WSIB Rate Framework Reform - Update CEC Members Meeting – February 2016

What is the Rate Framework Reform (RFR)? Part of the reform process that was spawned out of the Harry Arthurs review. Fundamental reorganization of the WSIB premium rate system. Employers in the same sector will no longer be charged a single, collective liability rate. Rates will be based off of a prospective, employer-specific rate setting model based on an employers’ previous 6 years of claims history. Individual company performance will impact rates to varying degrees based on company size. Many details of the system design and its operationalization remain unclear.

Broad CEC Positions on RFR Do not plan to implement a new Rate Framework until the unfunded liability (UFL) is eliminated. Do not rush the design of a new system; ensure comprehensive stakeholder consultations are undertaken on design and implementation of a new system. Construction is a unique sector and must be treated as such. When a new system is designed, start all companies at the Class Target Rate and allow them to migrate to their own company specific rates from this point in order to smooth the transition process. Begin transitioning companies to new Class Target rates over several years in advance of the new system being implemented.

RFR Design and Implementation Timeline Initial Critical Path identified January 2016 and launch date for new Rate Framework. After much delay, the initial system design proposal was published for stakeholder review at the end of March 2015. Expectation was to have all input provided by end of May 2015, with final system design before end of 2015. Consultation timeline instead extended until October 2015. Design update provided to stakeholders in December 2015, with comments now required back in March 2016. Expectation to have system designed by the end of 2016. Implementation timeline has most recently been set for 2019.

Initial RFR Proposal - Technical Papers Initial WSIB proposal for RFR was issued to stakeholders in March of 2015. Process for consultation and system design proposal were both critically flawed. Flawed Process Linked lower premium rates with new system implementation. Rushed design and consultation process, setting artificial deadlines for completion. Left out key statistical data to allow for proper analysis of new system. Failed to link elimination of UFL to implementation timeline. Flawed Design Eliminate SIEF Charge companies a single rate based on “predominant business activity” Eliminate the Executive Officer Rate Group (755) Initial rates to be set artificially high. Too few Rate Classes, grouping together unrelated sectors. “Per-claim limit” threshold categories too static.

CEC Submission on Initial RFR Proposal Broad Positions: Any reform should be put on hold until the UFL is extinguished. Delink RFR proposal from WSIB messaging on lower premium rates – mutually exclusive items. Provide company-specific impact data to help understand true cost implications of new system. Specific Positions: Preserve SIEF. Abandon proposal to assess companies based on predominant business activity. Maintain the Executive Officer Rate. Expand the number of Rate Classes in construction. Base “per-claim limits” on a percentage of insurable earnings rather than a set graduated scale. Start all employers at their new Class Target Premium Rate to smooth the transition towards company specific rates.

RFR December 2015 Update Expands the number of Construction Rate Classes from 3 to 5. Includes exemptions to the “predominant business activity” rule for employers who engage in more than one business activity, and a business activity is not dependent on other activities. Expands the number of “per-claim limit” threshold categories from 4 to 7. Maintain the SIEF “…as an interim measure pending the review.” 6 year Experience Rating window to be adjusted to weight the three most recent years at two- thirds, and the three remaining years at one-third. Targeted implementation timeline of 2019 “at the earliest.”

Progress, and What Comes Next? CEC advocacy on this reform process has yielded a number of critical successes to date: timeline for design and for implementation; linking to UFL (de facto); preservation of the SIEF; and, expansion of Rate Classes in construction. What Comes Next Focus in on maintaining Rate Group 755. Expand on “exceptions” to companies being assessed on their predominant business activity. Continue to press for company-specific impact data to help member companies understand true costing implications for the new system (likely not available until 2017-18). Delay implementation timeline until a completed system proposal has been issued to stakeholders, which also allows for 3-4 years of transition to the new rate setting scheme.