WSIB Announces Comprehensive Funding Review and Premium Rates

TORONTO, Sept. 30 /CNW/ - Ontario's Workplace Safety and Insurance Board (WSIB) is moving forward with a Funding Review to ensure the long-term financial stability of the WSIB. The Funding Review will be chaired by Professor Harry Arthurs, former Dean of Osgoode Hall Law School and President Emeritus of York University. 

The year-long Funding Review will gather expert advice and input from workers, labour and employers on a range of public policy issues relating to the WSIB's financial future including a plan on how to eliminate the WSIB's unfunded liability. Professor Arthurs will have a small committee provide expert advice as the Funding Review proceeds. Members of the Advisory Committee include Maureen Farrow Buzz Hargrove, John O'Grady and John Tory. More details can be found on the WSIB's website at www.wsib.on.ca.

To provide business with certainty and stability during the course of these consultations, and in order to help slow the growth of the WSIB's projected unfunded liability (UFL), the average premium rate will increase by two per cent for 2011 and 2012.

The UFL is the difference between the total cost of claims in the system and the funds in the system to pay for them. It has increased due to insufficient premium revenue, rising claims and health care costs and declining investment returns following the recent economic downturn. Currently the WSIB's projected UFL is more than $12 billion.

The WSIB is also making a number of internal administrative changes that will address the UFL while improving customer service and operational efficiency. This includes a Value for Money Audit of the claims and adjudication process.  These actions, along with the modest premium rate increases, will assist in balancing annual revenue with claim costs.

"We are taking important steps in ensuring that the workplace safety and insurance system is financially stable now and for future workers and employers," said WSIB President and CEO David Marshall.  "These steps, along with our continuing commitment to accountability and fiscal responsibility, will steer us toward our goal of achieving full funding, while preserving workers benefits and ultimately lowering employer premiums."

The average premium rate will rise from $2.30 to $2.35 for every $100 of insurable earnings in 2011 and to $2.40 in 2012.  This is well below the average premium rate of $3.00 in the mid 1990's. The increase is being applied to the average premium rate, meaning more than half of registered employers will see little to no increase, while other employers in high-risk industries with a history of costly injury claims may see increases of more than two per cent.  Employers with good safety records will continue to be eligible for rebates under the WSIB's incentive programs.

Ontario's Workplace Safety and Insurance Board (WSIB) plays a key role in the province's occupational health and safety system. The WSIB administers no-fault workplace insurance for employers and their workers and is committed to the elimination of workplace injuries and illnesses. The WSIB provides disability benefits, monitors the quality of healthcare, and assists in early and safe return to work for workers who are injured on the job or contract an occupational disease.

Media Backgrounder:
WSIB Funding Review, Premium Rates and Value-for-Money Audit

Overview

The Ontario workplace safety and insurance system is funded by the employers of Ontario. Schedule 1 employers pay premiums for no-fault collective liability workplace insurance — coverage for their workers and insurance against unforeseen and potentially catastrophic loss.

The WSIB collects premiums from employers to pay the current and future cost of claims and to pay for administering the system. Ideally, revenue from employer premiums along with investment revenue should form a fund that is equal to or greater than the actual costs of the system. However, over the last 25 years, the amount of money collected from employers and the income from the WSIB's investments has been less than the cost of funding the system. In fact, costs have outpaced premium revenue increases by 5% each year since 1999.

The WSIB's projected unfunded liability (UFL) - the difference between payments for future benefits to workers and funding received from business - has risen due to low premiums, rising claims and health care costs and declining investment returns following the recent economic downturn.

Right now, the fund is only large enough to cover about half of the projected costs in the system. Maintaining the UFL debt contributes to making WSIB premium rates among the highest in Canada.

The WSIB needs to improve its financial position by eliminating the projected unfunded liability and moving towards a fully funded system. This is the standard for most other Canadian workers' compensation systems. With a fully funded system, future benefits are secure and employer premiums are lower. Full funding means a fair system for all who rely on it, and stable and competitive premium rates for employers. It will help to keep Ontario among the best places in the world to live, work, and do business

The UFL was $12 billion in March 2010, up significantly from $6 billion in 2006. The pattern of new claims in the system indicates that the projected UFL could rise to $14 billion over the next three years before it begins to decrease. The WSIB must take action to address its financial situation now.

Auditor General's 2009 Report
The 2009 Annual Report of the Auditor General of Ontario reviewed the WSIB's projected unfunded liability as part of a regular review process. The Auditor General commented on the large unfunded liability and the risk that this poses to the system's financial viability.

As mentioned in the report, the WSIB acknowledges that significant actions will need to be taken. The Auditor General's report is available online at www.auditor.on.ca/en/reports_2009_en.htm

The WSIB's UFL Action Plan
For the first half of 2010, the WSIB engaged in an intensive study to identify the key drivers of the UFL and options to eliminate it while working towards safer and healthier workplaces for Ontario.

