Oregon. October 25,

Transcription

1 Oregon October 25,

2 Oregon State Advisory Forum Annual Issues Symposium (AIS): Bill Donnell Video Excerpt Countrywide Workers Compensation System Oregon Workers Compensation System and Filing Activity Countrywide and Oregon Labor Markets Guest Speaker Louis Savage, Administrator at Oregon s Workers Compensation Division Legislative Issues: Countrywide and Oregon Emerging Issue: 2017 Medical Marijuana Update Residual Market: Countrywide and Oregon Q&A 2

3 AIS State of the Line 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 for the latest year 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% Source: 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 WC Impact of Discounting on Premium Private Carriers NCCI States Percent 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 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 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: Personal Health Care (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 Oregon Workers Compensation System

21 Oregon Workers Compensation System An Overview Increasing premium volume Favorable loss ratios Frequency is stable Stable indemnity costs and decreasing medical costs 21

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

23 Impact of Discounting on Workers Compensation Premium in Oregon -15% -16% Percent -26% -21% -19% -16% -15% -16% -22% -42% -40% -36% -39% -33% -35% -52% Policy Year Dividends Rate/Loss Cost Departure Based on data through 12/31/2016 Dividend ratios are based on calendar year statistics 23

24 Oregon Accident Year Combined Ratios by Component 139% 25% 126% 129% 21% 25% 121% 124% 18% 20% 38% 35% 33% 35% 35% 76% 70% 71% 68% 69% Loss Ratio Expense Ratio Dividend Ratio Sources: NCCI s financial data through 12/31/2016 and NAIC s Annual Statement data Accident Year 24

25 -5.8% -4.1% -1.0% -1.4% -2.1% -0.4% -0.1% -1.9% -0.3% -0.7% -1.5% 1.4% 1.8% 1.9% Oregon Workers Compensation Lost-Time Claim Frequency Lost-Time Claims Cumulative Change of 13.6% ( ) Percent Change Policy Year Based on NCCI s financial data through 12/31/2016, developed to ultimate; premium adjusted to common wage level 25

26 Oregon Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of +0.0% ( ) -0.3% 2.0% 4.3% 0.8% 0.0% 7.1% 0.4% -4.4% -2.5% -0.2% -0.7% 2.7% -3.9% -4.6% $12.5 $13.1 $13.6 $13.3 $13.3 $13.4 $13.7 $14.3 $14.3 $13.3 $13.3 $13.2 $12.7 $12.4 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate 26

27 Oregon Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of +17.7% ( ) 5.8% 2.4% 4.2% 2.6% -1.8% 6.9% 4.7% 3.9% -0.1% -0.8% -3.1% 0.9% -3.5% -4.9% $15.0 $15.8 $16.4 $16.2 $16.7 $16.9 $16.9 $16.2 $15.5 $14.5 $14.8 $14.4 $13.8 $13.5 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate 27

28 Oregon Filing Activity Voluntary Loss Cost and Assigned Risk Rate Changes 1.7% 3.7% -3.6% -3.3% -7.6% -5.3% -5.3% -5.3% -6.6% -5.9% -10.0% -14.0% 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 Filing Effective Date Voluntary Assigned Risk 28

29 Oregon January 1, 2018 Loss Cost Filing Overall Loss Cost Level Change: 14.0% Change in Experience: Change in Trend: Change in Benefits: All Other Changes: 12.3% 1.9% 0.0% 0.0% 29

30 Oregon January 1, 2018 Filing Average Changes by Industry Group Overall Change 14.0% Manufacturing 13.9% Contracting 12.6% Office & Clerical 14.5% Goods & Services 14.6% Miscellaneous 13.8% 30

31 Cumulative Loss Cost Level Change (%) Oregon Cumulative Loss Cost Level Change Since 1/1/ /09 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 Effective Date 31

