Date of Adoption: May 12, 2000.

Purpose: Adoption of rules applicable to labor and industries retrospective rating program. These rules are designed to implement SB 6048 (chapter 7, Laws of 1999) and certain provisions of the Joint Legislative Audit Review Committee's (JLARC) performance audit relative to the retrospective rating program.

Citation of Existing Rules Affected by this Order: Repealing WAC 296-17-91201 Introduction, 296-17-91202 Definitions, 296-17-91203 Can you give me an overview of the retrospective-rating program?, 296-17-91204 I understand that there are specific requirements that an employer must meet before they can participate in either individual or group retrospective rating. Can you tell me what these requirements are?, 296-17-91205 I understand that there are specific prerequisites that an organization must meet to sponsor a retrospective rating group plan. Can you tell me what these requirements are?, 296-17-91206 Are there other qualifying requirements that an organization must satisfy once the preliminary requirements have been met?, 296-17-91207 I have several businesses that been combined for experience rating purposes because of common majority ownership. They still report and pay premiums using separate subaccounts. If I want to participate in retrospective rating, do I need to enroll all of my businesses or can I enroll some and not others?, 296-17-91208 Is there a requirement for employer members of an organization to be engaged in substantially similar businesses to participate in the organization's group plan?, 296-17-91209 Do all organization members enrolled in a retrospective rating group plan have to report within one classification?, 296-17-91210 Can you tell me how the authorized classifications for a retrospective rating group plan are determined?, 296-17-91211 After a retrospective rating group plan has been authorized a classification or classifications, can an organization be allowed additional classifications at a later date?, 296-17-91212 Does an organization have to reapply each year for authorized classifications applicable to their retrospective rating group plan?, 296-17-91213 The department has approved our organization to sponsor a retrospective rating group. Is there an application process that we must follow?, 296-17-91214 What is the next step after the organization has submitted this application?, 296-17-91215 Is there an application process to enroll in an individual retrospective rating plan?, 296-17-91216 Can you tell me what happens at the end of a coverage period?, 296-17-91219 If I am successful in reducing my workers' compensation insurance costs, and you inform me that I am entitled to a refund, when will I get the refund?, 296-17-91220 Do you establish how the refund is to be distributed to members of a group?, 296-17-91221 If a group is subject to an additional assessment, does the department bill each member of the group for their share?, 296-17-91222 If a group or individually enrolled employer owes money related to a retrospective-rating adjustment when is it due?, 296-17-91223 If I am in a dispute with the department over an assessment, claim cost or moneys alleged to be owed to the department, can I participate in the retrospective rating program?, 296-17-91224 Are employers required to share retrospective rating refunds with their employees?, 296-17-91225 Can an organization be disqualified from sponsoring a retrospective rating group?, 296-17-91250 Limitation of liability indemnification, 296-17-91402 Table II, 296-17-91403 Table III, 296-17-91404 Table IV, 296-17-91405 Table V, and 296-17-91406 Table VI.

Statutory Authority for Adoption: RCW 51.18.010.

Adopted under notice filed as WSR 99-22-110 on November 3, 1999.

Changes Other than Editing from Proposed to Adopted Version: Labor and industries is modifying from the proposed rules the number of mandatory evaluations for each coverage period and the effective dates of WAC 296-17-90402 and 296-17-90466.

Changes to the number of annual evaluations are covered in two sections. These two sections are modified and adopted as follows:

WAC 296-17-90402 Definitions.

Evaluation date: The date selected by the department in which incurred losses for applicable claims are measured and captured for the purpose of calculating retrospective premium. Changes in incurred losses that occur after an evaluation date will not be considered until the next applicable evaluation date. The first evaluation date is between nine and ten months after the coverage period ends. The next three All subsequent evaluations will occur in twelve-month intervals. Beginning with the coverage period October 1, 2000, and all coverage periods thereafter, the number of mandatory evaluations will change from two to three.

WAC 296-17-90445 Can you tell me what happens at the end of a coverage period? (1) Between nine and ten months after the coverage period has ended we will do an initial evaluation of the losses for each employer and group participating in retrospective rating. All future evaluation dates for a coverage period will take place approximately twelve months after the initial evaluation date.

Example: Assume that your coverage period began July 1, 1998, and ended June 30, 1999, (twelve calendar months). Our first evaluation date would occur mid-April 2000. This is roughly nine and one-half months from the last day of the coverage period. Because all retrospective rating plans have four three mandatory evaluations, each subsequent evaluation will occur at twelve-month intervals.

The effective dates of WAC 296-17-90402 and 296-17-90466(1) have been changed from the proposed July 1, 2000 to October 1, 2000. The adopted text for WAC 296-17-90402 is contained above. The adopted text for WAC 296-17-90466 is as follows:

WAC 296-17-90466 Do you establish how the refund is to be distributed to members of a group? (1) No. We are not involved in how the premium refund is distributed. The distribution of any refund is determined by the organization that sponsored the group. A sponsoring organization, however, cannot withhold a member's refund for not reenrolling in their retrospective rating group during the next or any future coverage year. Effective with the coverage period beginning October 1, 2000, and all coverage periods thereafter, a sponsoring organization must distribute In addition, at least ninety percent of any retrospective rating group refund must be distributed to members of the group.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 37, Amended 0, Repealed 31.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 37, Amended 0, Repealed 31.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0. Effective Date of Rule: July 1, 2000.

