Hawaii. September 27,

Transcription

1 Hawaii September 27,

2 Hawaii State Advisory Forum Annual Issues Symposium (AIS) Bill Donnell Video Excerpt Countrywide Workers Compensation System Hawaii Workers Compensation System and Filing Activity Countrywide and Hawaii Labor Markets Legislative Issues: Countrywide and Hawaii Emerging Issue: Air Ambulance Q & A 2

3 AIS Presentation Video Excerpt Bill Donnell NCCI President and CEO

4 Countrywide Workers Compensation System

5 Countrywide Workers Compensation (WC) System An Overview After five years of growth, premium is flat in the most recent year The combined ratio continues to show favorable results Frequency declined again at the latest point Medical and indemnity severity are increasing modestly 5

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

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

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

9 Percent 5 WC Approved Changes in Bureau Premium Level By Effective Year for NCCI States p Calendar Year p Preliminary Source: NAIC s Annual Statement Statutory Page 14 Bureau premium level changes reflect approved changes in advisory rates, loss costs, assigned risk rates, and rating values, as of 5/12/2017, relative to those previously approved in NCCI states only IN and NC are filed in cooperation with state rating bureaus 9

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

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

12 Percent WC Combined Ratio Underwriting Gain Achieved Private Carriers 3% lower p Calendar Year p Preliminary Source: NAIC s Annual Statement data 12

13 WC Combined Ratio Components Private Carriers Percent Dividends 1 1 Underwriting Expense Ratio Loss Adjustment Expense (LAE) Ratio Loss Ratio p Calendar Year p Preliminary Source: NAIC s Annual Statement data 13

14 WC Net Combined Ratios Calendar Year vs. Accident Year As Reported Private Carriers Percent 120 Calendar Year Accident Year p p Preliminary Source: NAIC s Annual Statement data Accident Year information is reported as of 12/31/2016 Includes dividends to policyholders 14

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

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

17 Changes in Medical Lost-Time Claim Severity by Component Private Carriers and State Funds NCCI States +72% +56% Change in the Medical Utilization Component +47% +27% Change in Overall Medical Severity +16% Change in the Medical Price Component +20% +14% +2% +12% 1995 to to to 2016p p Preliminary based on data valued as of 12/31/2016 Sources: Severity: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through 2007 Centers for Medicare & Medicaid Services: PHC Chain-Weighted Price Index 17

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

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

20 Hawaii Workers Compensation System

21 Hawaii Workers Compensation System An Overview Premium volume is increasing Combined ratios are improving Frequency is declining at a moderate rate Indemnity is flat, and medical costs decreased in the latest period 21

22 Hawaii Workers Compensation Premium Volume Direct Written Premium in $ Millions p p Preliminary Source: NAIC s Annual Statement data Calendar Year 22

23 Hawaii Accident Year Combined Ratios by Component 105% 105% 106% 1% 1% 1% 95% 1% 89% 2% 37% 42% 42% 38% 34% 67% 62% 63% 55% 53% Loss Ratio Expense Ratio Dividend Ratio Sources: NCCI s financial data through 12/31/2016, NAIC s Annual Statement data Accident Year 23

24 -10.6% -8.8% -8.4% -7.0% -5.3% -6.3% -4.7% -0.5% -1.5% -3.3% -0.5% -1.5% -3.6% 4.4% Hawaii Workers Compensation Lost-Time Claim Frequency Lost-Time Claims Cumulative Change of 45.1% ( ) Percent Change Policy Year Based on NCCI s financial data through 12/31/2016, developed to ultimate, premium adjusted to common wage level 24

25 Hawaii Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of +12.3% ( ) -4.6% -6.7% -4.2% 0.9% 12.6% 15.7% -9.3% 6.9% -0.2% -3.2% -0.3% 1.0% 5.0% 1.0% $18.0 $17.8 $17.0 $16.8 $16.9 $17.4 $17.4 $16.3 $18.0 $15.5 $13.8 $13.7 $14.3 $15.3 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate 25

