How to choose the BWC group that gives you the biggest premium discounts

Deciding which Ohio Bureau of Workers’ Compensation (BWC) group program is right for your company is an important business decision. Depending on your claims history, the choice may be clear. Otherwise, the choice may come down to whether you’re willing to gamble to get the biggest discount.

“With group rating, an employer gets up to a guaranteed 53 percent discount, which is made available in up-front savings,” says Andy Lembach, Chief Marketing Officer at Spooner, Inc. “But with group retrospective, an employer could receive a greater refund if its employer participants have low or no workers’ compensation claims. That’s not guaranteed, however, as it is with group rating.”

Smart Business spoke with Lembach about what to consider when deciding between group rating and group retrospective.

What’s the difference between group rating and group retrospective?

In group rating, employers in a similar industry, both public and private, form a pool that’s considered one entity for insurance purposes by the BWC. Pooled together, employers save money on their workers’ compensation insurance premiums through a significant up-front discount.

In this arrangement, employers have their own individual risks for which each is accountable — one company’s loss doesn’t affect any others. Entry into the group is based entirely on past experience. If a company has a better-than-average history of claims, its eligible for the group. If it has a poor history, it won’t be invited to join.

Group retrospective is similar to group rating in that it pools employers from similar industries. The difference is there is no up-front discount. Instead, after year’s end, the BWC looks back to compare how much premium was paid with how much they actually had in losses, then gives back the difference — the percentage of savings over the actual premium paid — to the companies within the group.

Unlike group rating, a single company can affect the refund available to the group at the end of the period. There’s a vested interest, then, for everyone to have safety as a priority and make sure costs are kept low.

How is group eligibility determined?

For group rating, employers must be compliant with reporting payroll and make their premium payments or they’re ineligible. Employers are not eligible for group rating if they have a history of claims that would put them at a penalty rate above the industry average.

For group retrospective, any employer is eligible because the underwriting criteria aren’t as strict.

Is there any risk to joining a group program?

With group rating, there aren’t a lot of what ifs. Discounts are based entirely on past performance and your group either realizes a discount or it doesn’t.

Group retrospective, conversely, is speculative because the savings are calculated after the policy year. Employers considering group retrospective should choose their third-party administrator carefully because those companies may have no history or past performance to support projections. Employers in a poor performing group may have to pay assessments in addition to their premium if claims costs are not controlled or bad risks poison the pool. There’s often nothing preventing the group administrator from showing a quote that reflects the highest discount or refunds, which in most situations is unrealistic and unattainable.

How should an employer choose a third-party administrator?

Work with an administrator that has a track record of group retrospective returns for its clients and a safety component to safeguard individual employers from something negatively affecting future refunds. If claims are mismanaged and loss controls are ignored, they will pay the price in lower refunds or even assessments. Employers need to find a third-party administrator that can expertly control claims and eliminate hazards from the workplace.

When exploring third party administrator options, look at the actual history of returns to employers over the years and the services provided. The commitment of the administrator during underwriting and the composition of groups is going to give employers the best chance of getting significant discounts.

Insights Workplace Health & Safety is brought to you by Spooner, Inc.

Fed names banks that tapped discount window in Q3 2010

WASHINGTON, Fri Sep 28, 2012 – The Federal Reserve on Friday named the banks that borrowed at its discount window during the third quarter of 2010, but the period showed very low levels of activity and none of the biggest Wall Street firms had turned to the facility for help.

Some of the decline in discount window borrowing may have reflected banks steering clear because they knew their actions would be disclosed, albeit with a two-year lag, once the Dodd-Frank financial reform law was passed.

However, Fed officials said it was impossible to know how much this may have been a factor in driving down discount window business, as opposed to what extent the lower level of borrowing just a reflection of market conditions at the time.

The data showed that Gorham Savings Bank of Gorham, Maine, and Commerce Bank of Kansas City, Mo., took the largest discount window primary credit loans. Gorham’s largest loan was $70 million during the period and Commerce’s was $60 million.

The data covers a wide range of Fed activities, including discount window borrowing and foreign exchange transactions, from July 22, 2010, which was the day after the passage of Dodd-Frank, until Sept. 30, 2010.

The discount window is a Fed lending facility that banks can access in times of stress and became essential to maintain functioning markets during the 2008 financial crisis.

The Fed document release was the first mandated by the 2010 Dodd-Frank financial reforms, but it also followed previous discount window disclosures forced on it by U.S. courts after several media organizations fought a stiff legal battle.