Costs 4 SECTION II NEER at Wo r k 5 A. Projected Future Costs 5 i) The Reserve Factor 5 ii) Claim Types 5 iii)1998 Changes Claim Type Definition 6 B. Insurance Provisions 7 C. Retrospective Rating 7 D. Refunds and Surcharges 8 SECTION III How to Read Your Quarterly Statement 9 A. Claim Cost Statement 10 i) How to Calculate Actual Claim Costs 13 B. Firm Summary Statement 16 i) How to Calculate Refunds and Surcharges 17 SECTION IV A NEER Glossary 2 0 Contacting the Workplace Safety and Insurance Board 2 1

4 Introduction The New Experimental Experience Rating (NEER) plan plays a major role in the way the WSIB accomplishes its overall mandate. By providing the financial incentive of reduced premiums, NEER encourages employers to invest time and money in making your workplace safer - therefore reducing accidents. Furthermore, when accidents do happen, those same incentives encourage employers to participate actively in early and safe return to work programs that help workers get back to work. NEER also helps promote a faire r distribution of the premium burden. Wi t h o u t experience rating, individual companies with a good safety re c o rd and those with a poor re c o rd within a particular industry rate gro u p pay the same premium. But under NEER, a company with a good re c o rd relative to the i n d u s t ry average gets a refund of its pre m i u m ; those with a poor re c o rd relative to the average pay a surc h a rg e. The purpose of this guide is to explain the basic principles of NEER and help you develop a working understanding of the program. The Guide also provides a detailed explanation of the NEER Quarterly Statement. This way you can watch your accident experience and costs on a regular basis and calculate your actual and expected claim costs. If necessary, you can take steps to improve claim costs and estimate your potential refund or surc h a rg e. The Guide has four sections, each of which can be read as a section on its own. Section I, Basic Principles, outlines fundamentals about NEER in straightforw a rd language. Section II, NEER at Work, takes you through the pro g r a m in more detail and introduces some of NEER s concepts and term i n o l o g y. Section III, How to Read Your Quarterly Statement, uses the Q u a rterly Statement to show how NEER works in particular cases, using the language that appears on the statement. 2

5 Section I Basic Principles NEER provides financial incentives to improve health and safety in the workplace by issuing a refund or adding a surcharge on your annual premium. To determine these refunds and surcharges, your expected claims costs, which reflect the rate group average for firms of your size, are compared to your actual claims costs. Your expected claims costs re p resent your initial premium less the portion allocated to reducing the unfunded liability, amounts t r a n s f e rred to the Second Injury and Enhancement Fund, and the NEER insurance s a f e g u a rds. Your actual or NEER claims costs re p resent your total claims benefit payments to date plus any projected future costs on those benefits plus an overhead charge; all are subject to the claim and firm limits (known as the NEER insurance safeguards). How NEER Wo r k s Components Expected Actual of the Claims Claims Costs Premiu m Costs (NEER Cost s) 3

6 TIP: NEER can protect you against unusually high accident costs. A. Actual Cl aims Costs NEER bases refunds and surcharges only on those total claims costs over which you may reasonably be expected to exercise some control. For example, while you may make every effort to reduce the incidence of longlatency occupational disease in your workplace, the symptoms of these diseases often show themselves long after exposure occurs. Efforts to control them may not produce measurable results in the foreseeable future. As a result, these claims and their costs are not considered for experience rating purposes. F u rt h e rm o re, any costs on a claim re s u l t i n g f rom a condition or injury existing prior to the accident are removed from your accident re c o rd. These amounts are allocated to the Second Injury and Enhancement Fund (SIEF). Once costs like SIEF have been re m o v e d, the actual cost for an individual claim includes payments already made for items such as health care and temporary disability loss of e a rnings (LOE), as well as an administrative fee. In most cases, the actual cost also includes possible future costs on the claim. The calculation takes into account information such as the type of disability claim involved and the age of the claim. Most injuries are not serious and the costs involved may be relatively small; however, in the case of a serious injury, the cost can exceed half a million dollars over the injured worker s l i f e t i m e. To protect you from the financial effects of an unusually costly claim, NEER s insurance p rovisions set a limit on how much each individual claim can cost. The same insurance p rovisions also protect you against unusually high claim costs in any given year by limiting the total cost of all your claims in that year. B. Exp ec ted Claims Costs The methods for determining expected claims costs under NEER are essentially the same as those for actual claims costs. The expected claims costs are calculated for each firm taking into account the average past accident experience for firms of comparable size within your rate group. The basic principle in deriving expected claims costs is to exclude those components of the premium not considered reasonably within your control. Two examples of this are SIEF c h a rges and the payment to reduce the unfunded liability. The third component is the cost of NEER s insurance provisions. As mentioned in the p revious discussion of actual claims costs, these p rovisions reduce your total claims costs depending on the amount of individual claims and the size of your firm. Costs in excess of the limits incurred by individual firms are s h a red by all employers within your rate gro u p. The pro-rated share of these costs forms part of your premium and is not included in your NEER calculation. The portion of the pre m i u m remaining re p resents your expected claims costs as used in your NEER refund and s u rc h a rge calculations. For each of the excluded components of the premium there is a corresponding exclusion in the calculation of your actual claims costs. This ensures that the comparison between actual and expected costs is a fair one: only the same types of costs are c o n s i d e red in each. The resulting refund or surc h a rge is based on a pro p o rtion of the diff e rence between your actual costs and your expected costs. This p ro p o rtion may range between 25 and 90 per cent - the smaller the firm, the lower the percentage. Because smaller firms are less able to absorb large surc h a rges, this lower p e rcentage provides greater collective liability insurance pro t e c t i o n. 4