26 Hawaii Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of +52.2% ( ) 13.0% 1.4% 8.5% 5.5% 0.3% 1.7% 5.0% 9.6% -6.6% -11.7% 6.2% -2.5% 2.9% 12.5% $14.6 $15.6 $14.2 $13.6 $13.3 $13.3 $12.6 $11.6 $11.5 $10.1 $9.0 $8.8 $9.0 $8.5 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate 26

27 Hawaii Filing Activity Voluntary Loss Cost Changes 6.2% 2.0% 1.4% 1.3% -1.7% 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 (Pending Approval) 27

28 Hawaii January 1, 2018 Loss Cost Filing Overall Loss Cost Level Change: 1.7% Change in Experience: 3.4% Change in Trend: 1.1% Change in Benefits: 1.0% Change in All Other: 0.3% 28

29 Hawaii January 1, 2018 Filing Average Changes by Industry Group Overall Change: 1.7% Manufacturing: 2.7% Contracting: 3.9% Office & Clerical: 1.8% Goods & Services: 0.9% Miscellaneous: 1.0% 29

30 Cumulative Loss Cost Level Change (%) Hawaii Cumulative Loss Cost Level Index /04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 Effective Date 30

31 Percent 15 Current NCCI Voluntary Market Loss Cost/Rate Level Changes Excludes Law-Only Filings NC OR NHMDCO TN AL CT IL NVWVOK LA IN NM UT IA AR KS AK VT MT TX AZ MS FL KY RI ME NE DCMO HI ID SD GA VA SC Approved Pending Reflects the most recent experience filing in each jurisdiction Due to the timing of the individual loss cost/rate filings, the figures shown may include changes from prior filing seasons 31

32 Current Voluntary Market Rates/Loss Costs Western NAIC Zone Idaho 1/1/17 1.2% Hawaii* 1/1/18 1.7% Arizona* 1/1/18 6.4% Montana 7/1/17 7.8% Texas 7/1/17 7.8% Alaska* 1/1/18 7.9% Utah 12/1/16 8.8% New Mexico 1/1/17 9.0% Nevada 3/1/ % Colorado* 1/1/ % Oregon* 1/1/ % *Pending 32

33 Current Average Voluntary Pure Loss Costs Using Hawaii Payroll Distribution Pure Loss Cost All Classes HI AZ CO ID NV OR Region Country Based on the latest NCCI approved rates and loss costs in the various states 33

34 A Cautionary Tale: The Danger of Comparing Average Loss Costs Across States

35 Countrywide and Hawaii Labor Markets

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

37 Percent 3 Change in Private Employment Private Employment Growth Is Below Average Hawaii United States Q1 2016Q1 2017Q1 Year-on-year percentage change, employment is for Total Private Industry Frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Moody s Analytics, and NCCI 37

38 Percent 5 Change in Average Weekly Wages Wage Growth Is Below the Rest of the Nation Hawaii United States Q1 2016Q1 2017Q1 Year-on-year percentage change, wages are for Total Private Industry Frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI 38

39 Percent Private Industry Payroll Growth Decomposition Payroll Growth Is Lower Than the Nation +1.7% +0.9% Hawaii +3.9% +2.6% +2.1% +1.7% United States Payroll AWW Employment 2017 Q1 year-on-year percentage change. AWW = Average Weekly Wage Source: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI 39

40 Change in Employment by Industry Employment in Most Industries Has Increased in the Past Year Industrial Sector Leisure and hospitality Trade, transportation, and utilities Government Information Professional and business services Education and health services Other services Financial activities Natural resources and mining Manufacturing Construction Year-Over-Year Percent Change, 2017Q1 Sector Size % Share 1-Year Change HI , ,400 US +1.9 HI , ,000 US +1.0 HI , US +0.8 HI , US 0.9 HI , US +3.1 HI , US +2.4 HI , US +1.0 HI , US +2.2 HI US 2.1 HI , US +0.0 HI , US +2.8 Employment numbers are rounded to the nearest hundred Year-on-year percentage change, frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Moody s Analytics, and NCCI 40

