WSR 98-21-077

PROPOSED RULES

DEPARTMENT OF

LABOR AND INDUSTRIES

[Filed October 21, 1998, 10:58 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 09-11-101 [98-11-101] on May 20, 1998.

Title of Rule: Manual of rules, classifications, rates and rating system for Washington workers' compensation insurance, chapter 296-17 WAC.

Purpose: The department proposes to revise the reporting rules applicable to the retrospective rating program to comply with Executive Order 97-02.

Statutory Authority for Adoption: RCW 51.16.035.

Statute Being Implemented: Chapter 51.16 RCW.

Summary: The department proposes the adoption of twenty-four new rules, amend two rules and repeal of ten rules as follows:

Proposed new rules:

WAC 296-17-91201 Introduction.

WAC 296-17-91202 Definitions.

WAC 296-17-91203 Overview of the retrospective rating program.

WAC 296-17-91204 Participation requirements.

WAC 296-17-91205 Participation prerequisites for associations.

WAC 296-17-91206 Workplace safety requirements.

WAC 296-17-91207 Commonly owned businesses--Participation in retro.

WAC 296-17-91208 Industry group table and classification process.

WAC 296-17-91209 Association members must be substantially similar.

WAC 296-17-91210 Groups classifications--Determination.

WAC 296-17-91211 Requesting additional classifications--Groups.

WAC 296-17-91212 Reapplication process for risk classifications.

WAC 296-17-91213 Application deadlines.

WAC 296-17-91214 Application process described for groups.

WAC 296-17-91215 Application process described for individuals.

WAC 296-17-91216 End of coverage period questions.

WAC 296-17-91219 When do I get my refund?

WAC 296-17-91220 Does the department determine refund distribution to association members?

WAC 296-17-91221 Additional assessments.

WAC 296-17-91222 When are assessments due?

WAC 296-17-91223 Disputes and participation.

WAC 296-17-91224 Are refunds to be shared with employees?

WAC 296-17-91225 Association disqualification's from sponsoring a group.

WAC 296-17-91250 Limitation of liability indemnification.

WAC 296-17-91402 Table II.

WAC 296-17-91403 Table III.

WAC 296-17-91404 Table IV.

WAC 296-17-91405 Table V.

WAC 296-17-91406 Table VI.

Amend:

WAC 296-17-914 Retro premium formula.

Repeal:

WAC 296-17-904 Definitions.

WAC 296-17-910 Qualifications for group insurance.

WAC 296-17-911 Group dividends.

WAC 296-17-912 Retrospective rating plan.

WAC 296-17-913 Qualifications for employers.

WAC 296-17-915 Evaluation of incurred losses.

WAC 296-17-916 Retro premium adjustment.

WAC 296-17-91601 Ninety-day open option.

WAC 296-17-917 Qualifications for group.

WAC 296-17-918 Limitation of liability indemnification.

WAC 296-17-91901 Table II.

WAC 296-17-91902 Table III.

WAC 296-17-91903 Table IV.

WAC 296-17-91904 Table V.

WAC 296-17-91405 Table VI.

Reasons Supporting Proposal: See above.

Name of Agency Personnel Responsible for Drafting and Enforcement: Frank Romero, Tumwater, Washington, (360) 902-4835; and Implementation: Laura Smith, Tumwater, Washington, (360) 902-4848.

Name of Proponent: Department of Labor and Industries, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: Chapter 51.16 RCW authorizes the department to offer retrospective rating options to employers on a voluntary basis. The subject rules promote workplace safety and effective claims management practices among employers that participate in the program. Employers can participate in either an individual plan of their selection, or a group plan sponsored by a trade organization. The subject rules clarify that the program is available to any state fund employer whose tax account is in good standing with the department; levels of participation that can be selected by the individual or organization and the procedure for requesting reconsideration of decisions made by the department. The anticipated effects of the subject rules include clarity of expectations and the financial incentives available to employers that participate in the program.

Proposal Changes the Following Existing Rules: The subject rules include the following new provisions:

Strengthened safety program requirements - WAC 296-17-91205 and 296-17-91206 (2)(b).