May 12, 2000

Gary Moore

Director

OTS-3220.9

NEW SECTION
WAC 296-17-90401
Introduction.

Retrospective rating is a program designed to encourage workplace safety and accident prevention for employers that insure their workers' compensation obligations with the state fund. The 1999 session of the legislature finding that the goal of workplace safety has been enhanced by retrospective rating determined that the plan provided for in RCW 51.16.035 should be formalized in its own section of law (RCW 51.18.005). By legislative policy (RCW 51.18.010) retrospective rating should encourage broad participation by employers and organizations that sponsor retrospective rating groups.

To implement the retrospective rating plan provided for in RCW 51.18.010 we have developed a series of formal rules found in the Washington Administrative Code (WAC). As required by law these rules are based on recognized principles of insurance. WAC 296-17-90401 through 296-17-90497 contains the general and special rules and rating plan tables applicable to the department's voluntary retrospective rating program. We refer to the individual rules (WACs) as sections and the complete body of sections as the retrospective rating manual. The retrospective rating manual contains sections (WACs) that define or explain:

• Words or phrases that we use;

• The steps you must take to participate in the program;

• How group plans are authorized;

• Why members of a group must be involved in similar business operations;

• The need to have an insurance account with the department and keep it in good standing in order to participate in this voluntary rating plan;

• Workplace safety requirements of the plan;

• Contract restrictions and refund requirements;

• Formulas used to establish retrospective premium;

• Premium size tables;

• Plan tables.

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In developing the general reporting rules and tables for retrospective rating, we have used certain words or phrases that could have several meanings. Appendix A of this manual contains a list of words or phrases defined by law (Title 51 RCW). To reduce misunderstandings which can result by our use of certain words or phrases not defined in law (Title 51 RCW), we have developed definitions which will govern what these words or phrases mean for purposes of the retrospective rating program.

Account: The term "account" means an individual employer's industrial insurance account and related subaccounts, or in the case of a retrospective rating group it means the sponsoring organization's industrial insurance account. For purposes of RCW 51.08.015, the term "retrospective rating account" and "industrial insurance account" shall have the same status.

Account in good standing: For an account to be in good standing, the employer and/or group must have:

(a) Submitted all of the required reports and paid all industrial insurance premium payments, assessments, penalties and interest when due and on time. This requirement also includes the payment of other fees, fines, penalties and assessments established by the department such as safety violations and computer access fees. An account may be deemed to be in good standing if the employer or group (organization) is current with a repayment agreement with the department; and

(b) Not participated in the activities described in WAC 296-17-90484 concerning the direct payment of medical services.

A sponsoring organization in addition to the requirements described in (a) and (b) of this subsection must also file the safety plan and reports required in WAC 296-17-90412 and comply with the contract and refund distribution requirements of WAC 296-17-90466 for the group account to be in good standing.

Adjustment: The process of calculating retrospective premium, and any resulting refunds or assessments. For the first adjustment of a coverage period, retrospective premium is compared to the standard premium due. The difference will be refunded if the retrospective premium is lower than the standard premium due. You will be assessed the difference if the retrospective premium is higher than the standard premium due. In subsequent adjustments of the coverage period, the new retrospective premium is compared to the prior retrospective premium to determine the amount of refund or assessment.

Basic premium ratio (BPR): A component of the retrospective rating premium formula, the BPR represents a charge for administrative costs (except claims handling) and an insurance charge which covers the cost of having retrospective premium limited by the selected maximum premium ratio.

Case reserve: The department's estimate of cost associated with a specific claim over the lifetime of the claim.

Coverage period: A twelve-month period beginning January 1 and ending December 31, or April 1 through March 31, or July 1 through June 30, or October 1 through September 30. Only claims with a date-of-injury within the selected coverage period and standard premium due for the same coverage period are used to calculate retrospective premium. The coverage period is selected by the group or individually enrolled employer.

Developed losses, a.k.a. total incurred losses (developed): A component of the retrospective rating premium formula. Based on historical trends we know that the total incurred losses for claims in a coverage period tend to increase over time. This can be the result of claim reopenings, changes in time loss duration, increased medical utilization, etc. The developed losses computation anticipates and distributes these increases among all the participants in a coverage period. Developed losses for pension claims are determined by multiplying their incurred losses by the applicable performance adjustment factor. For nonpension claims, developed losses are determined by multiplying their incurred losses by the applicable loss development factors.

Evaluation date: The date selected by the department in which incurred losses for applicable claims are measured and captured for the purpose of calculating retrospective premium. Changes in incurred losses that occur after an evaluation date will not be considered until the next applicable evaluation date. The first evaluation date is between nine and ten months after the coverage period ends. All subsequent evaluations will occur in twelve-month intervals. Beginning with the coverage period October 1, 2000, and all coverage periods thereafter, the number of mandatory evaluations will change from two to three.

Freeze date: See evaluation date.

Group: Employer members of an organization who have agreed to have their retrospective premium calculated using the combined applicable standard premium and related loss data of the participants as a whole.

Homogeneity: An insurance term used to denote a similarity between two or more business risks. Although it is rare that any two businesses will be identical, similar businesses have similar exposure to occupational injury and disease.

Incurred losses: A term we use to denote a cost component of a claim. For open claims, incurred losses are the total of costs paid-to-date which have been assigned to a given employer account, or the case reserve established by the department, whichever is greater. For closed claims, incurred losses are the total of costs paid-to-date which have been assigned to a given employer account, regardless of any case reserve that may have been established.