41 Hawaii s Payroll Growth Decomposition by Sector Employment Growth + AWW Growth Payroll Growth 15% 10% 5% 0 +5% Government Trade, transportation, and utilities Professional and business services Leisure and hospitality Education and health services Construction Financial activities Other services Manufacturing Information Natural resources and mining 15% 10% 5% 0 +5% 15% 10% 5% 0 +5% 2017Q1 year-on-year percentage change. AWW = Average Weekly Wage. Sectors are in descending order by the volume of state payroll amounts. Source: US Bureau of Labor Statistics; Bureau of Economic Analysis; Moody's Analytics; NCCI 41

42 Headline Unemployment Rate The Unemployment Rate Is Below Average Percent US: 4.3% 3 HI: 2.7% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Headline Unemployment Rate, seasonally adjusted Frequency of observation: monthly; latest available data point: July 2017 Source: US Bureau of Labor Statistics (BLS), 42

43 Hawaii s Labor Market Hawaii s unemployment rate is below the US rate Payroll growth in Hawaii is lower than the nation driven by slower growth in both employment and average wages Payroll has declined in the Education and Health Services, Construction, and Natural Resources and Mining sectors Professional and Business Services and Leisure and Hospitality posted the fastest growth Average weekly wages have fallen in three sectors Employment growth is below the US rate Leisure and Hospitality added the most jobs Trade, Transportation, and Utilities also added a large number of jobs Three sectors have experienced declines 43

44 Legislative Issues: Countrywide and Hawaii 44

45 2017 Overview Countrywide, legislative activity has increased over prior years both in volume and content. Regulation changes so far concern medical cost management, claim handling, and effectuating enacted legislation. Year to date, there has been about the same number of workers compensation-related cases at the state supreme court level as there were in The 2016 general election resulted in a net gain for Republicans in state government, where they now control both chambers of the legislature and the governor s office in 26 states. 45

46 2017 Workers Compensation Legislative Activity CA OR WA NV ID UT MT WY CO ND SD NE KS MN WI IA MO IL MI IN OH KY WV PA VA NY VT NH CT ME MA DC NJ DE MD RI AZ NM OK AR TN SC NC MS AL GA AK TX LA FL HI 0 10 Bills Introduced Bills Introduced Bills Introduced More Than 30 Bills Introduced As of 7/1/

47 Key Workers Compensation-Related Themes in Introduced Legislation First Responder Presumptions Indemnity Benefits Medical Cost Management Definitions 47

48 Federal Focus on State-Based Workers Compensation System Increased interest in state insurance regulation: Nexus between workers compensation program and federal benefit programs a. Centers for Medicare & Medicaid Services b. Social Security Disability Insurance Bipartisan Policy Center report Improving U.S. Insurance Regulation calls for considering minimal federal insurance standards for property/casualty (including workers compensation and life insurance lines). CHOICE Act (H.R. 10) would recast the federal focus on insurance issues by combining the Federal Insurance Office with the Financial Stability Oversight Council insurance representative and creating the Office of the Independent Insurance Advocate. 48

49 Federal Emerging Issues Regulation of Air Ambulance Services Sen. Jon Tester (MT) introduced legislation to provide state authority Federal Aviation Administration Reauthorization Social Security Disability Insurance (SSDI) Reform SSDI Solutions Initiative recommendations Trump Administration SSDI Reverse Offset Proposal Medicare Set-Aside (MSA) Reform Legislation to be introduced to bring greater efficiency to MSA Process Congressional Budget Office scoring 49

50 2017 Hawaii Enacted Legislation SB 859 (Act 172) Allows the injured employee to have a chaperone attend an employer-requested medical examination and permits the recording of such examination (with the approval of the physician) SB 984 (Act 153) Includes advanced-practice registered nurses in the definition of physician under the Workers Compensation Act 50

