Why Group Retrospective Rating may be a solution for your organization

Heather Vogus, vice president, Comp Management, Inc.

Over the past few years, many employers in Ohio have been looking at the Group Retrospective Program implemented in 2009 by the Ohio Bureau of Workers’ Compensation (BWC) as another option to garner savings when it comes to their workers’ compensation premium. Enrollment numbers have doubled each year, especially with employers that are of medium size and debit-rated by the BWC.

“If you are an employer in Ohio who has some claims in your experience — as accidents will happen — but also has a solid safety program in place, Group Retrospective Rating may be an option. Organizations that do not qualify for a Group Rating program or are seeing little savings from this program should consider Group Retrospective Rating as an alternative,” says Heather Vogus, vice president at CompManagement, Inc.

Group Retrospective Rating enrollment for private employers ends April 30 for the 2013 policy year.

Smart Business spoke with Vogus about the program and why it has the attention of businesses across Ohio.

What is Group Retrospective Rating? 

Group Retrospective Rating is a performance-based incentive program designed to recover a portion of premiums for employers that reduce injury rates and lower associated claims costs. It is similar in concept to Group Rating, as companies are grouped together to be rated as if the group was one big company. However, with this program, companies continue to pay their own individual premium but have the opportunity to receive retrospective premium adjustments, such as refunds or assessments, at the end of each of the three evaluation periods performed by the BWC.

How are groups evaluated by the BWC?

Three evaluations are performed by the BWC at 12, 24 and 36 months after the end of the policy year. At the end of each period, the BWC looks at the expected losses of the group and compares those to the actual losses to calculate the group’s Retrospective Premium. If the premium calculated is less than the group’s total Standard Premium, the participants receive a refund for that period. However, if the premium is greater, an assessment will be levied by the BWC, but each group limits the maximum assessment by selecting a premium cap that can be factored into your budget so that your organization is prepared. Before entering a program, be sure to have a feasibility study created to ensure this program fits the risk tolerance of your organization and has the ability to garner appropriate savings.

Why should my organization participate?

If your organization is committed to improving workplace safety and accident prevention, as well as taking action to reduce the frequency and severity of accidents involving your employees, this program has the ability to attain premium savings to boost your bottom line. The BWC has just released statistics showing that the 2009 private employer Group Retrospective Rating program has refunded a grand total of $12.4 million to date, for an average of $33,940 per employer.

How is the Group Retrospective savings projection calculated?

First, the overall group premium is calculated. As an example, suppose the Standard Premium for the group is $4 million and the Minimum Premium, assuming 25 percent, is $1 million. Add Developed Losses, which is incurred losses multiplied by the BWC developmental factor of  $1.4 million, and that equals the Retrospective Premium — the minimum premium plus developed losses — to give you $2.4 million.

The Group Retrospective Refund, which is the Standard Premium minus Retrospective Premium, is  $1.6 million, and the Estimated Refund Percentage is 40 percent.

Using the estimated refund percentage of 40 percent from the group example above, a mid-sized service company, assuming a payroll of $1 million, may expect:

• Individual Premiums of $62,500

• Group Retrospective Rating Premiums of $37,500

• Group Retrospective Rating Savings of  $25,000.

Savings reflected above do not include the additional savings that can be realized by also participating in programs compatible with Group Retrospective Rating such as Destination Excellence Go Green and Safety Council (participation rebate).

Heather Vogus is vice president at CompManagement, Inc. Reach her at (800) 825-6755, ext. 65440 or [email protected]

Insights Workers’ Compensation is brought to you by CompManagement, Inc.