Loss conversion factor (LCF): A component of the retrospective premium formula, the LCF represents an expense charge for claims handling and the present value of developed losses. LCFs can be found in WAC 296-17-90493 through 296-17-90497.

Loss development factor (LDF): LDFs are actuarially determined factors that are multiplied by incurred losses of nonpension retro claims to produce developed losses. LDFs are unique to each coverage period, but are the same for every nonpension retro claim in the coverage period. They are periodically recalculated. LDFs shown on retro reports have already been adjusted by the applicable performance adjustment factor.

Loss ratio: The numerical result when dividing developed losses by standard premium. The retrospective premium calculation will generate a net refund if the Basic premium ratio (BPR) + (Loss Ratio X the Loss conversion factor (LCF)) is less than 1. The BPR and LCF are determined by the plan picked by the individual enrollee, or in the case of a group by the sponsoring organization and the premium size of the individual enrollee or the group. Once these are picked the group can only influence the loss ratio to determine the amount of refund. The department suggests an evaluation of each claim to determine if there are trends and patterns and that the sponsoring organization implement workplace safety measures to eliminate or reduce loss regardless of the loss ratio.

Maximum premium ratio (MPR): A factor preselected by the organization (group) or individually enrolled employer that determines the maximum retrospective premium requirement for a given coverage period. MPRs can be found in WAC 296-17-90493 through 296-17-90497.

Member of a group: A term used by the department to describe the individual employers that participate in a group plan of a sponsoring organization.

Minimum premium ratio (MnPR): For plans A1, A2 and A3, an actuarially determined factor that determines the minimum retrospective premium requirement for a given coverage period. MnPRs can be found in WAC 296-17-90493 through 296-17-90497.

Pension claim: A claim designated as a fatality or total permanent disability.

Performance adjustment factor (PAF): An actuarially determined factor unique to each retro coverage period which ensures that aggregate refunds reflect the relative performance of retro versus nonretro state fund employers plus an investment credit.

Plan: A numeric table developed by the department used to calculate the retrospective premium requirement of a group or individually enrolled employer. A group or individually enrolled employer preselects from one of five plans (A, A1, A2, A3 or B). The selected plan (along with the MPR and standard premium volume) determine the minimum premium, basic premium and the loss conversion factor which is applied to the developed losses used in the retrospective premium calculation.

Premium: Money paid (due) from an employer for workers' compensation insurance. It does not include money paid as fees, fines, penalties or deposits.

Qualified employer: A term used by the department to describe an employer that has an industrial insurance account and that the account is in good standing at the time of enrollment.

Retrospective premium: The net premium for a group or individually enrolled employer after an adjustment for a given coverage period, using the formulas and provisions found in WAC 296-17-90491 through 296-17-90497.

Retrospective rating account: A term used by the department to describe the industrial insurance account of an employer or a sponsoring organization that participates in retrospective rating.

Standard premium: The total accident fund and medical aid fund premiums paid (due) by a group or individually enrolled employer for a given coverage period. The supplemental pension assessment portion of total premiums due (paid) is not included. If the group includes employers subject to the staggered enrollment provision of the retrospective rating rules, the standard premium is the total premiums due (paid) for the calendar months in which they have been accepted into a group.

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Retrospective rating is a voluntary program offered by the department to a qualified employer or group of employers who insure their workers' compensation insurance obligations with the state fund. Retrospective rating offers premium refunds to participants that help control their workers' compensation claim costs. Reductions in workers' compensation claim costs are accomplished in part through employer or group sponsored safety and accident prevention programs and employer cooperation with the department's claims management activities. The criteria that must be met to be considered a "qualified employer" can be found in WAC 296-17-90406. A qualified employer who enrolls in an individual plan, selects the plan and coverage period. Any employer in an individual plan must participate in the plan for the entire coverage period unless they become a self insured employer or their industrial insurance account is closed. An organization that sponsors a retrospective rating group selects the plan and coverage period for its members and must participate in the program through the end of a coverage period if their account remains active. The department will allow an organization sponsoring a group to enroll new employer members into their retrospective rating group on a quarterly basis. We refer to this as a staggered enrollment. Because of this feature, participation for employers in a group plan can be as short as three months or as long as twelve months. All retrospective rating participants agree to be subject to the provisions of the rules contained in the retrospective rating manual. Final determination of employer or group eligibility, account in good standing, evaluation of incurred losses and such other matters covered by the rules contained in the retrospective rating manual rest with the department. Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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Can you tell me what these requirements are? (1) To be a qualified employer you must have:

(a) An industrial insurance account with the department; and

(b) Your industrial insurance account must be in good standing at the time of enrollment.

(2) The department may require the posting of a surety bond or an assignment of savings. If so, it will be executed on forms authorized by the department and in one thousand dollar increments. The surety bond or assignment of savings requirement will be based on the difference between the participants' estimated standard premium and the maximum premium due under the applicable retrospective rating plan. In the event that surety bond or assignment of savings requirement falls within two increment ranges, the bond will be at the next higher thousand dollar increment. The surety bond or assignment of savings must be in full force and effect for the entire coverage and the related adjustment periods.

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(1) No, only organizations with members can sponsor a retro group. This requirement is intended to provide a distinction between a business enterprise with clients that are not permitted to sponsor a retrospective rating group and an organization with members that can sponsor one or more retrospective rating groups.