51 Emerging Issue: Air Ambulances and Workers Compensation

52 Air Ambulances The issue of air ambulances and their associated costs is under discussion in numerous states and the US Congress Some states have fee schedules regulating WC reimbursement rates for air ambulances Overview of the issue: Whether the federal Airline Deregulation Act of 1978 (ADA) preempts state WC laws as to reimbursement rates for air ambulances McCarran-Ferguson reverse preemption: Does McCarran- Ferguson, which grants authority to the states to regulate the business of insurance, preempt other federal law that may be applicable? 52

53 Air Ambulances Judicial Activity There have been several ADA preemption challenges to state reimbursement rates: Most recent cases in U.S. 10 th Circuit Court of Appeals, Texas (state and federal courts) and West Virginia federal court In some cases, ADA was found to preempt state WC laws regulating air ambulance reimbursement rates 53

54 Air Ambulances Legislative Activity Several states considered air ambulance legislation in 2017 Montana HB 73 and SB 44 Passed New Mexico HB 402 Failed West Virginia SB 276 Failed Federal activity Legislation to provide state authority (S. 471) Amendment to Federal Aviation Administration Reauthorization legislation 54

55 Air Ambulances The National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) are proponents of federal legislation that would allow air ambulance services and rates to be regulated at the state level NCOIL has created an Air Ambulance Task Force NAIC requested that NCCI provide aggregated, countrywide information on air ambulance usage and costs for service years 2011 to 2015 NCCI collects air ambulance information through the Medical Data Call 55

56 Air Ambulances Medical Data Basically, there are five Current Procedural Terminology (CPT) or Healthcare Common Procedure Coding System (HCPCS) codes used to describe air ambulance services: A0430 Ambulance service, conventional air services, transport, one way (fixed wing) A0431 Ambulance service, conventional air services, transport, one way (rotary wing) A0435 Fixed wing air mileage, per statute mile A0436 Rotary wing air mileage, per statute mile T2007 Transportation waiting time, air ambulance and nonemergency vehicle, one-half hour increments 56

57 Air Ambulances Countrywide Medical Data Code A0430 fixed wing, one way transport Service Year 2011 Billed: $2,908,292 Paid: $2,541,667 Transactions: 259 Service Year 2015 Billed: $3,893,449 Paid: $2,603,749 Transactions: 254 Code A0431 rotary wing, one way transport Service Year 2011 Billed: $20,117,771 Paid: $15,357,216 Transactions: 1,550 Service Year 2015 Billed: $32,902,966 Paid: $19,016,379 Transactions: 1,534 Service Year: medical payments for services provided from January 1 to December 31 57

58 Air Ambulances Countrywide Medical Data Code A0435 fixed wing air mileage Service Year 2011 Billed: $3,478,506 Paid: $2,835,795 Units: 60,788 Service Year 2015 Billed: $6,222,170 Paid: $3,623,582 Units: 59,959 Code A0436 rotary wing air mileage Service Year 2011 Billed: $12,346,054 Paid: $8,944,936 Units: 98,595 Service Year 2015 Billed: $20,907,090 Paid: $10,989,492 Units: 92,388 Service Year: medical payments for services provided from January 1 to December 31 58

59 Air Ambulances Countrywide Medical Data Code T2007 wait time, air ambulance and non-emergency Service Year 2011 Billed: $924,585 Paid: $843,918 Units: 44,775 Service Year 2015 Billed: $1,114,980 Paid: $939,032 Units: 59,686 Service Year: medical payments for services provided from January 1 to December 31 59

