The WSIB wishes to address some of the recent comments put forward on the WSIB Rate Framework Modernization consultation in a recent article by guest columnist Robert C. Cronish, (Lawyer: WSIB rate framework reform proposal ‘false and misleading’ – July 13). It is important to provide greater clarity and correct some of the misunderstandings that were identified by Mr. Cronish in his article.
In the current phase of the Rate Framework Modernization consultation, the WSIB has put forward a proposed preliminary Rate Framework to modernize how employers are classified and premium rats are set. This proposal is provided in a series of technical papers key products of varying depth to ensure our stakeholders can find the information in a format and level of information that best suits their needs. It builds upon Douglas Stanley’s recommendations contained in his Pricing Fairness report (February 2014) and further analysis undertaken by the WSIB with leading experts in the field.
Since the launch of the most recent phase of consultation in March 2015, the WSIB has actively been engaged with stakeholders by facilitating over 35 technical and working group sessions with employers, employer associations, and representatives, in addition to injured workers and labour groups. These outreach efforts have led to stakeholders gaining a better understanding of the recommendations put forward through the current consultation, as we solicit feedback and varied perspectives.
The WSIB seeks to replace the current classification system, with a more up-to-date and transparent classification structure.
The WSIB’s current classification structure, introduced in 1993, utilizes the 1980 Standard Industry Classification (SIC) system as developed by Statistics Canada, as its foundation. Since the creation of the SIC system, the structure of the Ontario economy has changed dramatically and, as Professor Harry Arthurs and Douglas Stanley identified, so too has the statistical system aimed at capturing and grouping industries. In 1997, Statistics Canada and their North American counterparts introduced the North American Industry Classification System (NAICS) to replace the outdated SIC with a commitment to updating the structure every five years to reflect any changes in the economy.
The proposed preliminary Rate Framework seeks to replace the WSIB’s current employer classification system with a simple and succinct structure adapted from the 2012 NAICS. Since the proposed classes are adapted from the NAICS, an up-to-date classification structure commonly used by other organizations, the classes would be easier for stakeholders to understand as they are commonly used for other reporting (e.g. tax filings).
Second Injury and Enhancement Fund Program
During the recent outreach efforts with stakeholders, the WSIB has heard many perspectives on the recommended approach to discontinue the Second Injury and Enhancement Fund (SIEF) program. This includes the concerns raised with the recommended approach and a clear consensus that some form of cost relief is required and that some form of support to promote hiring previously injured workers may need to be considered distinctly from any cost relief program.
Some stakeholders have also highlighted some potential unintended consequences with the proposal to discontinue SIEF, while others have provided specific examples to support their view. These perspectives are important to us and will assist us in making the most appropriate decision on this point.
To be clear, the WSIB is proposing to move from the current three retrospective programs to a prospective premium rate setting process.
Like most other Worker’s Compensation Boards in Canada, the proposed preliminary Rate Framework is recommending to move to a prospective premium rate setting process – that is, a rate that is updated each year to reflect the experience of each employer within their industry. The WSIB evaluated the merits of revising the existing experience rating programs, and it was determined that the programs should be replaced with a prospective employer level premium rate adjustment that applies to all Schedule 1 employers – right now approximately 140,000 employers do not participate in any of the current experience rating programs.
Under the proposed preliminary Rate Framework, each employer would see an adjusted premium rate based on the risk that the employer brings to the system. Depending on an employer’s claims costs and insurable earnings (i.e. their risk profile), they would be placed in one of the 40-80 risk bands found in each Industry Class. Under the proposed preliminary Rate Framework, employers with similar risk profiles would be grouped for premium rate setting purposes within a risk band and pay a common rate, subject to an annual three risk band limitation that limits premium rate volatility, given each risk band represents a five per cent increment in premium rate.
A prospective process would look at past experience over six years, and based on that experience the WSIB would set the upcoming year’s premium rate. As a result, when compared to the operations of the current experience rating programs, it is a more stable approach that is more effective at recognizing long-term performance trends with respect to claim costs and sustained and improved return to work efforts. It also places each employer on their own personalized journey towards a premium rate that better reflects their experience – yet provides a number of measures that ensure stability from one year to the next.
Proactive occupational health and safety interventions – Return to work and prevention
The proposed preliminary Rate Framework would act as an early warning for employers by providing target premium rates allowing employers to better identify the future projected path of their premium costs, and take proactive health and safety actions (e.g. prevention and return to work (RTW) to address the risks). This would be most helpful in assisting employers who have a particular interest in reducing their claims experience performance trends that may have led to higher premium rates.
The WSIB’s unfunded liability
The unfunded liability (UFL) represents the shortfall between the money needed to pay the future benefits to workers for all established claims, and the money that is in the insurance fund.
The government has recognized that the elimination of the UFL is an important goal and has specifically mandated a three stage sufficiency requirement for achieving full funding. The WSIB must reach at least 60 per cent funding by 2017, 80 per cent funding by 2022 and 100 per cent funding by 2027.
In an effort to be transparent to keep stakeholders up to date on our progress, the WSIB posts its quarterly sufficiency progress on its website. As at March 31, 2015, we had a funding shortfall of $8.3 billion on a Sufficiency Ratio basis, which means our liabilities (the estimated present value of future benefit payments) exceeded the current value of our assets. Expressed in percentage terms, we had 72.9 per cent of the assets required to meet our future benefit obligations.
For more information on the WSIB’s Rate Framework Modernization initiative, visit www.wsibrateframeworkreform.com, or contact the Consultation Secretariat firstname.lastname@example.org to schedule a working group session.
J.S. Bidal is the executive director of strategic revenue policy with the WSIB.