Requirements that commonly owned businesses that have substantially similar operations must participate in retro if one of the businesses participates - WAC 296-17-91207.

How classifications are assigned to an organization's retro group - WAC 296-17-91208 through 296-17-91211.

Reapplication process for all organizations that sponsor retro groups.

Activities that can result in an organization being disqualified from sponsoring a retro group - WAC 296-17-91225.

No small business economic impact statement has been prepared under chapter 19.85 RCW. RCW 51.16.035 explicitly and specifically dictates the content of the rule. Pursuant to RCW 34.05.328 (5)(b)(v) the department is not required to prepare a small business economic impact statement if a statute explicitly and specifically dictates the content of the proposed rule.

RCW 34.05.328 does not apply to this rule adoption. RCW 51.16.035 explicitly and specifically dictates the content of this rule. Therefore, this rule is exempt from the significant rule-making requirements of the Administrative Procedure Act.

Hearing Location: Labor and Industries, Room S117, 7273 Linderson Way S.W., Tumwater, WA, on November 25, 1998, at 1 p.m.

Assistance for Persons with Disabilities: Contact Mark Matthies by 3 p.m., November 24, 1998, TDD (360) 902-4838.

Submit Written Comments to: Labor and Industries, P.O. Box 44180, Olympia, WA 98504-4180, fax (360) 902-4258, by 5 p.m., November 24, 1998.

Date of Intended Adoption: November 30, 1998.

October 21, 1998

Gary Moore

Director

OTS-2266.7

NEW SECTION

WAC 296-17-91201  Introduction. Washington Administrative Code (WAC) 296-17-91201 through 296-17-91406 and 296-17-919 contains the general rules applicable to the department's voluntary retrospective rating program. We refer to these rules (WACs) as sections and the complete body of information as the retrospective rating manual. The retrospective rating manual contains sections (WACs) that define or explain:

Words or phrases which 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;

Formulas used to establish retrospective premium;

Premium size tables;

Plan tables.

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WAC 296-17-91202  Definitions. 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 in good standing: The term "account" means an individual employer's industrial insurance account and related subaccounts, or a group's retrospective rating account. For an account to be in good standing, the employer and/or group must have 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 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.

Adjustment: Is the term the department uses to denote the numerical result of subtracting the retrospective premium from the standard premium. The result can be zero or it can be a negative or positive number. If the retrospective premium is less than the standard premium, you will get a refund of the difference. In the event that your retrospective premium is more than your standard premium we will bill you for the additional premium due.

Basic premium ratio (BPR): A component of the retrospective rating premium formula, the BPR represents the portion of standard premium that covers administrative costs (except claims handling) and an insurance charge which enables us to limit your retrospective premium requirement. BPRs can be found in WAC 296-17-91402 through 296-17-91406.

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 open 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 initial evaluation date is between nine and ten months after the coverage period ends. The next evaluation will occur twelve months later. If you elect an optional third and fourth year adjustment the evaluation date will occur in twelve month intervals. The evaluation date is also referred to as a "freeze date."

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 296-17-91402 through 296-17-91406.

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.

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 296-17-91402 through 296-17-91406.

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 296-17-91404 through 296-17-91406.

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 are proportional to the relative performance of retro versus nonretro state fund employers.

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 one of five plans (A, A1, A2, A3 or B). The chosen plan will determine (along with the MPR and standard premium) which basic premium ratio, loss conversion factor and minimum premium ratio will be used to calculate the group or individually enrolled employer retrospective premium requirement.

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

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 296-17-914, 296-17-91402 through 296-17-91406 and 296-17-919.

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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WAC 296-17-91203  Can you give me an overview of the retrospective rating program? Retrospective rating is a voluntary program offered by the department to a qualified employer or group of employers that insure their workers' compensation insurance obligations with the state fund. It offers financial incentives to participants to reduce 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 effective claims management practices. The criteria that must be met to be considered a "qualified employer" can be found in WAC 296-17-91204. Qualified employers that enroll in an individual or group retrospective rating plan must participate in the program through the end of a coverage period if their account remains active. The department allows an organization sponsoring a group plan to enroll new employer members into their 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. An organization may request in writing that a member be removed from a group plan during a coverage period. The organization must set forth the reasons why the member should be removed from the group plan. The department may grant the removal request only in instances where the member of the organization has been convicted of criminal activities or civil infractions related to business practices of the member such as underpayment of taxes to any governmental agency, violation of environmental laws, theft of government managed resources such as timber, or willful violation of safety and health standards. Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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WAC 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? Yes. The requirements are:

(1) Any employer that wishes to participate in the retrospective rating program must have an industrial insurance account with the department.