32 Percent 15 Current NCCI Voluntary Market Loss Cost/Rate Level Changes Excludes Law-Only Filings OK NM CT OR AL NH MD CO TN IN NC IL NV WV LA UT FL IA AR AK VT MT TX KS NE AZ SC MS ID KY RI ME DC MO HI SD GA VA Approved Pending Reflects the most recent experience filing in each jurisdiction Due to the timing of the individual loss cost/rate filings, the figures shown may include changes from prior filing seasons 32

33 Current Voluntary Market Rates/Loss Costs Western NAIC Zone Hawaii* 1/1/18 1.7% Idaho 1/1/18 5.8% 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 12/1/17 9.4% Nevada 3/1/ % Colorado* 1/1/ % Oregon 1/1/ % New Mexico 1/1/ % *Pending 33

34 Current Average Voluntary Pure Loss Costs Using Oregon Payroll Distribution Pure Loss Cost All Classes OR CO ID MT NV UT Region Country Based on the latest NCCI approved rates and loss costs in the various states 34

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

36 Countrywide and Oregon Labor Markets

37 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 Medical inflation is forecasted to slow and then reaccelerate Interest rates are still low but expected to increase Upward pressure on payroll and premium as well as indemnity severity Increases in medical costs per claim Investment income will likely remain muted this year but increase as interest rates rise 37

38 Percent 5 Change in Private Employment Private Employment Growth Is Above Average Oregon 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 38

39 Percent 4 Change in Average Weekly Wages Wage Growth Is Below the Nation Oregon 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 39

40 Private Industry Payroll Growth Decomposition Payroll Growth Is Slightly Lower Than the Nation Percent % +3.9% Payroll % +2.1% AWW % +1.7% Employment 0 Oregon United States 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 40

41 Change in Employment by Industry Employment in Most Industries Has Increased in the Past Year Industrial Sector Construction Education and health services Professional and business services Trade, transportation, and utilities Other services Government Financial activities Leisure and hospitality Information Manufacturing Natural resources and mining Year-Over-Year Percent Change, 2017Q1 Sector Size % Share 1-Year Change OR , ,800 US +2.8 OR , ,300 US +2.4 OR , ,500 US +3.1 OR , ,900 US +1.0 OR , ,100 US +1.0 OR , ,200 US +0.8 OR , ,200 US +2.2 OR , ,000 US +1.9 OR , US 0.9 OR , US +0.0 OR , ,100 US 2.1 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 41

42 Oregon s Payroll Growth Decomposition by Sector Employment Growth + AWW Growth Payroll Growth 5% 0 +5% +10% Professional and business services Government Trade, transportation, and utilities Education and health services Manufacturing Financial activities Construction Leisure and hospitality Other services Information Natural resources and mining 5% 0 +5% +10% 5% 0 +5% +10% 2017 Q1 year-on-year percentage change; AWW = Average Weekly Wage; sectors are in descending order by the volume of state payroll amounts Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI 42

43 Headline Unemployment Rate The Unemployment Rate Is Below Average Percent US: 4.3% OR: 3.8% 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), 43

44 Oregon s Labor Market Oregon s unemployment rate is below the US rate Payroll growth in Oregon is slightly lower than the nation Payroll has decreased in two sectors Education and Health Services posted the fastest growth, driven by gains in both employment and the average weekly wage Average weekly wages have fallen in three sectors Employment growth is above the US rate Construction added the most jobs and grew at the fastest rate Education and Health Services has also added a large number of jobs Two sectors have experienced declines 44

45 Guest Speaker Louis Savage, Administrator Oregon s Workers Compensation Division

46 Legislative Issues: Countrywide and Oregon

47 2017 Countrywide Overview Countrywide, legislative activity has increased over prior years both in volume and content. Regulation changes thus far concern medical cost management, claim handling, and effectuating enacted legislation. Year to date, there have been fewer workers compensation-related cases at the state supreme court level than there were in The 2016 general election resulted in a net gain for Republicans in state government, where they now control both chambers of the legislature and the governor s office in 26 states. 47

