As we move closer to the January 1, 2020 implementation timeline the WSIB has put in place for its new Rate Framework, the Workplace Safety and Insurance Board continues to release information about the new program and how it will work in its early days.
The WSIB released advanced copies of a number of draft policies that will apply to the premium rate and experience rating system that should be of particular interest to employers. WSIB Operational Policy 14-01-09 (Transition to the Rate Framework) sets out how the WSIB will determine what premium rate an employer will pay for WSIB coverage when the new system comes online in January, and how their rates may be adjusted within the first 3 years.
In order to transition to the Rate Framework, employers business activities have been classified in the 6-digit North American Industry Classification System (NAICS) code that the WSIB determined best represents their business activity. Employers have already been advised of the NAICS code that they will be transitioned into. Employers who disagree with the code used to classify their business activity should contact the WSIB.
Under the new system, rather than having employers pay premiums based on their business activity, then calculating premium rebates or surcharge based on experience rating on a retrospective basis, the WSIB will be adjusting each employer's premium rate in the fall of each year based on past experience rating, and providing a projection as to whether the employer is trending upward or downward with their premium rate. Depending on their experience rating over a rolling 6 year period, an employer's premium rate will move up or down based on risk bands established as part of the program.
An employer's initial premium rate in 2020 will depend on whether they received experience rating adjustments in 2016, 2017 and 2018. Experience rating adjustments include MAP premium rate adjustments, NEER rebates or surcharges and/or CAD-7 rebates and surcharges.
- If an employer did not receive an experience rating adjustment in those years, their net premium rate will be the 2019 premium rate of the rate group they were classified in; for employers in multiple rate groups, their 2019 premium rates will be weighted to provide a net premium rate.
- If an employer received an experience rating adjustment in 2016, 2017 and 2018, the WSIB will calculate the employer's net premium rate by looking at the total premiums charged in each of those years, factoring in their rebate/surcharge, divided by the total premiums they would have been charged had they not been subject to an experience rating program. This calculation will produce a net premium ratio which will be multiplied by the 2019 premium rate of the employer's rate group in order to provide the net premium rate. For multi-rated employers, the net premium ratio will be applied to the 2019 premium rates of the rate groups. To produce the net premium rate, the resulting premium rates will be weighted.
It is anticipated that employers will be advised of their net premium rate in the fall of 2019.
Under the Rate Framework, the WSIB has built in safeguards to prevent excessive premium movements either up or down in any given year. When the system is fully established, the maximum shift an employer will be able to have in their premium is 3 risk bands (each representing a 5% change in premium rate). The WSIB has established special rules for changes to premiums over the first 3 years of the new program. The rules are as follows:
2020 - Employers will move downward from their initial prior year risk band directly to their projected risk band. Employers will not move up any risk bands.
2021 - Employers will move downward from their prior year risk band directly to their projected risk band (unlimited), or a maximum of one risk band upward (maximum 5%).
2022 - Employers will move downward from their prior year risk band directly to their projected risk band (unlimited), or a maximum of two risk bands upward (10%).
Based on the above, employers who did not have the benefit of having their net premium rate properly established in 2020 because they had not been experience rate adjusted in 2016, 2017 and 2018, will have the opportunity to experience rapid adjustments to their premiums if they have a positive experience rating over the first few years of the program. Conversely, negative experience rating will be capped in order to allow employers to get used to the program.
The WSIB is running regularly scheduled webinars to inform employers about the new Rate Framework and to provide updated information. For additional information please visit www.wsib.ca or send any questions to email@example.com