(2) Each employer's account must be in good standing at the time of enrollment.

(3) The department may require the posting of a surety bond or other security deposit. If so, it will be executed on forms authorized by the department and be in one thousand dollar increments. The surety bond or security deposit 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 security deposit requirement falls within two increment ranges, the bond will be at the higher increment level. The surety bond or security deposit must be in full force and effect for the entire coverage and the related adjustment periods.

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WAC 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? Yes. Before further consideration can be given to an organization's request to sponsor a retrospective rating group plan they must meet all the following requirements in addition to any other requirements contained in the retrospective rating manual.

(1) The organization must have been in existence for at least two years.

(a) To validate this, the 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 organization must have been formed for purposes other than 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 certification or recertification offers services which are limited 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) 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 that the members of the organization be 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 accompanied with an affidavit certifying the list to be true and accurate as of the date of submittal.

(b) Each employer member that wants to participate in the organization's retrospective rating group plan must be in good standing with the organization and the department.

(c) Each employer member that wants to participate in the organization's retrospective rating group plan must provide us with a written request on a form provided by the department. Completion and submission of this application to the department signifies the employer's desire to participate in the organization's retrospective rating group plan if it is approved. The proposed retrospective rating group plan membership list must be submitted with the group application of the organization and the other material listed in subsection (2) of this section.

(4) The organization's industrial insurance account and retrospective rating account must be in good standing at all times, including the application process and the coverage and adjustment periods.

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WAC 296-17-91206  Are there other qualifying requirements that an organization must satisfy once the preliminary requirements have been met? An organization seeking to sponsor a retrospective rating group must submit a written plan which demonstrates to the department's satisfaction that the formation of the group will substantially improve workplace safety, accident prevention and claims management for the employers in the group. An organization whose retrospective rating group is required to pay additional net premium assessments in two consecutive coverage periods will be placed on probationary status. If the organization is required to pay an additional premium assessment in the third consecutive coverage period, they will be denied future enrollment in the program until they can demonstrate that the deficiencies that led to the additional assessments have been corrected.

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WAC 296-17-91207   I have several businesses that have been combined for experience rating purposes because of common majority ownership. They still report and pay premiums using separate sub-accounts. If I want to participate in retrospective rating, do I need to enroll all of my businesses or can I enroll some and not the others?

(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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WAC 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? (1) Yes. Once we have determined that the organization at the time of certification or recertification exists:

(a) For purposes other than sponsoring a group and participating in the department's retrospective rating program;

(b) Has been in existence with members for over two years; and

(c) Will serve to encourage improvements in work place safety and effective claims management practices, we will verify that the occupations or industries of the employer members of the organization are substantially similar.

(2) The first step in this process is for the organization to select the retrospective rating group plan(s) it wishes to sponsor from a single general industry/business group from the table below:

Industry/business group table

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 - and related services.

Retail and wholesale stores and professional services such as banks and law firms and related services.

Temporary help services.

Transportation, recycle, warehousing, facility maintenance and related services.

The intent of this process is to ensure that the homogeneity requirement of RCW 51.16.035 is met. This is accomplished by requiring an organization to select a single industry/business group from which it will form its group or groups. Whether the organization sponsors one group or multiple groups they must be within the same industry/business grouping. The use of multiple groups cannot be used to circumvent the member homogeneity requirement of the organization contained in RCW 51.16.035.

