Across Canada, workers’ compensation programs are designed to protect employees who suffer work-related injuries. These act as insurance programs administered by various agencies across all Canadian jurisdictions. These insurance regimes are collectively funded by employers who pay premiums according to a number of factors, including their payroll and history of workplace injuries along with the occupational risks associated with their industry or employee classifications. In Ontario, the Workplace Safety and Insurance Board (WSIB) is the province’s agency responsible for worker’s compensation.
On November 14, 2016, the board of directors for Ontario’s WSIB approved a new rate framework that will completely change the way the WSIB charges employers for workers’ compensation coverage in that province. The new system is a product of research and consultation that began in 2010, when the WSIB appointed Professor Harry Arthurs to review a number of issues related to the financial situation of the WSIB.
Under Ontario’s current system, employers who pay premiums to the WSIB for coverage pay a rate of insurance based on the rate group in which they are classified. Employers who pay at least $1,000 per year in premiums are placed into experience rating programs that review their claims experience in comparison to other employers in their rate group.
The WSIB currently has three experience rating programs: one for construction employers who pay more than $25,000 per year in premiums; one for nonconstruction employers who pay more than $25,000 in premiums and where employers can receive premium rebates or surcharges depending on their experience rating; and lastly one for employers who pay between $1,000 and $25,000 per year in premiums where individual premium rates can also be adjusted based on experience rating. Employers who pay less than $1,000 per year in premiums are not experience rated.
Arthurs’ study found a number of issues with the WSIB’s current systems, most notably its complex and inconsistent classification structure that was no longer relevant because of the changing economy, increasing divergence between business activity and risk, and lack of recognition of each employer’s experience in premium rates. This in turn leads to subsidization and inadequate experience rating programs that exclude many employers, premium rate instability, and the perception of negative behaviors.
The new rate framework will be streamlined, with the number of rate groups reduced from more than 150 to a total of 34 “classes.” The WSIB will also be classifying employers under the North American Industrial Classification System rather than the Standard Industrial Classification system. Going forward, premium rates for each class will be set by examining new claim costs, administrative costs, and past claim costs within each class. Employers will then pay a premium rate based on their own insurable earnings, the number of claims they have, and their actual claim costs. The revised system still features a surcharging mechanism for employers who have consistently poor claims experience, as well as a revised provision for dealing with fatalities.
An employer’s premium rate can now fluctuate each year, subject to a review of its experience rating and associated claim costs. That said, the new system limits the amount of increases or decreases to premiums in order to decrease volatility in the system and limit an employer’s individual exposure to changes year over year.
All told, the WSIB will be moving toward a system that resembles those used in many other provinces across Canada, including British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, and Prince Edward Island. In these jurisdictions, premiums are based on industry class and employers’ individual experience rating compared to other employers in their industry class. This allows for a more individualized rate setting program.
Ontario’s framework will differ from that of other provinces in one significant respect, which is the experience rating window used to set the premium rate. In many other provinces, the workers’ compensation boards only consider the costs of an individual claim for a three-year period with respect to an employer’s experience rating. By comparison, Ontario’s new system will take these costs into account for a period of six years, though more weight will be given to the first three years.
This will be a significant change for employers in Ontario. Under the current system, claims affect nonconstruction employers for a maximum of four years, while construction employers experience the impact of a claim for up to five years. Managing claims and health and safety will become more important than ever if employers want to minimize their costs.
The revised rate framework should be effective as of January 1, 2019, and the WSIB is aiming to have policies supporting its new framework in place as early as 2018. For employers, this essentially means that the WSIB will be looking at an employer’s experience rating for the 2015, 2016, and 2017 accident years. Employers will want to be proactive in order to minimize the impact of claims from those years and establish the best rate possible when the system is implemented.
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