Premiums may encourage employers to focus on post-injury events, not prevention: IWH study
A recent study by the Institute for Work and Health (IWH) suggests experience rating might be detrimental to prevention efforts in Ontario.
The IWH, a not-for-profit workplace research organization in Ontario, had researchers study the program in the province. Their findings showed experience rating of compensation premiums may encourage employers to focus on post-injury events instead of preventing injuries in the first place.
“(Experience rating) seems to have an impact more on secondary prevention kind of issues than primary prevention,” said Emile Tompa, the IWH researcher that did the study. “And I talk about secondary prevention as the category of prevention as, once an injury or illness occurs, efforts to reduce the impact of that injury or illness on work disability, versus trying to prevent the incident from occurring, which would be primary prevention.”
The experience rating program in Ontario is called the New Experimental Experience Rating (NEER) Program. Companies can earn lump sum refunds or surcharges based on individual accident performance compared to the group, according to the Workplace Safety and Insurance Board (WSIB) website.
“For example, if you have a good accident cost record in a particular rate group, then your firm will be refunded a portion of the premium paid for that rate group,” the website states.
The program applies to businesses that operate in at least one non-construction rate group and have total yearly premiums of $25,000 or more. There is a separate program for employers in the construction industry and smaller employers.
The program was first introduced in 1984.
“Experience rating has been the focus of a great deal of discussion for several years, and most recently was reviewed by Professor Harry Arthurs in his report Funding Fairness,” said Christine Arnott, a spokesperson with the WSIB. “The WSIB will review the full IWH study once it is published. We look forward to learning how its findings add to the discussion as we also review recommendations from the Arthurs’ Review.”
The WSIB’s website discusses program review for NEER. The site states the WSIB has been continuing the dialogue on the experience rating program with stakeholders, including employers and workers affected by changes to the system.
“We are interested in improving the system now and in the long-term, however long it takes,” it states. “Of course, systemic change cannot happen overnight. But as we look to broader model changes, there is a lot we have done in the short-term to improve the system and make it better for injured workers and fairer for employers.”
The study, which looked at a sample of 21,558 firms that participated in NEER from 1998 to 2007, found a shifting of claims from lost-time claims to no lost-time claims. This happened without an overall statistical change in total claims. That would suggest there’s a reduction in severity and time off work, despite a steady number of claims, Tompa said.
Next steps: Comparing with B.C.
The next step for Tompa is another study where he’ll be comparing the Ontario program with the experience rating program in British Columbia.
“The B.C. program is quite different from the Ontario program,” said Tompa.
People tend to think of experience rating as a particular way of creating financial incentives, but it’s a broad category of programs with different ways of treating rates, he said.
The B.C. program is described as prospective whereas the Ontario program is retrospective, said Tompa.
In the Ontario program, each employer pays their rate group average for premiums at the beginning of the year. Then at the end of the year the employer may have a surcharge or refund depending on its performance.
“So we look at their performance over that year, in terms of claims cost burden and they make adjustments at the tail end,” he said. “A prospective program makes adjustments at the front end... so you get a discount or surcharge on the base rate premium for your rate group at the front end.”
How those adjustments are done is quite detailed in both programs but they’re much slower to evolve in B.C. The B.C. rating takes into consideration a company’s historical experience rating at the firm. That is factored in so the rate is sort of a moving average adjustment, said Tompa.
“This is just one study and we’re trying to take the literature a bit further,” he said. “Certainly there’s a lot more work to be done and that’s why I am continuing to do work on doing comparative stuff.”
Tompa emphasizes experience rating is complex and premium rating can be done in many ways.
“It obviously requires more work to really get a good sense of what works well and what doesn’t,” he said.