(2) In addition, the sponsoring organization must have been formed for purposes other than that of obtaining or offering insurance coverage or insurance services or sponsoring a group plan and participating in the department's retrospective rating program.

(a) The department will verify the purpose(s) of the organization from the information contained in the articles of incorporation, bylaws, contracts and/or advertising material of the organization.

(b) Since the enhancement of workplace safety for the group is a principal requirement of the retrospective rating program, an organization, which at the time of a request for sponsorship offers services which are primarily related to risk management, safety, loss control, claims administration or insurance will be deemed to be set up for the sole purpose of participating in the retrospective rating program and will not qualify to participate in this program.

(3) In addition to these prohibitions, an insurer, insurance broker, insurance agent or insurance solicitor may not:

(a) Participate in the formation of a retrospective rating group; or

(b) Sponsor a retrospective rating group.

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Can you tell me what these requirements are? Yes. Before we can consider an organization's request to sponsor a retrospective rating group plan they must meet all the following requirements:

(1) The sponsoring organization must have been in existence for at least four years prior to sponsoring a retrospective rating group.

(a) To validate this, the sponsoring organization must provide the department with copies of its articles of incorporation, bylaws and marketing/membership applications or similar material, accompanied with an affidavit certifying that the documents are true and the information contained in the documents is accurate as of the date of submittal.

(b) The department will verify this information through contacts with various state, local and federal agencies and other businesses.

(2) The sponsoring organization must have been formed for purposes other than that of obtaining or offering insurance coverage or insurance services described in WAC 296-17-90408.

(3) Employer members of the proposed retrospective rating group must be dues paying members of the organization. We recognize that some organizations may be funded through member donations and not dues. The intent of this requirement is to ensure that the members of the organization are current members as opposed to potential members. Where an organization's members do not pay dues the organization must provide a list of its current members and a written explanation of how member contributions are determined.

(a) An organization seeking to sponsor a group retrospective rating plan must submit a complete list of its current membership to the department that details the effective date of membership accompanied with an affidavit certifying the list to be true and accurate as of the date of submittal.

(b) Each employer member who wants to participate in the organization's retrospective rating group plan must have an industrial insurance account in good standing with the department.

(c) Each employer member who wants to participate in the proposed sponsoring organization's retrospective rating group must provide us with a written request/release. This is to be done on a form provided by the sponsoring organization and approved by the department. Sample forms can be found in Appendix A of this manual. Completion and submission of this application to the department signifies the employer's desire to participate in the organization's retrospective rating group if it is approved. The proposed retrospective rating group membership list must be submitted with the group application of the organization and the other material listed in this section.

(d) All employers in the retrospective rating group must be members of the sponsoring entity.

(e) Fifty percent of the members of the proposed retrospective rating group must have been members of the sponsoring organization for one year prior to the group's entrance into the retrospective rating program. We will verify this from the membership information provided to the department in (a) of this subsection.

(4) The sponsoring organization must have an industrial insurance account and the account must be in good standing at all times, including the application process and the coverage and adjustment periods.

(5) The initial premium level of the proposed retrospective rating group must be at least one million five hundred thousand dollars. This will be based on the standard premium of the proposed group members' most current fiscal year (four quarters) of reporting.

(6) The requirements contained in this rule are in addition to any other requirements contained in the retrospective rating manual such as those found in WAC 296-17-90412(2) applicable to an annual safety report and WAC 296-17-90421(2) applicable to selection of an industry group by the sponsoring organization.

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(1) Yes. An organization seeking to sponsor a retrospective rating group must submit a written workplace safety and accident prevention plan that demonstrates to the department's satisfaction that the formation of the group will substantially improve workplace safety and accident prevention. At a minimum the plan must be tailored to the business and industry grouping selected by the organization. The written plan must include identification and evaluation of the common hazards found in the business and industry grouping selected, disclosure of services to be provided by the organization to each member, if the services are fee based or free and meeting and workshop attendance requirements. In addition, the sponsoring organization must explain how the formation of the group will result in enhanced cooperation with the department's claims management activities.

(2) An organization seeking to continue sponsorship of an existing retrospective rating group must provide annually a written report that highlights workplace safety accomplishments of the group during the past coverage year and identifies areas that the group has targeted for improvement during the next coverage period. This might include a focus on a specific type of injury, special attention to employers with high loss ratios, or employers identified by the organization as needing special services. The written report is due at the time of the group reenrollment. Failure to submit the required report will result in group disqualification at the time of reenrollment.

(3) Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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(1) Yes. A retrospective rating group required to pay additional net premium assessments in two consecutive coverage periods will be immediately placed on probationary status. Once a group is placed on probationary status, the department will review the group's workplace safety and accident prevention plan and its methods for cooperation with department claims management activities. Following the review, the department will make recommendations for corrective steps that may be taken to improve the group's performance.

(2) In the event that the group's performance is not improved and the same retrospective rating group is required to pay an additional net premium assessment in the third consecutive coverage period, that group shall be denied future enrollment in the state's retrospective rating plan at the next enrollment. In addition, the sponsoring entity of the failed group may not sponsor another group in the same business or industry category for five coverage periods (sixty months) from the ending date of the failed group's last coverage.

