Effective Date of Rule: January 1, 2008.

     Purpose: This rule making will amend the tables of classification base premium rates, experience rating plan rates, calculations, and factors, and retrospective rating plan size groupings for the workers' compensation insurance program for calendar year 2008. New classification base rates were calculated based on updated loss and payroll experience resulting in a proposed overall average 3.2% increase in premium rates. The experience rating calculations that were deferred last year for employers who had lower rates under the pre-2007 rating plan have now been fully implemented.

     Citation of Existing Rules Affected by this Order: Proposal establishes premium rates for workers' compensation insurance classifications for calendar year 2008 and modifications to the related experience rating and retrospective rating plans:

     Amending WAC 296-17-855 Experience modification, 296-17-87305 Initial recalculation of experience factor, 296-17-875 Table I Primary losses for selected claim values, 296-17-880 Table II Primary and excess credibility values, 296-17-885 Table III Expected loss rates and primary ratios, 296-17-890 Table IV Maximum experience modifications, 296-17-895 Base rate table by class of industry, 296-17-89502 Industrial insurance rates for nonhourly rated classifications, 296-17-89504 Horse racing industry industrial insurance, medical aid and supplemental pension by class, 296-17-90492 Table I Retrospective Rating Plans A, A1, A2, A3 and B, Standard premium size ranges and 296-17-920 Assessment for supplemental pension fund; repealing WAC 296-17-891 Table IV-A and 296-17-86505 2007 Alternative claim free experience modification calculation; and new section WAC 296-17-89505 2007 Rate holiday dividend.

     Statutory Authority for Adoption: RCW 51.16.035 Base rates, 51.32.073 Supplemental pension, 51.08.010 Retrospective rating, and 51.04.020(1) General authority.

      Adopted under notice filed as WSR 07-19-133 on September 19, 2007.

     Changes Other than Editing from Proposed to Adopted Version: The rate for the newly established classification 4801 for geoduck divers was established at $3.33 per hour. The accident fund portion of the rate is $1.4067, the medical aid portion of the rate is $1.8451 and the supplemental pension portion is $0.0782 for a base rate of $3.33.

     Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.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 1, Amended 11, Repealed 2.

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

     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 1, Amended 11, Repealed 2.

     Date Adopted: November 30, 2007.

Judy Schurke

Director

OTS-1024.5

AMENDATORY SECTION(Amending WSR 06-24-054, filed 12/1/06, effective 1/1/07)

WAC 296-17-855   Experience modification.   (((1))) The basis of the experience modification shall be a comparison of the actual losses charged to an employer during the experience period with the expected losses for an average employer reporting the same exposures in each classification. The comparison shall contain actuarial refinements designed to weigh the extent to which the actual experience is credible, due consideration being given to the volume of the employer's experience. Except for those employers who qualify for an adjusted experience modification as specified in WAC 296-17-860 or 296-17-865, the experience modification factor shall be calculated from the formula:

EXPERIENCE MODIFICATION FACTOR	=	(Credible Actual Primary Loss + Credible Actual Excess Loss)/Expected Loss
Where
Credible Actual Primary Loss	=	Actual Primary Loss x Primary Credibility
	+	Expected Primary Loss x (100% -Primary Credibility)
Credible Actual Excess Loss	=	Actual Excess Loss x Excess Credibility
	+	Expected Excess Loss x (100% -Excess Credibility)

     The meaning and function of each term in the formula is specified below.

     For each claim, the actual primary loss is the first dollar portion of the claim costs, which has been shown in actuarial studies, to have the greater credibility in predicting future experience. These amounts are summed over all claims. For each claim in excess of $((19,560)) 20,112 the actual primary loss shall be determined from the formula:

ACTUAL PRIMARY LOSS	=	((48,900)) 50,280	x total loss
		(Total loss + ((29,340)) 30,168)

     For each claim, less than $((19,560)) 20,112 the full value of the claim shall be considered a primary loss.

     For each claim, the excess actual loss is the remaining portion of the claim costs, which have been shown in actuarial studies to have less credibility in predicting future experience. The excess actual loss for each claim shall be determined by subtracting the primary loss from the total loss. These amounts are summed over all claims.