7 Section II NEER at Work TIP: Start each year with a clean slate. 5 Under NEER, only the costs of claims arising out of accidents occurring in a given calendar year are considered for that year. The costs of claims include not only the actual payments to date but also a projection for possible future payments and the cost of administering the workplace insurance system. The total cost of a claim, including past costs and estimated future costs, is the lifetime cost of the claim. A. Projected Fut ure Costs The future costs of an accident take into account the fact that claim costs don t always end after a worker receives health care benefits or temporary disability/loe benefits. Nor do claim files close permanently for an injured worker even if he or she returns to work at full pay. For example, an employee with a broken leg who re t u rns to a regular job after six weeks on t e m p o r a ry disability may appear completely re c o v e red. But in a few years the employee could develop health problems due to that i n j u ry. Or an employee with a back strain can be treated and may improve, but a flare - u p might occur at some future time. The amount the WSIB estimates a claim will cost in the f u t u re is its projected future costs. Employers under NEER are individually responsible in part for their own accident costs. The refunds or surc h a rges modifying your p remium are based on your individual accident re c o rd. As a result, you re q u i re a detailed b reakdown of claim costs. For this reason, we p rovide an estimate of the projected future costs of each claim as part of the inform a t i o n we provide to you. i) The Reserve Factor To calculate how much to set aside for a claim s future costs under NEER, we keep track of the cost history of all such claims. This information provides the basis for determining the reserve factor, a percentage applied to the total cost of the temporary disability/loe, health care and early and safe return to work benefits paid to date in order to determine the amount to be set aside for future costs. Claims drawing only health care benefits do not have future costs projected for them. The re s e rve factor is based on historical data p rovided by the rate gro u p s accident costs and averaged for each claim type. Each rate gro u p t h e re f o re has its own set of re s e rve factors. The claim type and the age of the claim are used to select the re s e rve factor applicable to the claim at the time of the current cost valuation. The age of the claim refers to the length of time between the date of the accident and the current valuation date. ii) Claim Types Each claim is classified by type. These classifications exist because estimating the projected future costs of each claim on an individual basis would not be administratively feasible. The WSIB therefore strikes a balance between accuracy and administrative efficiency by dividing all claims into 14 types (2 to 15). Claim types depend on the benefits (or combination of benefits) paid. They include health-care-only benefits, temporary disability/loe benefits (including health care), worker disability awards (future economic loss and non-economic loss), and fatalities. Early and safe return to work awards are included under either a temporary disability/loe or a future economic loss claim type. Survivor benefits are included in the same claim type as fatalities (type 15). In the case of temporary disability, the number of weeks the injured worker has received temporary disability benefits/loe is also taken into account. Generally, claims other than health care only are classified as either active or inactive (see table, page 6). Claims which draw nonhealth care benefits to health care during a given calendar year are considered active in that year. Inactive claims are less likely to incur long-term costs, so the WSIB sets aside less money for these reserves than for active claims. This reduces NEER costs to the individual employer and provides an incentive to encourage the workplace party self-reliance model and return the worker to the job at full pay.