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 to a minimum the administrative costs associated with devising a different classification system for the retrospective rating program, 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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WAC 296-17-91209  Do all organization members enrolled in a retrospective rating group plan have to report within one classification? No. Although it might be desirable for all members of the retrospective rating group to be covered under a single common classification, that approach would not be practical since most employers have more than one classification under which they report and pay premiums. We do, however, require that the members of the organization participating in the group be engaged in substantially similar businesses. An otherwise qualifying account which has additional risk classifications not authorized for the group can still be permitted to enroll with the group. 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 in these heterogeneous classifications.

Example: An employer operates an apple orchard and a separate car repair business. This employer could request an organization sponsoring an agricultural group to include the car repair business in their group provided their agricultural (apple orchard) was also enrolled. The organization sponsoring the agricultural and related services group could not enroll a car repair business in their group if the employer member did not also have an agricultural business also enrolled in the group plan.

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WAC 296-17-91210  Can you tell me how the authorized classifications for a retrospective rating group plan are determined? 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 risk classification(s) that our underwriters have assigned to those businesses. The department may also rely on information obtained from applicable field audit and classification inspection reports. Only those individual current dues-paying members of an organization or members described in WAC 296-17-91205(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 51.16.035) that the industries of employers in an organization are substantially similar.

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WAC 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? The department may authorize an existing retrospective rating group to obtain additional classifications under the following circumstances:

(1) The department has created a new classification which is substantially similar to the nature of the business or businesses authorized for the group;

Example (a): Several years ago the department covered all forms of logging under a single logging classification. Changes in technology created new methods of logging leading to a new emerging industry of mechanized logging. To address this change the department created a new classification to cover this form of logging. If a retrospective rating group which included the general logging industry wanted employers assigned the new mechanized logging classification in their group, they could request the addition of this classification and the department would in this case grant approval.

(2) Changes in technology, materials, processes or industry practices if they are substantially similar to the overall process and nature of the business or businesses authorized for the group; or

Example (b): Consider a homeowner that wants to have a deck built onto their house. A few years ago the homeowner's choices were limited to wood products. As technology has changed, and new products were developed, the homeowner is now provided a number of options such as polymer based composites. These new products are installed in much the same way as wood decking. Assume the new product is cut, handled and stacked in the same way as wood decking. A retrospective rating group involved in wood products manufacturing could be authorized the classification related to this manufacturing process based on a change related to technology.

(3) Changes in market conditions provided the overall scope of service has not changed.

Example (c): A farmer that has historically been engaged in growing hops learns that the market conditions for this crop make it necessary for the farmer to diversify to another crop or livestock. Assume this grower participates in a narrow based organization that was not authorized the classification for the other crop or livestock. This organization could request the additional classification.

The organization must petition the department for the additional classification(s). The request must be in writing and include detail as to how the new classification(s) are substantially similar to others currently assigned to the group. The request and recommendation(s) proposed by the department will be available for public review and comment. This will be done on the same day either before or after the regular business meeting of the retro advisory committee. Information and comments presented by the public at the meeting will be considered by the department prior to final determination. Final approval of classifications rests with the department. Determinations applicable to the retrospective rating program are subject to review under chapter 51.52.060 RCW.

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WAC 296-17-91212  Does an organization have to reapply each year for authorized classifications applicable to their retrospective rating group plan? (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) New groups formed on or after July 1, 1999, will be required to present their written request for approval to the department. The request and recommendation(s) proposed by the department will be available for public review and comment. This will be done on the same day either before or after the regular business meeting of the retro advisory committee. Information and comments presented by the public at the meeting will be considered by the department prior to final determination. Final approval rests with the department. Department determinations applicable to the retrospective rating program are subject to review under chapter 51.52.060 RCW.

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WAC 296-17-91213  The department has approved our organization to sponsor a retrospective rating group. Is there an application process that we must follow? 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 us 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 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. 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.

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WAC 296-17-91214  What is the next step after the organization has submitted this application? (1) To enroll, each dues-paying employer member of your organization that completed a written request provided for in WAC 296-17-91205 (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 must be received by the department by 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 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 15th calendar day of the month prior to the selected coverage period.