60 Air Ambulances Summary Workers compensation regulators have been trying to control air ambulance costs by capping the amounts payable in the fee schedules In some cases, fee schedules were challenged and ruled unenforceable If there is no fee schedule, workers compensation insurance carriers are required to pay the high air ambulance charge unless they can negotiate a lower price Injured workers typically are not balance-billed by the air ambulance providers, unlike those insured under a health insurance plan Billed charges may differ from paid amounts in workers compensation due to reasons such as unchallenged fee schedules and negotiated payments 60

61

62 Q & A

63 Supplemental Information: Loss Cost Filing Support

64 Loss Ratio Hawaii Indemnity and Medical Loss Ratios Policy Year Indemnity Medical Based on NCCI s financial data through 12/31/2016 at current benefit level and developed to ultimate 64

65 What Drives Indemnity and Medical Loss Ratios? Frequency (Claims/ Premium) Indemnity Severity (Loss/Claim) Indemnity Loss Ratio (Loss/Premium) Frequency (Claims/ Premium) Medical Severity (Loss/Claim) Medical Loss Ratio (Loss/Premium) 65

66 Frequency per Million of On-Leveled Premium Hawaii Claim Frequency Policy Year Based on NCCI s financial data through 12/31/2016 adjusted to a common wage level 66

67 Indemnity Average Claim Severity ($ '000s) Hawaii Average Indemnity Claim Severity Policy Year AY 2016 Adjusted to Common Wage Level Actual Based on NCCI s financial data through 12/31/2016 for lost-time claims at current benefit level and developed to ultimate 67

68 Medical Average Claim Severity ($ '000s) Hawaii Average Medical Claim Severity Policy Year AY 2016 Adjusted to Common Wage Level Actual Based on NCCI s financial data through 12/31/2016 for lost-time claims at current benefit level and developed to ultimate 68

69 Supplemental National/Regional/State Information

70 Pure Loss Costs All Classes Current Average Voluntary Pure Loss Costs Using Hawaii Payroll Distribution TX AR WV IN UT NV KS DC TN AZ VA SD MS OR KY NC NE AL HI MD MO NM OK LA CO IA ID SC ME FL NH RI GA IL MT VT AK CT CW State Based on the latest NCCI approved rates and loss costs in the various states 70

71 Indemnity Benefits Constitute the Majority of Total Benefit Costs in Hawaii Indemnity Medical 53.2% 46.8% 37.3% 62.7% 41.4% 58.6% Regional states are AZ, CO, ID, NV, and OR Based on NCCI s financial data through 12/31/

72 Hawaii Average Claim Frequency Frequency per 100,000 Workers All Claims OR 1,547 3,091 Total 4,638 NV 1,061 4,082 Total 5,143 ID 1,208 4,036 Total 5,244 CO 945 3,238 Total 4,183 AZ 593 2,906 Total 3,499 HI 1,541 1,797 Total 3, Lost Time Medical Only Based on NCCI s Statistical Plan data 72

73 Average Indemnity Claim Severity in the Region Lost-Time Claim Severity in $ Thousands HI AZ CO ID NV OR PY 2013 PY 2014 Based on NCCI s financial data through 12/31/2016 for lost-time claims premium adjusted to common wage level 73

74 Average Medical Claim Severity in the Region Lost-Time Claim Severity in $ Thousands HI AZ CO ID NV OR PY 2013 PY 2014 Based on NCCI s financial data through 12/31/2016 for lost-time claims premium adjusted to common wage level 74

75 Hawaii Distribution of Claims by Injury Type 54% 34% 12% 0% 77% 14% 9% 0% 75% 15% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Medical Only Temporary Total Permanent Partial Fatal & Permanent Total Regional states are AZ, CO, ID, NV, and OR Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 75

76 Hawaii Indemnity Loss Distribution by Injury Type 0% 52% 45% 3% 23% 65% 4% 8% 33% 57% 4% 6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Temporary Total Permanent Partial Permanent Total Fatal Regional states are AZ, CO, ID, NV, and OR Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 76