48 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/

49 Key Countrywide Workers Compensation-Related Themes in Introduced Legislation First Responder Presumptions Indemnity Benefits Medical Cost Management Definitions 49

50 Enacted Oregon Legislation HB 2192 Increases the term of the Workers Compensation Management-Labor Advisory Committee (MLAC) members from two years to three years. HB 2335 Permits the Director of Department of Consumer and Business Services to appoint as many as three members to a panel of medical arbiters in accordance with criteria the director sets by rule. HB 2337A Increases workers compensation benefits for Permanent Total Disability (PTD). It also increases the minimum PTD weekly benefit from the lesser of $50 or 90% of the worker s wage to no less than 33% of the Statewide Average Weekly Wage (SAWW) and increases the maximum PTD weekly benefits from 100% of the SAWW to no more than 133% of the SAWW. HB 2338A Creates a single standard for fatality benefits. The bill defines one monthly benefit rate for children of a deceased worker and uniform duration of benefits for children less than 19 years of age. 50

51 Federal Legislative and Regulatory Issues Impacting the Workers Compensation System NCCI engages Congress and federal agencies regarding issues impacting the state-based workers compensation system NCCI provides insights and information on the system to several agencies including: US Department of Labor (USDOL) National Institute for Occupational Safety and Health (NIOSH) Government Accountability Office (GAO) US Department of the Treasury 51

52 Federal Emerging Issues Regulation of Air Ambulance Services Sen. Jon Tester (MT) introduced legislation to provide state authority Federal Aviation Administration Reauthorization Social Security Disability Insurance (SSDI) Reform SSDI Solutions Initiative recommendations Trump Administration SSDI Reverse Offset Proposal Medicare Set-Aside (MSA) Reform Legislation to be introduced to bring greater efficiency to the MSA Process Congressional Budget Office scoring 52

53 2017 Medical Marijuana Update

54 Emerging Issue: The Legalization of Marijuana and Its Impact on Workers Compensation

55 55

56 State Activity Medical Marijuana Recreational Marijuana 29 8 Plus Washington, DC have legalized medical marijuana Plus Washington, DC have legalized recreational marijuana 56

57 Federal Activity US Drug Enforcement Administration Federal funds will not be used to prevent state implementation of medical marijuana laws Controlled Substances Act Unclear as to what will happen August 2016 May 2017 Currently 2017 and Beyond Will not reclassify marijuana House Resolution 244 Marijuana is an illegal Schedule I drug Current Administration 57

58 Colorado Supreme Court Coats v. Dish Network (2015) Employers can lawfully terminate workers for using marijuana outside of work hours even though the drug is LEGAL in the state. 58

59 An insurer MUST reimburse a qualified workers comp claimant for the cost of medical marijuana to treat low back pain Appealed to NM New Mexico Court of Appeals Vialpando v. Ben s Automotive Services and Redwood Fire & Casualty (2014) Supreme Court: Certiorari denied 59

60 New Mexico Court of Appeals Maez v. Riley Industrial (2015); Lewis v. American General Media (2015) An employer is required to reimburse a qualified claimant for medical marijuana if the drug is reasonable and necessary medical care for treatment of a work injury. 60

61 Connecticut Workers Compensation Commission Decision Petrini v. Marcus Dairy, Inc. and Gallagher Bassett Service (2016) Upheld decision that the claimant s use of medical marijuana for pain management of his debilitating condition constitutes reasonable and necessary medical treatment. 61

62 62 Maine WC Board Decisions (2016) Maine WC Board: Noll v. Lepage Bakeries, Inc. and Cannon Cochran Management Services Bourgoin v. Twin Rivers Paper Co., LLC and Sedgwick CMS A self-insured employer is to reimburse costs for reasonable and proper use of medical marijuana under the state s WC and medical marijuana law. 62