(3) Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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(1) Because an employer might manipulate their company's safety record by use of multiple industrial insurance accounts, employers enrolling a particular account in either an individual or group plan must enroll all businesses that they own or have a controlling interest whose nature of business is substantially the same. A controlling interest is defined as more than fifty percent ownership by one or more owners.

(2) If you have several businesses which are dissimilar to each other when the nature of the service is considered, you may elect to have all of the businesses covered under a retrospective rating plan or just one or more of the businesses.

Example: You operate a chain of ten grocery stores. Each store is operated at a different location. You have requested that each store be assigned a special account. In addition to the ten stores, your company also has a separate administrative office. This office reports under the clerical classification. Under subsection (1) of this section you must enroll all of your store locations if you are to participate in a retrospective rating plan. You may elect to include your administrative office under subsection (2) of this section.

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(1) Yes, Washington law (RCW 51.18.040) requires all retrospective rating groups to be made up of employer members who are engaged in substantially similar business operations when the nature of their services or work activities of employees is considered.

(2) The first step in this process is for the sponsoring organization to select the single retrospective rating group it wishes to sponsor. This is done at the time the application for group is submitted to the department from the broad industry or business category from the table below:

Industry/business group table

•	Agriculture and related services.
•	Automotive, truck and boat, manufacturing, sales, repair and related services.
•	Construction and related services.
•	Distillation, chemicals, food and related services.
•	Facilities, property management, maintenance and related services.
•	Government, utilities, schools, healthcare and related services.
•	Healthcare, pharmaceutical, laboratories and related services.
•	Logging and wood products manufacturing and related services.
•	Manufacturing, processing, mining, quarrying, and related services.
•	Retail and wholesale stores and professional services such as banks and law firms and related services.
•	Temporary help and related services.
•	Transportation, recycle, warehousing, facility maintenance and related services.

The intent of this process is to ensure that the homogeneity requirement of RCW 51.18.040 is met.

Example: An organization that was formed to advance the interests of apple growers would select the agriculture and related services business/industry group plan. This organization could sponsor a single group for all its grower members or could offer different performance groups for its grower members.

(3) To simplify administration and keep the administrative costs associated with devising a different classification system for the retrospective rating plan to a minimum, the retrospective rating program follows the same classification procedure established by the department to assign workers' compensation insurance classifications to an employer (WAC 296-17-31012). This procedure requires employers to be assigned a classification or series of classifications based on the nature of their business, not the occupations or duties of the workers they employ. Only those members whose business undertakings are substantially similar to the industry/business group selected by the organization will be permitted to participate. This grouping technique is fundamental to workers' compensation insurance and is referred to as "homogeneity of risk."

Example: Having selected the agriculture and related services business/industry grouping the department would verify that the employer members of the apple grower organization were either apple growers or were involved in a related service such as an apple processing operation owned by the grower.

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No. Although it might be desirable for all members of the retrospective rating group to report under a single common classification, that approach would not be practical. Most employers are assigned more than one classification for reporting and paying premiums. We do, however, require that the members of the organization participating in the group be engaged in substantially similar businesses. In some cases an employer may report and pay premiums in other classifications not authorized for the group. This employer's business may still qualify to participate in the group provided the employer is assigned and reports in a classification assigned to the group and the approved classification represents the primary business of the employer. This assumes that the organization agrees to the added risks as a part of their group plan. Under no circumstance does this provision allow an organization to market their plan to existing members and/or prospective members that report only in these heterogeneous classifications.

Example: An employer operates an apple orchard and is assigned an agricultural risk classification for purposes of reporting and paying premium. This same employer also has an auto repair service and is assigned a separate risk classification for this business. Both businesses report under a single industrial insurance account. An organization sponsoring a retro group for agricultural businesses could allow this employer to participate in their retro group. This same organization could not, however, allow an employer engaged in an auto repair business to participate in their retro group if the employer did not have an agricultural business enrolled in the organization's retro plan.

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Yes, the authorized classification or classifications of a group is determined from an analysis of an organization's current dues paying membership that have submitted applications to participate in the plan. This analysis consists of evaluating the nature of each current dues paying member's business. The nature of business will be determined from information provided by the employer, information contained in department's files and/or information obtained from applicable field audit and/or classification inspection reports. Only those individual current dues paying members of an organization or members described in WAC 296-17-90409(3) that are homogeneous (substantially similar) will be considered in determining the classifications authorized for the organization's retrospective rating group. This analysis ensures compliance with the requirement (RCW 51.18.040) that the industries of employers in an organization are substantially similar.

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The department may authorize an existing retrospective rating group to obtain additional classifications.

To request additional classifications, the organization must petition the department for the additional classification(s). The request must be in writing and include the name of the member reporting in the requested classification, the member's industrial insurance account number and an explanation of how the new classification(s) are substantially similar to others currently assigned to the group. Final approval of classifications rests with the department. Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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(1) Once the department approves a classification or a series of classifications for an organization's retrospective rating group, no further reapplication is necessary. Exceptions to this policy are noted in subsections (2) and (3) of this section.

(2) The department will review the past reporting of an organization's retrospective rating group members annually. If we discover a classification or series of classifications under which no worker hours were reported during the prior fiscal year (ending June 30) by the group members, we will remove the classification from the group. The organization can apply to have the classification reinstated if they have members reporting in the classification or classifications in the previous and current year.