     For any claim without disability benefits (time loss, partial permanent disability, total permanent disability or death) either actually paid or estimated to be paid, the total actual losses for calculating the primary loss and excess loss shall first be reduced by the lesser of $((1,510)) 1,640 or the total cost of the claim. Here are some examples for these claims:

Total Loss	Total Loss (after deduction)	Primary Loss	Excess Loss
200	-	-	-
2,000	((490)) 360	((490)) 360	-
20,000	((18,490)) 18,360	((18,490)) 18,360	-
200,000	((198,490)) 198,360	((42,603)) 43,643	((155,887)) 154,717
2,000,000	((487,490)) 502,800	((46,124)) 47,434	((441,366)) 455,366

Note:

The deduction, $((1,510)) 1,640, is twice the average case incurred cost of these types of claims occurring during the three-year period used for experience rating. On average this results in reducing the average actual loss about seventy percent for these types of claims adjusted. This is done to help make the transition between the two different experience rating methods better by helping make the change in experience factor reasonable for small changes to the actual losses. The $2,000,000 loss is limited by the Maximum Claim Value before the reduction of $((1,510)) 1,640 is applied.

     For each employer, the primary credibility and the excess credibility determines the percentage weight given to the corresponding actual primary losses and the actual excess losses, included in the calculation of the experience modification, based on the volume of expected losses. Primary credibility and excess credibility values are set forth in Table II.

     An employer's expected losses shall be determined by summing the expected loss for each of the three years of the experience period, which are calculated by multiplying the reported exposure in each classification during the year by the corresponding classification expected loss rate and rounding the result to the nearest cent. Classification expected loss rates by year are set forth in Table III.

     Expected losses in each classification shall be multiplied by the classification "Primary-Ratio" to obtain "expected primary losses" which shall be rounded to the nearest cent. Expected excess losses shall then be calculated by subtracting expected primary losses from expected total losses rounded to the nearest cent. Primary-Ratios are also set forth in Table III.

     (((2) Alternative experience modification calculation. The following experience modification factor calculation provides results similar to the experience rating calculation used in 2006. The experience modification factor shall be calculated in the manner identified in subsection (1) of this section with the following exceptions:

     (a) The Expected Loss Rate and Primary Ratio Table IIIA shall be used instead of Table III.

     (b) No medical only deduction (of $1,510) shall be applied to claims without disability benefits during the three year experience period for purposes of calculating the primary and excess losses.

     (c) The Primary and Excess Credibility Table IIA shall be used instead of Table II.

     (3) Experience modification calculation for 2007. For calendar year 2007, if the calculated experience modification factor using the manner identified in subsection (1) of this section is greater than the experience modification factor calculated using subsection (2) of this section then the experience modification factor shall be the lower of the two calculations.))

