Rate Framework (Archived): Illustrative Example

The WSIB tested the premium rate outcomes of the proposed preliminary Rate Framework by using what employers are paying today as a starting point, and then projecting their Employer Target Premium Rates. In undertaking this work an estimated value for the UFL is required. While implementation timelines still need to be determined and the value of the UFL may fluctuate accordingly, for this illustrative example, a UFL balance of $5 billion was utilized to show premium rate implications. Alternate scenarios could be developed to test any UFL value, including a scenario where the UFL has been eliminated.

In order to complete this modeling of the proposed preliminary Rate Framework and project Employer Target Premium Rates, the WSIB needed to determine an appropriate starting point - what "best" represents what employers are paying today.

The WSIB evaluated different payment amounts (such as premiums paid in 2013, premiums net of experience rating charges for last year, last two years, last three years, etc.) to determine the right starting point, as this would change the outcome when transitioning employers from their current premium rate to the proposed preliminary Rate Framework.

The WSIB found the following:
  • Using premiums paid in 2013 based on the employer's rate group (RG) rate(s) may not incorporate the impact of experience rating surcharges or refunds (that are provided in the following year), and therefore may not reflect the employer's actual claims experience - or net premiums;
  • Using a shorter time period - such as last year's net premium rate - may be easier for employers to understand, but may overly penalize an employer who had a poor accident year, when in prior years they had good accident records; and
  • Using a longer time period - such as six preceding years - to assess an employer's net premium rates may include claims costs that may not reflect an employers' recent claims experience (e.g., an employer successfully, but only recently, adopted health and safety practices).
After considering a number of methods, the WSIB determined that the following approach provides a reasonable reflection of an employer's premium rate experience and helps address any potential anomalies that may have occurred in the prior year:
  • For employers who are currently participating in WSIB experience rating programs: using the employer's average "net" premium rate (after considering experience rating refunds and surcharges) over the last three years; and
  • For employers who are not experience rated (who are not eligible to participate in an experience rating program) using the premium rate of the RG from the prior year.

Under the proposed preliminary Rate Framework, approximately 74% of employers would be projected to see premium rate decreases and 26% would be projected to see premium rate increases, of which 10% would see a premium rate increase of greater than 25%.

As further described in Paper 5: A Path Forward, under WorkSafeBC's transition plan, approximately 48% of base assessment rates were projected to decrease, and the remaining 52% would experience rate increases. Many of these increases were of a modest size, while 24% of those employers experienced increases of more than 40%.

The WSIB would like to hear from you! Please email us your questions or comments about the proposed preliminary Rate Framework to consultation_secretariat@wsib.on.ca.

For more information, see Paper 5: A Path Forward (PDF)