8 TIP: Your future costs ar e much lower on claims of short duration. TIP: NEER reviews each claim every year for three years. For example, a claim entered in February 1995 would be classified as active to the end of On March 31, 1996, it would be listed as inactive unless additional non-healthcare costs were incurred in the first quarter of CLAIM TYPES (Pre-1998 Claims) Type Health care benefits only 02 Temporary Disability Benefits Less than 4 weeks payment Active: 03 Inactive: 04 4 to less than 16 weeks payment Active: 05 Inactive: weeks to less than 32 weeks payment Active: 07 Inactive: weeks payment and over Active: 09 Inactive: 10 Worker Disability Awards Non-Economic Loss Active: 11 Inactive: 12 Future Economic Loss Active: 13 Inactive: 14 Fatalities 15 Others 15 iii) 1998 Changes Claim Type Definition In response to Bill 99 benefit provisions, changes have been made to the NEER definition for claim types 7, 8, 9 and 10 for workplace injuries occurring on or after January 1, Claim type 7 (active) and 8 (inactive) apply to claims where LOE benefits are between 16 to less than 52 weeks, whereas claim type 9 (active) and 10 (inactive) are for claims where LOE benefits are between 52 and 104 weeks. CLAIM TYPES (1998 Claims) Type Health care benefits only 02 Loss of Earnings (LOE) - Temporary Benefits Less than 4 weeks payment Active: 03 Inactive: 04 4 to less than 16 weeks payment Active: 05 Inactive: weeks to less than 52 weeks payment Active: 07 Inactive: to 104 weeks payment Active: 09 Inactive: 10 Worker Disability Awards Non-Economic Loss Active: 11 Inactive: 12 Loss of earnings (Permanent) Active: 13 Inactive: 14 6 Fatalities 15 Others 15

9 TIP: Accurate data results in effective claims management. TIP: Only NEER years are considered in retrospective rating. 7 B. Insur ance Pro vision s NEER protects you from the full extent of an expensive claim or a particularly bad accident year in three ways: A limit is placed on the maximum cost which can be used for NEER for any one claim. This Claim Cost Limit is equal to four times the maximum insurable earnings, which represent the maximum earnings for which benefits can be paid as of January 1 of each year. The amount is fixed each year by legislation; in 1995 it was $55,400, so the limit on a claim cost in that accident year would be $221,600. The maximum insurable earnings in 1996 were $55,600, and the claim cost limit was $222,400. A further limit is placed on the accumulated amount of your individual claims. This Firm Cost Limit is equal to three times your expected costs for the given accident year. A limit is placed on the degree to which you re held financially accountable for your claims costs under NEER; depending on the size of the firm you re only liable for a portion of the difference between your expected and actual costs. The percentage of liability is represented by the Rating Factor. The smaller the premium the lower the rating factor and the lower the d e g ree to which the firm is held financially responsible for the actual accident costs. This maintains a larger pro p o rtion of collective liability insurance for smaller firm s, and has the effect of reducing potential refunds as well as surc h a rg e s. The Rating Factor is restricted to a minimum and maximum, usually 25 to 90 per cent. In other words, depending on the size of your p remium, you can be responsible for between 25 per cent and 90 per cent of the diff e re n c e between the actual costs and expected costs of your accidents. The excess costs of individual and total claims are shared by the rate group as a whole and are not subject to experience rating. C. Re trospe ctive Rating NEER operates on the principle of retrospective rating. In order to assess the amount of your refund or surcharge, we require accurate data about payments to date on a claim, as well as up-to-date estimates of the future costs. The projected future costs become more p recise as more claims cost data becomes available. The WSIB reviews the claims costs for a given accident year in each of the thre e following years. The recalculation of claim costs under NEER throughout the thre e - y e a r review period takes into account any additional benefits or approved cost relief made on the claim. As a result, claims costs are constantly being updated on your Quarterly Statement. These revisions affect the NEER refund or s u rc h a rge adjustment to the pre m i u m calculated in the fall of each year. To be completely accurate, revisions to claim costs would have to be made for every year that a claim was still active and benefits were being awarded. However, because of cost and c o m p l e x i t y, we limit the re t rospective re v i e w of claim costs to the first three years following the year in which the claim was re g i s t e re d. R e g a rdless of what happens to the claim after the third refund or surc h a rge adjustment, no f u rther adjustments will be made. By limiting these adjustments to three years, NEER gives you a further incentive to advance early and safe re t u rn to work and labour market re - e n t ry pro g r a m s. In the months immediately following a claim, claims data can be incomplete and f u t u re costs difficult to estimate. In the i n t e rests of accuracy, there f o re, no refund or s u rc h a rge is issued for claims re g i s t e red in the c u rrent accident year. This means that your p remium for 1995 was adjusted re t ro s p e c t i v e l y with a refund or surc h a rge for the first time in the fall of 1996 on claims incurred thro u g h o u t