63 Other Activity At least five states (Connecticut, Maine, Minnesota, New Jersey, and New Mexico) have allowed reimbursement for WC under certain circumstances Florida and North Dakota passed legislation in 2017 prohibiting payment of WC benefits for medical marijuana New Mexico Adopted a fee schedule to provide for reimbursement of medical marijuana to injured workers effective January 1, 2016 Introduced legislation (SB 371/HB 527) in 2017 requiring employers and carriers to pay for medical marijuana for injured workers; the legislation did not pass 63

64 Questions Raised by WC Stakeholders Is marijuana a safer alternative to opioids for pain management? Is it a less expensive alternative to other drugs? When a state legalizes marijuana, what is the potential impact on neighboring states? Should states consider fee schedules for marijuana (like New Mexico)? How are appropriate dosage levels determined? What is the impact on Medicare Set-Aside Allocations since marijuana is still illegal under federal law? 64

65 Legalization of Marijuana Summary States are increasingly legalizing marijuana in some form for medical use. Courts are increasingly dealing with contested cases of medical marijuana in the work environment. Marijuana is still illegal under federal law and remains a Schedule I drug. 65

66 66

67 Residual Market: Countrywide and Oregon

68 Where Does NCCI Provide Residual Market Services? As of January 2017, NCCI provides Plan Administration services in the following states: AK, AL, AR, AZ, CT, DC, GA, IA, ID, IL, KS, MS, NH, NM, NV, OR, SC, SD, TN, VA, VT, and WV Other Plan Services: DE, IN, and NC As of January 2017, NCCI provides Pool Administration services in the following states: National Pool: AK, AL, AR, AZ, CT, DC, DE, GA, IA, ID, IL, KS, NC, NH, NJ, NV, OR, SC, SD, TN, VA, VT, and WV New Mexico Pool Tennessee Reinsurance Mechanism Financial and Actuarial Services: MA and MI 68

69 Residual Market Video Excerpt Jim Nau, General Manager NCCI Residual Markets

70 $ Millions $50M $45M $40M $35M $30M $25M $20M $15M $10M $5M Oregon Total Residual Market Plan Estimated Premium Volume Premium in $ Millions As of 12/31/2016 $44M $31M $24M $18M $20M $26M $36M $38M $43M $37M $0M Policy Year 70

71 Oregon Residual Market Share Plan Premium As a Percentage of Direct Written Premium 8% 7% 6% 5% 5.0% 6.8% 6.7% 6.8% 6.3% 4% 3% 2% 1% 0% *Preliminary * Calendar Year 71

72 Oregon Total Residual Market Plan Policy Counts As of 12/31/ ,000 12,000 12,023 10,611 10,000 8,000 9,242 7,853 7,875 7,956 8,794 9,246 9,383 9,402 6,000 4,000 2, Policy Year 72

73 Oregon Average Size Accounts for Residual Market Policies and Estimated Premium As of 12/31/2016 Premium Range Policy Count % of Policies Total Premium % of Premium Average Policy Size $0 $2,499 6, % $4,439, % $671 $2,500 $4,999 1, % $4,159, % $3,537 $5,000 $9, % $5,545, % $6,923 $10,000 $19, % $6,248, % $14,200 $20,000 $49, % $8,332, % $29,340 $50,000 $99, % $4,247, % $67,423 $100,000 $199, % $2,297, % $127,639 $200, % $1,631, % $326,329 Total 9, % $36,901, % $3,925 73

74 Policy Year Oregon Residual Market Reinsurance Pool Net Operating Results Estimated Net Operating Gain/(Loss) Projected to Ultimate as of 12/31/ ($827) 2015 $1,665 ($8,715) ($1,083) -$10,000 -$8,000 -$6,000 -$4,000 -$2,000 $0 $2,000 $4,000 Operating Gain/(Loss) ('000s) 74