(3) Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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Yes, an organization can sponsor more than one group. (1) Under Washington law (RCW 51.18.030), an organization that sponsored a retrospective rating group prior to July 25, 1999, will have to wait until January 1, 2003, before they can sponsor an additional retrospective rating group in a new business or industry. At that time a sponsoring organization could propose to sponsor one additional group every five years. Each new group must meet the requirements found in WAC 296-17-90409.

(2) A sponsoring organization that had a retrospective rating group approved by the department on or after July 25, 1999, may not propose another retrospective rating group in a new business or industry category until the minimum mandatory adjustment periods required by the department for first two coverage periods of the last formed retrospective rating group are completed. At that time a sponsoring organization could propose to sponsor one additional group every five years. Each new group must meet the requirements found in WAC 296-17-90409.

(3) Subsections (1) and (2) of this section do not prohibit a sponsoring organization from proposing to:

(a) Divide an existing retrospective rating group into two or more groups provided that the proposed new groups fall within the same business or industry category as the group that is proposed to be divided; or

(b) Merge existing retrospective rating groups into one business or industry category provided that the proposed merged groups fall within the same business or industry category as the groups that are proposed to be merged.

(4) Under no circumstance may a sponsoring organization propose more than one retrospective rating group or multiple business or industry categories in the same application to the department.

(5) Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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Yes. Your next step would be to complete an application for group retrospective rating on forms provided by the department for the proposed group. A copy of this application can be found in Appendix A of this manual.

The application must be received by the department by the close of business 5:00 p.m. (Pacific time) on or before:

•	April 30 for the coverage period beginning the following July 1;
•	July 31 for the coverage period beginning the following October 1;
•	October 31 for the coverage period beginning the following January 1; and
•	January 31 for the coverage period beginning the following April 1.

When you complete this application you will need to select the single industry or business category that will be applicable to your group, the maximum premium ratio and plan (A, A1, A2, A3, or B) that will apply to the group for the coverage period. You should consider the benefits and risk of each plan and maximum premium ratio in making this selection. Plan and maximum premium ratio choices can not be changed after the deadline listed above. A copy of the signed agreement bearing an original signature must be received in our Tumwater office by the deadline indicated above. We will accept a faxed copy of the agreement provided it is received in our Tumwater office by the deadline and a copy of the signed agreement bearing original signatures is received before the coverage period begins. In the event that an application with an original signature is not received by the beginning of the coverage period you will not be enrolled in the program.

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(1) To initially enroll, each dues-paying employer member of your organization who completed a written request provided for in WAC 296-17-90409 (3)(c) must complete a group membership application/employer's authorization and release of insurance data. A copy of the application can be found in Appendix A of this manual. Other qualifying members of your organization who want to enroll in your group must complete the same application. The completed application/releases for the accounts the organization wishes to enroll in the group bearing original signatures must be received by the department by the close of business 5:00 p.m. (Pacific time) the 15th calendar day of the month prior to the selected coverage period.

Example: You have selected the coverage period beginning July 1. We must receive all group membership applications bearing original signatures on or before June 15.

(2) An officer or designated representative of your organization must complete, sign and forward to us an original retrospective rating group agreement. A copy of this agreement can be found in Appendix A of this manual. This completed form must be received by us by the close of business 5:00 p.m. (Pacific time) the 15th calendar day of the month prior to the selected coverage period.

(3) For each subsequent coverage period the sponsoring organization must secure authorization from their members that want to continue to participate in their retrospective rating group. The sponsoring organization must keep these records on file for the selected coverage year and subsequent adjustment periods. These records are to be made available for department inspection upon request. Group members will be reenrolled if their account is in good standing unless they or the sponsoring organization provide the department written notification of withdrawal by the close of business 5:00 p.m. (Pacific time) the 15th calendar day of the month preceding their coverage period. This process is intended to reduce the administrative burden of submitting applications to the department for members reenrolling in the group plan.

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Yes. You must complete a retrospective rating plan agreement on forms provided by the department, listing each account or subaccount to be enrolled. A copy of this agreement can be found in Appendix A of this manual. The completed form must be received at our Tumwater office by the close of business 5:00 p.m. (Pacific time) on or before the 15th calendar day of the month prior to the selected coverage period. If the agreement is submitted by fax by the deadline, an agreement with an original signature must be received by the department prior to the beginning of the coverage period. In the event that an application with an original signature is not received by the beginning of the coverage period you will not be enrolled in the program. When you complete this agreement you will need to select the maximum premium ratio and plan (A, A1, A2, A3, or B) that you wish to participate in. You should consider the benefits and risk of each plan and maximum premium ratio in making this selection. Plan and maximum premium ratio choices can not be changed after the coverage period begins.

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(1) Between nine and ten months after the coverage period has ended we will do an initial evaluation of the losses for each employer and group participating in retrospective rating. All future evaluation dates for a coverage period will take place approximately twelve months after the initial evaluation date.

Example: Assume that your coverage period began July 1, 1998, and ended June 30, 1999, (twelve calendar months). Our first evaluation date would occur mid-April 2000. This is roughly nine and one-half months from the last day of the coverage period. Because all retrospective rating plans have three mandatory evaluations, each subsequent evaluation will occur at twelve-month intervals.

(2) On the evaluation date, all claims with a date-of-injury within the coverage period are evaluated and the incurred losses which have been established for these claims are "captured" or "frozen."