10 D. Refunds and Surcharges The WSIB calculates the refund or surcharge for an accident year using the updated claim cost data on the September 30 Quarterly Statement. The formula for calculating your NEER refund (R) or surcharge (S) applies the rating factor (RF) to the difference between the actual (NEER) costs and the expected costs. The formula for calculating a refund (R) or surcharge (S) is: R or S = (NEER Costs - Expected Costs) x RF A negative amount indicates a refund and a positive amount indicates a surc h a rg e. The refund or surc h a rge adjusts the p remium for the accident year. This adjustment, along with any adjustments made in previous years, is shown on the September 30 Quarterly Statement. For example, the first NEER adjustment for claims occurring in 1995, was made in the fall of Refund or surc h a rge adjustments on these claims will also be made in 1997 and, for the last time, in the fall of The following table shows the sequence of NEER adjustments made over three years (1996 to 1998). Adjustments in the fall of 1996 are also made for 1994 claims (their second adjustment) and 1993 claims (their t h i rd and final adjustment). Those adjustments made in 1997 cover the 1994 to 1996 accident years, and those made in 1998 cover the years 1995 to The refund and surc h a rge adjustments for each accident year are totalled on the Q u a rterly Statement to show one overall refund or surc h a rge. In addition, the adjustments for each accident year appear on the monthly Statement of Account. If there is an overall refund, the WSIB may send a refund cheque at the time of the NEER Annual Issue each fall. The overall re f u n d amount is first applied to any outstanding balance owing to the WSIB as indicated on the Statement of Account. Any remaining credit is then issued as a refund cheque. If the September Quarterly Statement indicates an overall surc h a rge, the WSIB takes no further action at that time. The surc h a rg e adjustments for each accident year are applied to the Statement of Account at the Annual Issue and must be paid in full by the due date i n d i c a t e d. NOTE: For claims occurring on or after Januar y 1, 1996, the refund and surcharge calculations have been changed if the employer has mor e than one account with a common rate group in some or all of the accounts. In these cases, NEER refund and surcharge adjustments will be calculated using cost factors (for example, the expected cost factor and the rating factor) based on the total premium for the common rate group in all the accounts in which it appears. September Quarterly Statement Accident Years (3) 1994(2) 1995(1) (3) 1995(2) 1996(1) (3) 1996(2) 1997(1) 8

11 Section III How to Read Your Quarterly Statement TIP: Monitor your quarterly statements to quickly identify problem areas. The function of the Quarterly Statement is to give you as complete a picture as possible of your accident experience. At the same time, the statement allows you to monitor your safety and return to work efforts on a quarterly basis, and to compare your record with your rate group average and your previous record. This way, you are encouraged to take quick action if necessary to implement safe workplace procedures and early and safe return to work programs. The Quarterly Statement is issued for each f i rm every three months (as at March 31, June 30, September 30 and December 31). The Quarterly Statement comes in two parts - the Firm Summary Statement and the Claim Cost Statement. If your firm falls under more than one rate group, you will receive separate F i rm Summary Statements and Claim Cost Statements for each rate gro u p. All claims for the current year and the thre e years under review are listed on the Claim Cost Statement. Claims are revalued on an ongoing basis, so the costs of a claim in the c u rrent or any previous accident year may change from one Quarterly Statement to the next. The most recent estimates of these costs a re updated to the day indicated on the Q u a rterly Statement. The Firm Summary Statement shows how your claims costs translate into actual claims costs for the purposes of comparison with your expected costs. Through the Perf o rm a n c e Index, the Firm Summary Statement also indicates how your cost perf o rmance to date c o m p a res to the rate group average for a firm of your size. The Perf o rmance Index for each accident year is updated every quarter as claims costs change. By comparing the actual claims costs for each year with the expected claims costs, the Index indicates whether your firm may receive a refund or have a surc h a rge levied in a given accident year. The Perf o rmance Index is obtained by the formula: Performance Index = NEER Costs Expected Costs Expected claims costs reflect average costs within the rate group for a firm of similar size. If the actual claims costs are the same as the expected claims costs, the Perf o rmance Index will be 1.00, indicating no refund or surc h a rg e. The lower the actual claims costs the lower the P e rf o rmance Index and the greater the re f u n d. A Perf o rmance Index over 1.00 indicates a s u rc h a rge. The upper limit is 3.00 because of the NEER insurance feature that limits the NEER costs to three times the expected claims c o s t s. 9

12 A. Claim Cost Statement Claim Cost Limit: The maximum cost that can be charged to you for any one claim. This amount is equal to four times the maximum insurable earnings, representing the maximum earnings for which benefits can be paid as of January 1 of each year. In 1995, the Claim Cost Limit was $221,600. Overhead Factor: A percentage applied to the total cost of each claim to arrive at the overhead. The NEER Overhead Factor for each rate group is determined by dividing its Administration Costs by New Claims Costs. Past Awards to: The claim costs on this statement have been updated to the valuation date recorded here. Accident Date: The date of the injury or accidental death of the worker; or, if the claim is for an occupational disease covered under NEER, the date the impairment started, as confirmed by a medical practitioner. Claim Type: A claim s classification based on type of benefits paid, length of time on benefits and whether or not the claim has been recently active. For a list of claim types see page 6. Claim Age Month: Age of claim in complete months, equal to the length of time between the accident date and the valuation date recorded under the heading Past Awards to. 10