[Statutory Authority: RCW 51.16.035, 51.32.073, 51.08.010, and 51.04.020(1). 06-24-054, § 296-17-855, filed 12/1/06, effective 1/1/07. Statutory Authority: RCW 51.04.020, 51.16.035, and 51.32.073. 05-23-162, § 296-17-855, filed 11/22/05, effective 1/1/06; 04-24-025, § 296-17-855, filed 11/23/04, effective 1/1/05. Statutory Authority: RCW 51.04.020, 51.16.035, 51.32.073, and 51.18.010. 03-24-066, § 296-17-855, filed 12/1/03, effective 1/1/04. Statutory Authority: RCW 51.16.035, 51.32.073, 51.18.010, and 51.04.020(1). 02-24-029, § 296-17-855, filed 11/27/02, effective 1/1/03. Statutory Authority: RCW 51.04.020, 51.16.035, 51.32.073, 51.18.010. 01-23-061, § 296-17-855, filed 11/20/01, effective 1/1/02; 00-23-101, § 296-17-855, filed 11/21/00, effective 1/1/01. Statutory Authority: RCW 51.16.035, 51.04.020. 00-14-052, § 296-17-855, filed 7/1/00, effective 7/1/00. Statutory Authority: RCW 51.04.020, 51.16.035 and 51.32.073. 99-24-055, § 296-17-855, filed 11/29/99, effective 12/31/99; 98-24-094, § 296-17-855, filed 12/1/98, effective 1/1/99; 97-24-062, § 296-17-855, filed 12/1/97, effective 1/1/98; 96-24-063, § 296-17-855, filed 11/29/96, effective 1/1/97. Statutory Authority: RCW 51.04.020. 95-23-080, § 296-17-855, filed 11/20/95, effective 1/1/96; 94-24-007, § 296-17-855, filed 11/28/94, effective 1/1/95; 93-24-114, § 296-17-855, filed 12/1/93, effective 1/1/94. Statutory Authority: RCW 51.04.020(1) and 51.16.035. 93-12-093, § 296-17-855, filed 5/31/93, effective 7/1/93; 92-24-063, § 296-17-855, filed 11/30/92, effective 1/1/93; 91-24-053, § 296-17-855, filed 11/27/91, effective 1/1/92; 90-24-042, § 296-17-855, filed 11/30/90, effective 1/1/91; 89-24-051 (Order 89-22), § 296-17-855, filed 12/1/89, effective 1/1/90. Statutory Authority: RCW 51.16.035 and 51.04.020. 88-24-012 (Order 88-30), § 296-17-855, filed 12/1/88, effective 1/1/89. Statutory Authority: RCW 51.16.035. 87-24-060 (Order 87-26), § 296-17-855, filed 12/1/87, effective 1/1/88. Statutory Authority: RCW 51.04.020(1) and 51.16.035. 86-24-042 (Order 86-41), § 296-17-855, filed 11/26/86. Statutory Authority: RCW 51.16.035. 85-24-032 (Order 85-33), § 296-17-855, filed 11/27/85, effective 1/1/86; 84-24-016 (Order 84-23), § 296-17-855, filed 11/28/84, effective 1/1/85; 83-24-017 (Order 83-36), § 296-17-855, filed 11/30/83, effective 1/1/84; 82-24-047 (Order 82-38), § 296-17-855, filed 11/29/82, effective 1/1/83; 81-24-042 (Order 81-30), § 296-17-855, filed 11/30/81, effective 1/1/82; 80-17-016 (Order 80-23), § 296-17-855, filed 11/13/80, effective 1/1/81. Statutory Authority: RCW 51.04.030 and 51.16.035. 79-12-086 (Order 79-18), § 296-17-855, filed 11/30/79, effective 1/1/80; Order 77-27, § 296-17-855, filed 11/30/77, effective 1/1/78; Order 74-40, § 296-17-855, filed 11/27/74, effective 1/1/75; Order 73-22, § 296-17-855, filed 11/9/73, effective 1/1/74.]

     (1) Acquiring entity retains all rating experience associated with the firm (business), or portion thereof, being acquired. The selling entity shall revert to an experience factor of unity (1.0000) until such time as it may requalify for experience rating or unless another treatment is specified in these rules.

     (2) If the acquiring entity already has an experience factor, it shall be assigned a weighted average of its existing experience factor and the acquired experience factor. Weights will be based on expected losses. In the event the acquiring entity does not have an existing experience factor, it shall be assigned an experience factor developed from the past experience of the firm (business) or portion thereof being acquired.

     (3) If the past experience of the firm (business) cannot be segregated between the operations remaining with the selling entity and the operations being taken over by the acquiring entity, then the entire experience of the firm (business) shall remain with the selling entity. In the event that the past experience can be segregated, the following shall apply:

     (a) Separate experience factors shall be calculated for each portion of the firm (business) being sold using the experience rating procedures in WAC 296-17-855 through 296-17-870.

     (b) Both experience factors shall be increased or decreased in the same proportion, if necessary, so that their weighted average is the same as the selling entity's experience factor prior to the sale or change.

     (c) The selling entity shall be assigned the experience factor for the experience it is retaining.

     (d) The experience factor developed in (a) and (b) of this subsection shall be used in accordance with subsection (2) of this section.

[Statutory Authority: RCW 51.04.020(1) and 51.16.035. 90-20-092, § 296-17-87305, filed 10/1/90, effective 11/1/90; 89-24-051 (Order 89-22), § 296-17-87305, filed 12/1/89, effective 1/1/90. Statutory Authority: RCW 51.16.035. 83-24-017 (Order 83-36), § 296-17-87305, filed 11/30/83, effective 1/1/84. Statutory Authority: RCW 51.04.030 and 51.16.035. 79-12-086 (Order 79-18), § 296-17-87305, filed 11/30/79, effective 1/1/80.]