(3) Because our evaluation is limited to claim status and type, and not the adjudicative decisions surrounding a claim such as, but not limited to, claim allowance, case reserve, wage determination and dependent status; retrospective rating program appeals that concern claims are limited to the open or closed status of a claim on the evaluation date. If you are in disagreement with the department over an adjudicative or reserving issue you must appeal that decision at the appropriate time. We can not provide relief in the computation of the retrospective premium unless the disagreement (protest or appeal) produces relief prior to the evaluation date. Ideally, your workplace safety and accident prevention program has been successful and none of your workers were injured during the coverage period. In the event that one or more of your employees were injured you should be working cooperatively with us and their medical caregiver to help the worker recover from the injury and return to the workforce as soon as possible.

(4) In the adjustment process, captured incurred losses are translated into developed losses using the appropriate loss development and performance adjustment factors. Retrospective premium is then calculated using the requisite formulas and tables in the retrospective rating manual.

(5) For a given coverage period, each group or individually enrolled employer is subject to three mandatory adjustments. The initial adjustment will occur approximately ten months after the coverage period has ended, with any subsequent adjustment occurring in twelve-month intervals.

(6) Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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The loss value for any one claim or group of claims arising from a single accident is limited to a maximum of five hundred thousand dollars prior to the application of the performance adjustment factor.

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Yes, there are two ways that you can do this.

(1) Every month we will send you a report that details the claims activity related to your individual or group account. If you discover a claim that you believe has been closed and is not reflected as such on the report or you believe the information needed to close the claim is available to the department you should bring it to our attention.

(2) Approximately one year after the coverage period has ended we will notify you of the amount of refund or additional assessment. This notification will be on a legal document referred to as an "order and notice." A copy of this document can be found in Appendix A of this manual. Included with the order and notice will be an adjustment report that details the status of each claim and their related cost. If you are in disagreement with the status of any claim that appears on the report you must send us a written request within the time specified on the order and notice. Upon receipt of your request, we will review the open status of a specific claim. In the event that we determine that all of the information necessary to close the claim was in the department's possession at the time of the evaluation date, we will recalculate the retrospective premium requirement. We will refund the additional premium or reduce the assessment as applicable.

(3) If you wish to request a review, send the request to:

Labor and Industries, Attention: Retrospective Rating, P.O. Box 44180, Olympia, Washington 98504-4180.

(4) Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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(1) If you are enrolled in an individual employer plan, approximately eleven months after the coverage period has ended we will notify you if you are entitled to a refund of premium or owe us additional premium.

(2) If you participate as a member of retrospective rating group, approximately eleven months after the coverage period has ended we will notify the sponsoring organization of the group refund or amount owing. It is the responsibility of the sponsoring organization to notify each member of the amount of refund to each member. The sponsoring organization will provide the department with a detail of the refund or assessment distribution to its members.

(3) Our notification will also include instructions on how to request reconsideration of the amount of the refund or assessment.

(4) We will not issue a refund check if it is less than ten dollars. If a refund is less than ten dollars we will credit the amount to your industrial insurance account and you can deduct the amount from your next premium payment.

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(1) No. We are not involved in how the premium refund is distributed. The distribution of any refund is determined by the organization that sponsored the group. A sponsoring organization, however, cannot withhold a member's refund for not reenrolling in their retrospective rating group during the next or any future coverage year. Effective with the coverage period beginning October 1, 2000, and all coverage periods thereafter, a sponsoring organization must distribute at least ninety percent of any retrospective rating group refund to members of the group.

(2) We will, however, withhold the pro rata share of any member whose account is not in good standing, with unresolved debt remaining from their coverage period up to the amount owed by the member for the coverage period. Any moneys withheld will be deposited into the insurance trust funds and credited to the member's industrial insurance account. If you are enrolled individually and owe us money, we will apply your refund to the amount you owe. In the event that your refund is greater than the amount you owe us, we will refund the difference to you.

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No. Just as we do not determine how a refund is to be distributed to members of a group, we are not concerned with how an additional assessment is distributed to members of a group. We hold the organization responsible for any additional assessment.

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All additional assessments resulting from a retrospective rating adjustment are due within thirty days of the date we communicate the decision to you. If a group is assessed an additional premium on a coverage year and a refund is calculated on a subsequent coverage year and the amount owed has not been satisfied, we will apply the refund to the amount owed. In the event that the refund is greater than the amount owed, we will refund the difference to the group. If you disagree with the assessment you should either protest or appeal the decision. Make sure you do this in writing within thirty days of the date we communicate the decision to you. If you fail to do so our decision is final and binding on you.

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If you are in a dispute with the department over an assessment, a claim cost or owe the department any moneys, you cannot participate in the retrospective rating program unless you pay the amount in dispute, or provide a surety bond or an assignment of savings in lieu of the payment pending the outcome of the disagreement. If you have paid the amount covered by the disagreement and it is resolved in your favor, we will refund these moneys. We will not pay interest on this money.

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No. Retrospective rating refunds are paid out of the accident fund. Accident fund premiums are paid exclusively by employers. Since employees do not pay or contribute towards accident fund premiums employers are not obligated to return any of the retro refund to workers. Similarly, employers cannot charge retrospective rating assessments to their workers.

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(1) If the change is limited to a change in legal structure we may allow the new entity to continue to be a member of the group without a new application.

Example: A business operated as a sole proprietorship changes their legal structure to a corporation. Assuming the sole proprietor owner owns more than fifty percent of the stock in the corporation we would allow this business to continue to be a member of the group without a new application.