13 A. Claim Cost Statement Past Awards: Non-Pension benefits (health care + temporary disability/loe + early and safe return to work costs) and Pension benefits (including worker disability awards, fatality benefits and survivor benefits) awarded for each claim from the Accident Date to the valuation date recorded under the heading Past Awards to: Discounted Past Awards: All costs paid on the claim valued in accident year dollars. Projected Future Costs: An estimate of the cost of future benefits based on the discounted Non-Pension past awards, claim type and age of claim. These projections will vary over time. Health-care-only claims do not have Projected Future Costs. Overhead: The amount of money added to the claim cost to pay for overhead costs such as WSIB services and safety education. The amount is calculated by applying the Overhead Factor to the Discounted Past Awards plus the Projected Future Costs. Limited Claim Costs: The maximum amount that can be charged for this particular claim. It is calculated by adding up the Discounted Past Awards, the Projected Future Costs and the Overhead. If this is greater than the amount listed as the Claim Cost Limit, it is replaced by the Claim Cost Limit. 11

14 A. Claim Cost Statement Total NEER Costs ($) : Total NEER Costs: The actual claims costs used in your refund or surcharge calculation, representing the total of all claims costs for the accident year subject to NEER. The amount recorded may not match the total of the Limited Claim Costs for two possible reasons. The first reason is that, to give a meaningful estimate for the calculation of the possible refund or s u rc h a rge, the Total NEER Costs should cover the accident experience for a full year. For the c u rrent year, however, this would only be possible on the final Quarterly Statement of the year when costs are updated to December 31. T h e re f o re, on your June and September Quarterly Statements for the current year, the To t a l NEER Costs are revised to reflect what the year end total might be if costs were incurred at more or less the same rate throughout the year. The second reason why the Total NEER Costs may not match the total of the Limited Claim Costs is that the NEER insurance provision limiting the total amount of your claims costs may have come into effect. If the total of the Limited Claim Costs goes over this Firm Cost Limit, then the F i rm Cost Limit becomes the Total NEER Costs. The Firm Cost Limit is always equal to thre e times your expected claims costs, which are listed on the Firm Summary Statement as the Expected Costs. 12

15 i) How to Calculate Actual Claim Costs Here are two examples of how to calculate the actual cost of a given claim under NEER. Because the current year is taken to be 1995, both examples for 1995 are active claims. I n f o rmation re g a rding the breakdown of Non-Pension awards on the claim into health c a re and temporary disability/loe appears on the monthly Accident Cost Statement. ABC TRUCKING 101 NEER ST. TORONTO ON M4U 1A , ZZ SEP GRANDE JOE 07 MAR , , , , Example 1 Claim A - Joe Grande Joe Grande from the ABC Trucking Company broke his leg on March 7, He was hospitalized and off work for eight weeks, during which time he was paid temporary disability benefits. This is how the information on his claim appeared on the September 30, 1995 Quarterly Statement. The costs on Joe Grande s claim have been updated to September 30, as indicated under Past Aw a rds to. On the tables of claim types (p. 6), an active claim with eight weeks t e m p o r a ry disability is claim type 05 (active: four to less than 16 weeks temporary d i s a b i l i t y ). We know from the Accident Cost Statement that the benefits paid to date include $600 in health care benefits plus $2,400 in temporary disability benefits, for a total of $3,000. This appears on the Claim Cost Statement in the Non-Pension section under Past Aw a rd s. To determine the Projected Future Costs of J o e s claim, the re s e rve factor for the claim type and the age of the claim is applied to the discounted past awards. In this case, six months have elapsed between the Accident Date and the valuation date. 13

16 The 1995 re s e rve factor tables for this rate g roup (#570) indicate that the re s e rve factor for a six month old type 05 claim is The Projected Future Costs are there f o re calculated by multiplying the re s e rve factor (3.1382) by the discounted past award s ($3,300), yielding a sum of $9, After the payments to date and the Pro j e c t e d F u t u re Costs, the third element in estimating the actual cost of a claim is overhead. This amount is determined by applying the O v e rhead Factor - a percentage fixed annually for the rate group - to the sum of all Discounted Past Aw a rds plus the Pro j e c t e d F u t u re Costs. In this case, the Overhead Factor for rate g roup #570 is 29 per cent, and the sum of the Discounted Past Aw a rds ($3,000) and P rojected Future Costs ($9,414.60) is $12, The calculation yields an o v e rhead charge of $3, The final Limited Claim Cost is the sum of the Discounted Past Aw a rds, the Pro j e c t e d F u t u re Costs and the Overhead ($12, plus $3, equals $16,014.83). The Claim Cost Limit ($221,600) does not apply, so the final Limited Claim Cost is $16, ABC TRUCKING 101 NEER ST. TORONTO ON M4U 1A , ZZ MAR PEARCE DONNA 05 APR , , , , , Example 2 Claim B - Donna Pearce Donna Pearce from ABC Trucking Company had a severe accident on April 15, She was in Intensive Care for several weeks and required major surgery. On the valuation date of March 31, 1996, she was off work for 45 weeks being paid temporary disability benefits. This is how Donna s claim would look on the March 31 Claim Cost Statement. On the tables of claim types (p. 6), an active claim with 45 weeks temporary disability is claim type 09 (active: more than 32 weeks t e m p o r a ry disability). The Accident Cost Statement tells us that the benefits paid to date include $20,000 in health care benefits plus $20,000 in temporary disability benefits for a total of $40,000. This amount is listed under the Non-Pension section of Past Aw a rd s. 14