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WAC 296-17-91215   Is there an application process to enroll in an individual retrospective rating plan? 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. This completed form must be received by us by 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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WAC 296-17-91216  Can you tell me what happens at the end of a coverage period? (1) The initial evaluation date will occur between nine and ten months after the end of the coverage period. 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. This is roughly nine and one-half months from the last day of the coverage period. Because all retrospective rating plans have two mandatory evaluation dates we would do the second evaluation twelve months later.

(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) For occupational disease claims where multiple employer responsibility has been established, prorated incurred losses will be captured.

(4) 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.

(5) In the event that the disagreement is over the open status of a specific claim and 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 and refund the additional premium or reduce the assessment as applicable.

(6) 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.

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

(8) For a given coverage period, each group or individually enrolled employer is subject to two mandatory adjustments. The initial adjustment will occur approximately ten months after the coverage period, with any subsequent adjustments occurring in twelve-month intervals. A group or individually enrolled employer can elect a package of two additional adjustments if the request is made within thirty days of the second mandatory adjustment. A group or individually enrolled employer may request an extension of sixty additional days to evaluate the potential impact of electing the two additional adjustments. The request for extension must be received by the department prior to the last day of the initial thirty-day election period.

(9) For claims with injury dates prior to July 1, 1996, a potential claim cost recovery from action against a third party, either by an injured worker or by the department, shall not be considered in the evaluation of incurred losses until the third-party action has been completed. For claims with injury dates after July 1, 1996, if the department determines that there is a reasonable potential of recovery from an action against a third-party, the incurred loss shall be reduced by fifty percent while the third-party action is pending. Regardless of the final outcome of the third-party action, the incurred loss will not be reevaluated after the final retrospective rating adjustment.

(10) For a third-party action completed before the final adjustment, the claim shall be credited with the department's net share of the recovery, after deducting attorney fees, if the action is completed prior to July 1, 1996. If a third-party action is competed on or after July 1, 1996, the claim shall be credited with the department's gross share of the recovery, before deducting attorney fees.

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WAC 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? 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. Our notification will also include instructions on how to request reconsideration of the amount of the refund or assessment. We will not issue a refund check for under 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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WAC 296-17-91220   Do you establish how the refund is to be distributed to members of a group? 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. We will, however, withhold the pro rata share of any member whose account is not in good standing, 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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WAC 296-17-91221   If a group is subject to an additional assessment, does the department bill each member of the group for their share? 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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WAC 296-17-91222   If a group or individually enrolled employer owes money related to a retrospective rating adjustment, when is it due? All additional assessments resulting from a retrospective rating adjustment are due within thirty days of the date we communicate the decision to you. 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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WAC 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? If you are in a dispute with the department over an assessment, claim cost or owe the department any moneys, you cannot participate in the retrospective rating program unless you provide a surety bond or security deposit 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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WAC 296-17-91224   Are employers required to share retrospective rating refunds with their workers? 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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WAC 296-17-91225   Can an organization be disqualified from sponsoring a retrospective rating group? Yes. If an organization or its officers are convicted of criminal or civil infractions related to the business practices of the organization such as under payment of taxes to any governmental agency; violation of environmental laws; theft of government managed resources such as timber; willful violation of safety and health standards they will lose eligibility to sponsor a retro group plan. The disqualification will take place within thirty days of our formal notice to the organization. Department determinations applicable to the retrospective rating program are subject to review under RCW 51.52.060.

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WAC 296-17-91250  Limitation of liability indemnification. With the exception of 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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WAC 296-17-914   How is retrospective premium calculated? (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 296-17-91402 through 296-17-91406, 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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WAC 296-17-91402  Table II.

RETROSPECTIVE RATING PLAN A

BASIC PREMIUM RATIOS

LOSS CONVERSION FACTOR.= .729

Effective January 1, 1998

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WAC 296-17-91403  Table III.

RETROSPECTIVE RATING PLAN B

BASIC PREMIUM RATIOS

AND LOSS CONVERSION FACTORS

Effective January 1, 1998

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WAC 296-17-91404  Table IV.

RETROSPECTIVE RATING PLAN A1

MINIMUM PREMIUM RATIOS

BASIC PREMIUM RATIO.= .058

LOSS CONVERSION FACTOR.= .729

Effective January 1, 1998