75 Residual Market Summary National Stable residual market share Manageable operating results Residual market premium declined slightly in 2016 High levels of customer service satisfaction State Decline in premium volume Relatively stable residual market share Self-funded operating results Please visit ncci.com for additional state and countrywide information. 75

76 Q&A

77 Supplemental Information: Loss Cost Filing Support

78 Loss Ratio Oregon 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 78

79 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) 79

80 Frequency per Million of On-Leveled Premium Oregon Claim Frequency Policy Year Based on NCCI s financial data through 12/31/2016 adjusted to a common wage level 80

81 Average Indemnity Claim Severity ($ '000s) Oregon Average Indemnity Claim Severity AY Policy Year 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 81

82 Average Medical Claim Severity ($ '000s) Oregon 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

83 Supplemental Information: National/Regional Comparisons

84 Pure Loss Costs All Classes Current Average Voluntary Pure Loss Costs Using Oregon Payroll Distribution TX AR WV IN UT KS NV DC OR AZ VA MS TN SD NC NM OK MD AL HI KY NE MO NH CO ID IA SC ME LA IL RI FL GA VT MT AK CT CW State Based on the latest NCCI approved rates and loss costs in the various states 84

85 Medical Benefits Constitute the Majority of Total Benefit Costs in Oregon Indemnity Medical 45.4% 54.6% 36.3% 63.7% 41.6% 58.4% Regional states are CO, ID, MT, NV, and UT Based on NCCI s financial data through 12/31/

86 Oregon Average Claim Frequency Frequency per 100,000 Workers All Claims UT 630 3,134 Total 3,764 NV 1,061 4,082 Total 5,143 MT 1,137 4,016 Total 5,153 ID 1,208 4,036 Total 5,244 CO 945 3,238 Total 4,183 OR 1,547 3,091 Total 4, Based on NCCI s Statistical Plan data Lost Time Medical Only 86

87 Average Indemnity Claim Severity in the Region Lost-Time Claim Severity in $ Thousands OR CO ID MT NV UT PY 2013 PY 2014 Based on NCCI s financial data through 12/31/2016 for lost-time claims; premium adjusted to common wage level 87

88 Average Medical Claim Severity in the Region Lost-Time Claim Severity in $ Thousands OR CO ID MT NV UT PY 2013 PY 2014 Based on NCCI s financial data through 12/31/2016 for lost-time claims; premium adjusted to common wage level 88

89 Oregon Distribution of Claims by Injury Type 67% 21% 12% 0% 79% 13% 8% 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 CO, ID, MT, NV, and UT Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 89

90 Oregon Indemnity Loss Distribution by Injury Type 20% 70% 3% 7% 25% 65% 3% 7% 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 CO, ID, MT, NV, and UT Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 90

91 Oregon Medical Loss Distribution by Injury Type 25% 56% 4% 15% 0% 23% 54% 6% 15% 2% 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 CO, ID, MT, NV, and UT Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 91

92 Glossary

93 Glossary Assigned Risk Adjustment Program (ARAP) An assigned risk market program that surcharges residual market risks based on total actual losses in the experience rating period. 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. 93

94 Glossary Claim Severity The average cost of a claim. Severity is calculated by dividing total losses by the total number of claims. Combined Ratio The sum of the (1) loss ratio, (2) expense ratio, and (3) dividend ratio for a given time period. Detailed Claim Information (DCI) An NCCI Call that collects detailed information on an individual workers compensation losttime claim basis, such as type of injury, whether or not an attorney was involved, timing of the claim s report to the carrier, etc. Direct Written Premium (DWP) The gross premium income adjusted for additional or return premiums, but excluding any reinsurance premiums. 94

95 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. 95

96 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. 96

97 Appendix

98 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 98

99 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 99

100 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 100

101 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 101

102 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 102

103 Valuation of Statistical Plan Data 1st Report Valuation 2nd Report Valuation 3rd Report Valuation 4th Report Valuation 5th Report Valuation Policy Effective 18 Months 42 Months 66 Months 30 Months 54 Months 103