17 TIP: NEER s insurance protection limits the cost of long term claims. Using the claim type and age of the claim - in this case 11 months - we can find the re s e rve factor which determines the Pro j e c t e d F u t u re Costs of Donna s claim. The 1995 re s e rve factor tables for rate group #570 show that the re s e rve factor for a 11-month type 09 claim is Multiplying the re s e rve factor by the discounted awards ( x $39,902.00) yields Projected Future Costs of $162, The Overhead for the claim is d e t e rmined by multiplying the sum of the Discounted Past Aw a rds and the Pro j e c t e d F u t u re Costs by the Overhead Factor of 29 per cent (.29 x [$39, $162,939.82]), giving an overhead charge of $58, When the Discounted Past Aw a rds, the P rojected Future Costs and the Overhead are all added together, we get a total claim cost of $261, However, the Claim Cost Limit for 1995 was $221,600. Donna s claim is t h e re f o re subject to the limit and the limit is listed as the Limited Claim Cost. Because the costs of Donna Pearc e s claim a re higher than the Claim Cost Limit, the costs a l ready incurred in excess of that limit and any f u rther costs fall under NEER s insurance p rovisions. These are not subject to experience rating but are averaged out across the whole rate group. NEER Costs Let s assume that, in addition to Joe s and Donna s accidents, just one other accident occurred at the ABC Trucking Company during This was a health care only claim, in which the health care costs amounted to $90. Health care only claims have no Projected Future Costs, so the only additional cost was the Overhead which amounted to $ The Claim Cost Statement at March 31, 1996 would therefore list the three claims in the following manner: ABC TRUCKING 101 NEER ST. TORONTO ON M4U 1A , ZZ MAR GRANDE JOE 07 MAR , , , , , PEARCE DONNA 05 APR , , , , ,600.00* ADAMS PAUL 24 SEP * SUBJECT TO CLAIM COST LIMIT TOTAL NEER COSTS ($): 226, NOTE: No costs were added to Joe Grande s claim in 1996, so it is now inactive and listed as claim type 06. The Projected Future Costs, Overhead and Limited Claim Cost have changed from the September 30, 1995 statement because a lower reserve factor is now applied to Joe s claim. The total of the Limited Claim Costs does not exceed the Firm Cost Limit for this accident year. There f o re, the total Limited Claim Costs become the Total NEER Costs.

18 B. Firm Summary Statement Accident Year: The calendar year for which Expected Costs were calculated and in which the accident occurred. Premium: Your firm s premium for the year based on your insurable earnings and your rate group s premium rate. Past Awards to: The NEER Costs on this statement have been updated to the valuation date recorded here. Performance Index: An indicator of your firm s accident costs in relation to the rate group. An index of less than 1.0 indicates you are performing better than rate group average and may receive a refund. More than 1.0 shows that your record is poorer than average and you may have a surcharge levied. Expected Cost Factor: A percentage applied to your premium to derive the Expected Costs. The amount excluded once the factor is applied is an estimate of the claim costs transferred to SIEF, the portion of your premium applied to your rate group s unfunded liability, and the likely effects of NEER s insurance provisions averaged across the rate group. The percentage varies each year depending on the rate group and size of firm. Expected Costs: Your firm s expected claims costs for this Accident Year. The amount is calculated by applying the Expected Cost Factor to the premium. NEER Costs: Your firm s actual claims costs, equivalent to the total claims costs subject to experience rating for the Accident Year. The amount for each Accident Year is the same as the Total NEER Costs for that year on the Claim Cost Statement (see p.12-15). Rating Factor: The percentage applied to the difference between your actual claims costs and your expected claims costs to arrive at the refund or surcharge. The factor generally ranges from a minimum of 25 per cent for smaller firms to a maximum of 90 per cent for larger firms. 16

