In 2009, the Ohio Bureau of Workers’ Compensation (BWC) introduced group retrospective. The program was initially meant to provide companies not eligible for its group rating program a way to realize some level of savings. Now it’s a program that’s as beneficial or more so than group, especially if a company is seen as not as much of a risk as it first seemed.
“Group retrospective is a good program for companies with one or two really bad claims that kicked them out of group, but that have an otherwise good track record,” says Joe Spooner, regional sales manager at Spooner, Inc. “If they continue to not have big claims, they can get back to group eligibility. Many times, however, once a company sees the benefits of group retrospective — that it’s not as much of a risk as it was first thought to be, and that it offers stackable refunds — some companies see it as more beneficial than group.”
Smart Business spoke with Spooner about the pros and cons of group rating and group retrospective.
What is the difference between group and group retrospective?
The group rating program offers employers with a good claims experience a discount of up to 53 percent. The future claims made by other companies in group rating don’t impact any other company.
Conversely, group retrospective pools companies together from the same industry and their ongoing experience decides the refund each company in the group receives in the future. It comes with an element of risk, manifest in the potential for an assessment. If, for instance, all the companies in a group retrospective pool have more claims costs than their expected losses, they’re assessed for those claims and that affects the discount payment of the group.
On average, companies in group retrospective programs have outperformed the expected losses and are realizing refunds that might exceed a lower percentage group rating discount.
What are the refund structures of each and how might that sway a company to join one group over the other?
In group rating, companies know the discount they’re getting upfront.
In group retrospective, companies pay their premium on an individual basis and refunds are paid over the course of three years, with the first payment received two years later.
Companies that continue to re-enroll in the program will receive stackable refunds for up to three years.
What are the criteria to take part in a group retrospective program?
For group retrospective, the criteria are set by the third-party administrator (TPA). For successfully run group retrospective programs, TPAs typically look at premium size, the companies’ willingness to work with the administrator’s recommendations and whether or not they have a comprehensive safety program.
Group rating criteria, set by the BWC, include industry affiliation, member limits or premium threshold, and current standing.
What are the biggest concerns for companies considering group retrospective?
Hesitation to join group retrospective often comes down to cash flow upfront. If cash flow is tight at a company, then it might want the upfront discount group provides.
The size of a group retrospective pool is a consideration. A large premium amount in a pool lessens the impact of a claim against the overall group.
In group retrospective, there’s the potential for risk assessment. If companies have multiple, maximum impact claims that causes the pool to exceeds expected losses, companies would be required to pay an assessment percentage of premium based on what the TPA has set for the group.
The past performance of the group retrospective pool is a significant factor as it tends to indicate future performance.
Have companies ever regretted the decision to join one group program over the other?
Regret surfaces if a company is not group rating eligible and won’t take the risk to get into the retrospective pool because of the employer’s concern of an assessment. In a couple years, however, these companies often see the missed opportunity for savings through refunds.
Companies in the group rating program rarely have regrets because the group discount is upfront, so there’s less risk.
Insights Workplace Health and Safety is brought to you by Spooner, Inc.