(2) If the change results in new ownership the new owner(s) will need to reapply if they want to participate in the group plan.

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(1) Washington workers' compensation laws do not distinguish first-aid treatment from any other form of medical treatment. Employers that insure their workers' compensation insurance obligations with the state fund are not permitted to pay a medical service provider directly for any work-related injury or illness sustained by one of their workers. Payment of medical services on behalf of state fund insured employers is the sole responsibility of labor and industries.

(2) If you insure your workers' compensation insurance obligations with the state fund and pay a medical provider directly for services and we discover this, we will remove you from the retrospective rating program effective the date of our notification to you.

(3) Any employer that has been removed for this practice will be barred from ever participating in the retro program.

(4) A sponsoring organization that engages in this practice or encourages their members to engage in this practice will be barred from ever sponsoring a retro group and any groups that they currently sponsor will be terminated effective the date of our notification to you.

(5) In the event that a terminated group or a member of the group was entitled to a refund it will be forfeited.

(6) Members of a terminated group that owe additional premium will be held responsible for their pro-rata share of the premium assessment.

(7) Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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With the exception of the provisions found in WAC 296-17-90466 and the required authorization for release of insurance data and group membership enrollment application for each employer account to be enrolled, the department disclaims interest in contracts executed between employer groups and participating group members.      The department neither approves nor disapproves of any language contained therein and shall be held harmless for misrepresentation of fact(s) or errors of omission or commission stated in the terms of said contract.      The department is released and exempt from liability for any dispute or cause of action between an employer group and participating group members or amongst participating group members arising under the contract.

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(1) Retrospective premium for a group or individually enrolled employer is calculated using the formula:

Retrospective Premium = (Basic Premium Ratio x Standard Premium) + (Loss Conversion Factor x Developed Losses).

Applicable basic premium ratios and loss conversion factors are found in WAC 296-17-90493 through 296-17-90497, depending on the preselected plan, maximum premium ratio and standard premium.

(2) The maximum retrospective premium is the product of the maximum premium ratio times the standard premium. If the retrospective premium formula produces a value greater than the maximum retrospective premium, the retrospective premium shall be reduced to the maximum retrospective premium.

(3) For plans A1, A2, and A3, the minimum retrospective premium is the product of the minimum premium ratio times the standard premium. If the retrospective premium formula produces a value less than the minimum retrospective premium, the retrospective premium shall be increased to the minimum retrospective premium.

(4) Under plan A, an employer enrolled in an individual plan or an organization sponsoring a group may elect to forego the protection of a maximum premium ratio if its financial condition is sufficiently strong and stable so that it could qualify as a self-insurer under the department's certification guidelines. The basic premium ratio will be .058 if the employer/group selects and qualifies for an unlimited maximum retrospective premium.

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Size Group Number			Standard Premium Range
63		$ 3,182		-		$ 3,844
62		3,845		-		4,616
61		4,617		-		5,493
60		5,494		-		6,500
59		6,501		-		7,650
58		7,651		-		8,946
57		8,947		-		10,418
56		10,419		-		12,088
55		12,089		-		13,949
54		13,950		-		16,048
53		16,049		-		18,409
52		18,410		-		20,423
51		20,424		-		22,162
50		22,163		-		23,851
49		23,852		-		25,697
48		25,698		-		27,737
47		27,738		-		29,992
46		29,993		-		32,469
45		32,470		-		35,226
44		35,227		-		38,295
43		38,296		-		41,689
42		41,690		-		45,490
41		45,491		-		49,759
40		49,760		-		54,514
39		54,515		-		59,885
38		59,886		-		65,973
37		65,974		-		72,812
36		72,813		-		80,093
35		80,094		-		88,103
34		88,104		-		96,913
33		96,914		-		106,605
32		106,606		-		117,265
31		117,266		-		128,402
30		128,403		-		140,685
29		140,686		-		154,684
28		154,685		-		170,517
27		170,518		-		188,740
26		188,741		-		209,820
25		209,821		-		234,009
24		234,010		-		262,330
23		262,331		-		295,711
22		295,712		-		334,726
21		334,727		-		381,426
20		381,427		-		437,817
19		437,818		-		505,332
18		505,333		-		588,552
17		588,553		-		692,359
16		692,360		-		820,806
15		820,807		-		1,048,546
14		1,048,547		-		1,339,476
13		1,339,477		-		1,711,128
12		1,711,129		-		2,185,897
11		2,185,898		-		2,792,375
10		2,792,376		-		4,013,945
9		4,013,946		-		5,890,979
8		5,890,980		-		8,375,803
7		8,375,804		-		12,341,084
6		12,341,085		-		19,194,022
5		19,194,023		-		30,299,109
4		30,299,110				& Over

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RETROSPECTIVE RATING PLAN A

BASIC PREMIUM RATIOS

LOSS CONVERSION FACTOR=.729

Effective January 1, 2000

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RETROSPECTIVE RATING PLAN A1

MINIMUM PREMIUM RATIOS

BASIC PREMIUM RATIO=.058

LOSS CONVERSION FACTOR=.729

Effective January 1, 2000

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RETROSPECTIVE RATING PLAN A2

MINIMUM PREMIUM RATIOS

AND BASIC PREMIUM RATIOS

LOSS CONVERSION FACTOR=.729

Effective January 1, 2000