19 i) How to Calculate Refunds and Surcharges In addition to helping firms monitor their accident experience, the Firm Summary Statement allows you to estimate your possible refund or surcharge for a given accident year. The information on the statement also allows you to calculate what the maximum and minimum refund or surcharge would be for the same period. The basic formula for calculating refunds (R) and surcharges (S) is as follows: R or S = (NEER Costs - Expected Costs) x RF The maximum refund is paid when the NEER Costs are $0. When this happens the formula for calculating a refund reduces to: R = (NEER Costs - Expected Costs) x RF = (0 - Expected Costs) x RF = Expected Costs x RF This means that your maximum refund for any accident year can be calculated as soon as your first Quarterly Statement is received indicating the premium and the Expected Costs. Your maximum surc h a rge can be calculated in a similar manner. The potential NEER Costs a l ready has a maximum imposed on it by the F i rm Cost Limit, which is equal to three times the Expected Costs. There f o re, the maximum s u rc h a rge that can be levied on your firm occurs in a situation where the NEER Costs reach this limit. The formula for the maximum s u rc h a rge then becomes: S = (NEER Costs - Expected Costs) x RF = (3 x Expected Costs - Expected Costs) x RF = (2 x Expected Costs) x RF T h e re f o re, in any accident year, your maximum surc h a rge is always equal to twice your maximum re f u n d. With re f e rence to the table below, the P r i m a ry Adjustment re p resents the NEER R e f u n d / S u rc h a rge for each accident year at the Past Aw a rds date. The Previous Adjustment is the NEER Refund/Surc h a rge issued in pre v i o u s year(s). The Current NEER Adjustment is the d i ff e rence between the Primary Adjustment and the Previous Adjustment(s). Please note that the first re t ro s p e c t i v e adjustment for the 1995 accident would be calculated in the fall of 1996 using updated claim costs on the September 30, 1996 Q u a rterly Statement. The second and third re t rospective adjustments would be issued in the fall of 1997 and 1998, re s p e c t i v e l y. R e f u n d / S u rc h a rge Calculation Past Aw a rds To: 30 Sep. 98 Accident P r i m a ry P revious C u rrent NEER Ye a r Adjustment ($) Adjustment ($) Adjustment ($) CR C R CR CR C R Total Rebate C R NOTE: This box only appears on your September NEER Firm Summary Statement. 17

20 F i rm A: $10,000 Initial Premium YY MAR , , The premium for 1995 is $10,000. To determine how much of that premium would be used for the calculation of refunds and surcharges under NEER, the Expected Cost Factor (22.94 per cent) is applied to the premium. This Expected Cost Factor accounts for those components of the premium covering SIEF relief, the payment to reduce the rate group s unfunded liability and NEER s insurance provisions. The amount remaining is the Expected Costs which will be compared to the NEER Costs. The amount for the NEER Costs is the same amount as the Total NEER Costs that appears for this accident year on the Claim Cost Statement. In this case, the pre m i u m ($10,000) times the Expected Cost Factor (22.94 per cent) yields Expected Costs of $ 2, To arrive at your refund or surc h a rge for the 1995 accident year, the diff e rence between your NEER Costs and your Expected Costs is multiplied by the Rating Factor. This p e rcentage varies your final refund or s u rc h a rge depending on the size of your c o m p a n y. In this case, the Rating Factor is 25 per cent. The actual calculation for the refund or s u rc h a rge is as follows: R or S = (NEER Costs - Expected Costs) x RF = (500-2,294) x.25 = A negative amount indicates a refund, so F i rm A might expect to receive a refund of a p p roximately $450 for 1995 if its accident re c o rd and claims costs valuation remain more or less constant until the September 30, 1996 Q u a rterly Statement used for the 1996 Annual I s s u e. The maximum refund occurs when there a re no actual claims costs, that is, if the NEER Costs are $0. In this situation, the maximum refund for a firm this size in this rate gro u p would be: R = Expected Costs x RF = 2,294 x.25 = The maximum surc h a rge is levied when the actual claims costs are three times the expected claims costs. In this case, with Expected Costs of $2,294, the maximum surc h a rge is levied when the NEER Costs are $6,882. The maximum surc h a rge is always twice the maximum refund; in this case, the maximum s u rc h a rge would be $1,147. The calculation for the Perf o rmance Index is: PI = NEER Costs Expected Costs = 500 2,294 =

21 F i rm B: $250,000 Initial Premium XX MAR , , , The premium for 1995 is $250,000. The Expected Cost Factor is per cent. Multiplying these together gives Expected Costs of $93,150. NEER Costs are the same amount as the Total NEER Costs that appear for this accident year on the Claim Cost Statement - $200,000. The Rating Factor for a firm of this size in this rate group is per cent. The refund or surc h a rge calculation is as f o l l o w s : R or S = (NEER Costs - Expected Costs) x RF = (200,000-93,150) x.4744 = 50, The amount is positive, so Firm B might expect a surc h a rge in the area of $50, if its accident re c o rd and the claims costs valuation remain more or less constant until the September 30, 1996 Quarterly Statement used for the 1996 Annual Issue. The maximum refund is paid when there a re no actual claims costs, that is the NEER Costs are $0. In this case, the calculation for the maximum refund would be: R = Expected Costs x RF = 93,150 x.4744 = 44, The maximum surc h a rge is levied when the NEER Costs are three times the Expected Costs. In this case the maximum surc h a rg e would be levied when the NEER Costs are $279,450 (3 x $93,150). The maximum s u rc h a rge is twice the maximum refund; this amount would be $88, The Performance Index is: PI = NEER Costs Expected Costs = 200,000 93,150 =