Primary Losses for Selected Claim Values
Effective January 1, ((2007)) 2008

CLAIM VALUE		PRIMARY LOSS
	((19,560	19,560
	20,304	20,000
	23,996	22,000
	28,280	24,000
	33,312	26,000
	39,307	28,000
	46,571	30,000
	55,555	32,000
	73,878	35,000
	100,000	37,807
	125,000	39,604
	150,000	40,900
	191,760*	42,411
	300,000	44,544
	489,000**	46,132))
	5,000	5,000
	10,000	10,000
	15,000	15,000
	20,112	20,112
	29,834	25,000
	44,627	30,000
	69,102	35,000
	100,000	38,627
	200,000	43,690
	222,141*	44,268
	300,000	45,686
	400,000	46,754
	502,800**	47,434
	1,000,000	47,434

*	Average death value
**	Maximum claim value

[Statutory Authority: RCW 51.16.035, 51.32.073, 51.08.010, and 51.04.020(1). 06-24-054, § 296-17-875, filed 12/1/06, effective 1/1/07. Statutory Authority: RCW 51.04.020, 51.16.035, and 51.32.073. 05-23-162, § 296-17-875, filed 11/22/05, effective 1/1/06; 04-24-025, § 296-17-875, filed 11/23/04, effective 1/1/05. Statutory Authority: RCW 51.04.020, 51.16.035, 51.32.073, and 51.18.010. 03-24-066, § 296-17-875, filed 12/1/03, effective 1/1/04. Statutory Authority: RCW 51.16.035, 51.32.073, 51.18.010, and 51.04.020(1). 02-24-029, § 296-17-875, filed 11/27/02, effective 1/1/03. Statutory Authority: RCW 51.04.020, 51.16.035, 51.32.073, 51.18.010. 01-23-061, § 296-17-875, filed 11/20/01, effective 1/1/02; 00-23-101, § 296-17-875, filed 11/21/00, effective 1/1/01. Statutory Authority: RCW 51.04.020, 51.16.035 and 51.32.073. 99-24-055, § 296-17-875, filed 11/29/99, effective 12/31/99; 98-24-094, § 296-17-875, filed 12/1/98, effective 1/1/99; 97-24-062, § 296-17-875, filed 12/1/97, effective 1/1/98; 96-24-063, § 296-17-875, filed 11/29/96, effective 1/1/97. Statutory Authority: RCW 51.04.020. 95-23-080, § 296-17-875, filed 11/20/95, effective 1/1/96; 94-24-007, § 296-17-875, filed 11/28/94, effective 1/1/95; 93-24-114, § 296-17-875, filed 12/1/93, effective 1/1/94. Statutory Authority: RCW 51.04.020(1) and 51.16.035. 92-24-063, § 296-17-875, filed 11/30/92, effective 1/1/93; 91-24-053, § 296-17-875, filed 11/27/91, effective 1/1/92; 90-24-042, § 296-17-875, filed 11/30/90, effective 1/1/91; 89-24-051 (Order 89-22), § 296-17-875, filed 12/1/89, effective 1/1/90. Statutory Authority: RCW 51.16.035 and 51.04.020. 88-24-012 (Order 88-30), § 296-17-875, filed 12/1/88, effective 1/1/89. Statutory Authority: RCW 51.16.035. 87-24-060 (Order 87-26), § 296-17-875, filed 12/1/87, effective 1/1/88. Statutory Authority: RCW 51.04.020(1) and 51.16.035. 86-24-042 (Order 86-41), § 296-17-875, filed 11/26/86. Statutory Authority: RCW 51.16.035. 86-12-041 (Order 86-18), § 296-17-875, filed 5/30/86, effective 7/1/86; 85-24-032 (Order 85-33), § 296-17-875, filed 11/27/85, effective 1/1/86; 84-24-016 (Order 84-23), § 296-17-875, filed 11/28/84, effective 1/1/85; 83-24-017 (Order 83-36), § 296-17-875, filed 11/30/83, effective 1/1/84; 82-24-047 (Order 82-38), § 296-17-875, filed 11/29/82, effective 1/1/83; 81-24-042 (Order 81-30), § 296-17-875, filed 11/30/81, effective 1/1/82; 80-17-016 (Order 80-23), § 296-17-875, filed 11/13/80, effective 1/1/81. Statutory Authority: RCW 51.04.030 and 51.16.035. 79-12-086 (Order 79-18), § 296-17-875, filed 11/30/79, effective 1/1/80. Statutory Authority: RCW 51.04.020(1) and 51.16.035. 78-12-043 (Order 78-23), § 296-17-875, filed 11/27/78, effective 1/1/79; Order 77-27, § 296-17-875, filed 11/30/77, effective 1/1/78; Order 76-36, § 296-17-875, filed 11/30/76; Order 75-38, § 296-17-875, filed 11/24/75, effective 1/1/76; Order 74-40, § 296-17-875, filed 11/27/74, effective 1/1/75; Order 73-22, § 296-17-875, filed 11/9/73, effective 1/1/74.]