The Workplace Safety and Insurance Board (the “WSIB”) approved its new Rate Framework in November 2016 and has recently launched a public consultation on the draft policies made to support the implementation of the new Rate Framework.
The new Rate Framework is intended to make the premium rate setting process more transparent and ensure employer premium rates align better with actual system costs. According to the WSIB, the new Rate Framework includes a streamlined and simpler classification structure for Schedule 1 employers, a fairer allocation of premiums for better workplace coverage, and a premium rate that provides an incentive for sustained occupational health and safety efforts by better balancing employer claims experience and collective liability. The WSIB’s aims in introducing this new framework include limiting premium rate volatility for employers and providing support for a gradual transition towards the new Rate Framework, eliminating the two-year wait for employer premium rate adjustments based on actual risk, and providing a premium-setting approach that all stakeholders can easily understand
The six existing WSIB classification policies would be replaced by four of the new draft policies, including a separate policy for temporary employment agencies. Similarly, the six existing WSIB policies regarding employer premium adjustments and experience rating would be replaced by three of the new draft policies. As a result, the WSIB is currently requesting feedback on the following seven draft policies:
- Coverage Status Policy;
- The Classification Structure Policy;
- Eligibility for Single or Multiple Premium Rates Policy;
- Associated Employers Policy;
- Temporary Employment Agencies Policy;
- Employer Level Premium Rate Setting Policy; and
- Employer Premium Adjustments Policy.
Under the existing classification system, employers are placed in one of 155 rate groups, each containing various sub-groups called classification units. Currently, if an employer’s business fits into more than one rate group the employer is required to calculate the premiums for each rate group separately. The new Rate Framework uses a 34 industry class/subclass structure adapted from Statistics Canada’s North American Industry Classification System (NAICS). The structure was developed from an initial 22 industry classes/subclasses after engagement with stakeholders to ensure that the WSIB grouped together industries with similar occupational risks and claims experience. NAICS codes will be familiar to many employers as businesses are required to identify and include their six-digit NAICS code in their tax filings with the Canada Revenue Agency, and a single NAICS code is generally used to identify an entire operation. Under the new Rate Framework businesses will be assigned to a Predominant Class based on the class that represents a business’s largest percentage of insurable earnings. Unlike under the current system, except where a particular set of criteria is met, an employer’s Predominant Class under the new system will be its only class, and employers therefore will have only one premium rate for all employees.
Using the NAICS will mean significantly fewer employer groupings, leading to a more streamlined classification system and will ensure collective liability amongst employers in the same grouping. According to the WSIB, employers will find it easier to understand why their business falls into a particular category. As a result, the new Rate Framework will establish a more efficient and effective system for employers and for the WSIB to administer and maintain.
The new class/subclass projected premium rate will not act like the current group premium rate because individual employers would not be limited to this premium rate pending any experience rating adjustments. Furthermore, there will be no pooling of costs from other classes or from Schedule 1 more broadly, meaning that each class premium rate will fairly reflect that class’ experience. The WSIB will determine to which extent individual claims experience and collective class/subclass experience will affect an employer’s premium rates by considering insurable earnings and total claims. The WSIB determined that when employers have high insurable earnings and a large number of claims, their individual claims experience should have a greater impact on the premium they pay. Conversely, when employers have low insurable earnings and a small number of total claims, individual claims experience should have a smaller impact. Therefore, under the new Rate Framework, employers with high insurable earnings and a large number of claims would be required to pay premium rates based on their individual claim experience. Employers with low insurable earnings and a small number of total claims, on the other hand, would pay a premium rate more reflective of the collective class experience, minimizing premium rate volatility and ensuring smaller, more reasonable adjustments.
The new Rate Framework also allows the WSIB to perform employer-level adjustments based on claims costs over a rolling six-year period. The WSIB has stated that any premium changes will be capped, requiring rate changes to be phased in gradually to allow employers to adjust. In addition to annual rates, employers will be given projected premium rates in advance, which will act as an early indicator of future premium rate direction. Employers will be able to use this information to prepare for any future rate changes and mitigate future risks, such as by investing in health and safety initiatives.
For those wishing to participate in the WSIB consultation, submissions will be accepted until October 13, 2017 and should be sent to firstname.lastname@example.org.
The WSIB has committed to finalizing the new policies at least one year before implementation. Although the original targeted date for implementation was January 1, 2019, a regulation filed on August 31, 2017 has pushed back the target implementation date to January 1, 2020.
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This information is not intended as legal advice.