22 NEER CLAIM COST STAT E M E N T S Section IV A NEER Glossary Accident Date: Claim Age Month: Claim Cost Limit: Claim Ty p e : Discounted Past Aw a rd s : Limited Claim Costs: O v e rhead Factor: O v e rh e a d : Past Aw a rd s : P rojected Future Costs: The date of the injury or accidental death of the worker; or, if the claim is for an occupational disease under NEER, the date the impairment started, as confirmed by a medical practitioner. Age of claim in complete months, equal to the length of time from the first month after the accident date to the valuation date re c o rded under the heading Past Aw a rds to: The maximum cost that can be charged to you for any one claim. This amount is equal to four times the maximum insurable earnings. A claim s classification based on type of benefits paid, length of time on benefits and claim activity. All costs paid on the claim valued in accident year dollars. The maximum amount that can be charged for a particular claim. A percentage applied to the total cost of each claim to arrive at the overhead. The NEER Overhead Factor for each rate group is determined by dividing Administration Costs by New Claims Costs. The amount of money added to the claim cost to pay for overhead costs such as WSIB services and safety education. The amount is calculated by applying the O v e rhead Factor to the Discounted Past Aw a rd s plus the P rojected Future Costs. Non-Pension benefits and Pension benefits awarded for each claim from the Accident Date to the valuation date. An estimate of the cost of future benefits based on the discounted Non-Pension past awards, claim type and age of claim. Health care-only claims do not have P rojected Future C o s t s. NEER FIRM SUMMARY STATEMENT Accident Ye a r : Expected Cost Factor: The calendar year for which Expected Costs w e re calculated and in which the injury/accident occurred. A percentage applied to your Initial Premium to derive the Expected Costs for your firm. Expected Costs: Your firm s expected claims costs for this Accident Ye a r. Calculation: Expected Cost Factor x Pre m i u m. P re m i u m : Your firm s premium for the year based on your insurable earnings and your rate gro u p s premium rate. NEER Costs: Your firm s total limited claims costs, subject to the firm limit for the Accident Ye a r. P e rf o rmance Index: Rating Factor: An indicator of your firm s accident costs in relation to the rate group. The percentage applied to the diff e rence between your NEER claims costs and your expected claims costs to arrive at the refund or surc h a rge. 20

23 Contacting the Workplace Safety and Insurance Board Inquiries can be made between the hours of 8:30 a.m. and 4:30 p.m., Monday to Friday. Head Office Simcoe Place 200 Front Street West Toronto ON M5V 3J1 Teletypewriter (TTY) Internet web site: wsib.on.ca Centralized Location for all claims mail Send ALL claim-related mail to: Workplace Safety and Insurance Board 200 Front Street West Toronto ON M5V 3J1 or Fax: toll free (416) NOTE: Each toll-free number has the area code(s) or area(s) that it services indicated in brackets below it. Where no area code(s) is specified, all of Ontario is served. Employer Account Serv i c e s Call Fax Clearance...(416) (416) Certificates Collections...(905) (905) Prevention...(416) (416) Services Cerification/First Aid...(416) Schedule 2...(416) (416) Local Office Call Fax Hamilton...(905) (905) (416, 519, 613, 705 & 905) K i t c h e n e r /...(519) (519) Wa t e r l o o London...(519) (519) North Bay...(705) (705) (Ontario & 819) Ottawa...(613) (613) (Ontario & Quebec) St. Catharines...(905) (905) Sudbury...(705) (705) (705 & 819) Thunder Bay...(807) (807) (all of Canada) Toronto...(416) (416) (Head Office) Windsor...(519) (519) (all of Canada) Industry Sectors Sector Call Fax Agriculture...(519) (519) Automotive...(416) (416) Construction...(416) (416) Food...(416) (416) Forestry,...(807) Pulp & Paper Health Care...(416) (416) Manufacturing...(416) (416) Mining...(705) (705) M u n i c i p a l, E d u c a t i o n,...(416) (416) Electrical Process/...(416) (416) C h e m i c a l s Schedule 2...(416) (416) Services...(416) (416) Steel...(905) Transportation...(416) (416) Small Business Units Office Call Fax Hamilton...(905) London...(519) Ottawa...(613) Sudbury...(705) Thunder Bay...(807) Toronto...(416) (416) Windsor...(519)

24 Workplace Safety and Insurance Board For further information on any aspect of NEER, please contact: Experience Rating Section Workplace Safety and Insurance Board 200 Front Street West, 11th Floor To ronto, Ontario, M5V 3J1 (416)