77 Hawaii Medical Loss Distribution by Injury Type 51% 38% 11% 0% 23% 53% 7% 16% 1% 30% 47% 9% 13% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Temporary Total Permanent Partial Permanent Total Medical Only Fatal Regional states are AZ, CO, ID, NV, and OR Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 77

78 Glossary

79 Glossary Assigned Risk Adjustment Program (ARAP) An assigned risk market program that surcharges residual market risks based on the magnitude of their experience rating modification. Calendar Year (CY) Experience of earned premium and loss transactions occurring within the calendar year beginning January 1, irrespective of the contractual dates of the policies to which the transactions relate and the dates of the accidents. Calendar-Accident Year (AY) The accumulation of loss data on all accidents with the date of occurrence falling within a given calendar year. The premium figure is the same as that used in calendar year experience. Claim Frequency The number of claims per unit of exposure; for example, the number of claims per million dollars of premium or per 100 workers. 79

80 Glossary Claim Severity The average cost of a claim. Severity is calculated by dividing total losses by the total number of claims. Combined Ratio The sum of the (1) loss ratio, (2) expense ratio, and (3) dividend ratio for a given time period. Detailed Claim Information (DCI) An NCCI Call that collects detailed information on an individual workers compensation lost-time claim basis, such as type of injury, whether or not an attorney was involved, timing of the claim s report to the carrier, etc. Direct Written Premium (DWP) The gross premium income adjusted for additional or return premiums, but excluding any reinsurance premiums. 80

81 Glossary Indemnity Benefits Payments by an insurance company to cover an injured worker s time lost from work. These benefits are also referred to as wage replacement benefits. Loss Ratio The ratio of losses to premium for a given time period. Lost-Time (LT) Claims Claims resulting in indemnity benefits (and usually medical benefits) being paid to or on behalf of the injured worker for time lost from work. Medical-Only Claims Claims resulting in only medical benefits being paid on behalf of an injured worker. Net Written Premium (NWP) The gross premium income adjusted for additional or return premiums and including any additions for reinsurance assumed and any deductions for reinsurance ceded. 81

82 Glossary Permanent Partial (PP) A disability that is permanent but does not involve a total inability to work. The specific definition and associated workers compensation benefits are defined by statute and vary by jurisdiction. Policy Year (PY) The year of the effective date of the policy. Policy year financial results summarize experience for all policies with effective dates in a given calendar year period. Schedule Rating A debit and credit plan that recognizes variations in the hazard-causing features of an individual risk. Take-Out Credit Program An assigned risk program that encourages carriers to write current residual market risks in the competitive voluntary marketplace. Temporary Total (TT) A disability that totally disables a worker for a temporary period of time. 82

83 Appendix

84 NCCI s Workers Compensation Resources Financial Aggregate Calls Used for aggregate ratemaking Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan) Used for class ratemaking Detailed Claim Information In-depth sample of lost-time claims Policy Data Policy declaration page information 84

85 Financial Aggregate Calls Collected Annually Policy and calendar-accident year basis Statewide and assigned risk data Premiums, Losses, and Claim Counts Evaluated as of December 31 Purpose Basis for overall aggregate rate indication Research 85

86 Policy Year Financial Aggregate Data Policy Expiration Date Policy Year 2012 Policy Year 2013 Policy Year /1/2012 1/1/ /31/2013 1/1/ /31/2016 Policy Effective Date 86

87 Calendar-Accident Year Financial Aggregate Data Policy Expiration Date Calendar- Accident Year 2013 Calendar- Accident Year 2014 Calendar- Accident Year /1/2013 1/1/ /31/2014 1/1/ /31/2017 Policy Effective Date 87

88 Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan) Data Experience by Policy Detail Exposure, premium, and experience rating modifications Individual claims by injury type Purposes Classification relativities Experience Rating Plan Research 88

89 Valuation of Statistical Plan Data 1st Report Valuation 2nd Report Valuation 3rd Report Valuation 4th Report Valuation 5th Report Valuation Policy Effective 18 Months 30 Months 42 Months 54 Months 66 Months 89