The WSIB has analyzed its current financial situation and developed a plan to address some of the concerns raised in the Auditor General's report.

This plan is focused on key internal operational initiatives that, as administrators of the system, the WSIB has a responsibility to address and improve. These include:

Administrative Efficiencies

• Improvements to WSIB business practices to enhance customer service and ensure operational efficiency.
• Comprehensive policy review and renewal.
• Development of new eServices.
• Introduction of a new Strategy Cluster to consolidate WSIB data resources and analyze trends.
• A greater focus on promoting compliance with legislative and policy requirements, including a review of key activities to ensure compliance by stakeholders and the WSIB.
• Commitment to transparency and stakeholder consultation - building a reputation as a trusted, accountable and value-added agency for Ontario's workers and employers.

Case Management

• Continuing focus on case management to reduce claim duration; specialized teams to manage long term cases.
• New Work Reintegration program addressing Return to Work and Labour Market Re-entry with clear targets to measure success. 
• A Value for Money Audit on the efficiency and effectiveness of WSIB claims administration processes.
• Identifying top four serious injuries (High Impact Claims) with a focus on targeted prevention and streamlined case management.
• Taking action on health care to promote early intervention, reduce dependence on narcotics, provide timely, specialized care, and continue to focus on strategic procurement of medical supplies and treatments.
• Focus on timely decision making and service excellence for occupational disease claims.

Investments

• Ongoing commitment to a conservative investment strategy with a focus on reduced volatility.
• Investment in infrastructure projects, private equity and real estate to better match timeframes of benefit payments with income streams from investments.
• Setting a long-term (10 year) investment return target of 7%, reporting investment returns at one, five, and 10 year intervals.

Incentives

• Modify current incentive programs to ensure self-funding of incentive programs by balancing rebates with incentive surcharges and to reflect - as accurately as possible - the full costs of claims. 

Premium Increases

In order to create stable and competitive premium rates for the future, the WSIB must implement modest average premium rate increases for both 2011 and 2012. The increase in rates is a necessary step to reducing the WSIB's unfunded liability (UFL) which has grown to more than $12 billion. 

The WSIB Board of Directors has set the 2011 average premium rate for Schedule 1 employers at $2.35 for every $100 of insurable earnings - an increase of 2 per cent compared to the average premium rate for 2010 of $2.30.

The average premium rate is determined through an actuarial process, and is a weighted average reflecting the premium rates of each of the 154 rate groups.  The individual rates are set based on rate-group specific claims frequency and cost information. 

This increase reflects the principles of collective liability on which the system is based. This means that, all employers must contribute to cover the real costs of running the system and eliminating the UFL. While premium rate increases may add costs to employers now, the retirement of the UFL will result in lower premiums and strengthened competitiveness for Ontario businesses for the longer term.

More information on premium rates is available at:
http://www.wsib.on.ca/wsib/wsibsite.nsf/Public/EmployersPremiuminfo

Learn how employers can lower WSIB costs by participating in incentive programs:
http://www.wsib.on.ca/wsib/wsibsite.nsf/Public/PreventionTIP

Funding Review
Clear direction on tackling the balance of the UFL and addressing systemic issues must come from the workers and employers of this province. Employers fund this system. Workers depend on it for support when they are injured. We need input and active support from our stakeholders to address other elements that drive costs and put pressure on the system.

Harry Arthurs, one of Canada's leading labour law scholars, will Chair a comprehensive funding review on several key public policy issues related to the financial state of the system.

Professor Arthurs will be joined by a small committee to provide expert advice as the Funding Review proceeds. Members of the Advisory Committee are:

• Maureen Farrow is an external advisor on the WSIB Board of Directors' Investment Committee. She is President of Economap Inc., and a Director of the Equitable Life Insurance Company of Canada.
• Buzz Hargrove is former National President of the Canadian Auto Workers. He is currently serving as a Distinguished Visiting Professor at Ryerson University's Ted Rogers School of Management.
• John O'Grady is Chair of the Institute for Work and Health. As a consulting economist, he specializes in labour market and industry analysis.
• John Tory is a former leader of the Progressive Conservative Party of Ontario. He is now a broadcaster and volunteer chair of the Toronto City Summit Alliance.

By engaging in a third-party review of the system, the WSIB is dedicated to being open and transparent about the review process and its findings. Recommendations from the Funding Review will be used to amend the WSIB's Internal UFL Plan.

The goal of the funding review is to establish a dialogue and seek input from employers of all sizes, from workers and unions, and from other interested parties on a range of public policy issues relating to the WSIB's financial future. This includes appropriate funding levels for the WSIB, the current rate group model and a timeline for eliminating the UFL.

Through dialogue and evaluation of alternatives, the Funding Review is intended to work towards building a consensus around the best path to follow and to inform WSIB strategies moving forward. This consultation is expected to conclude in November 2011.

Value for Money Audit
The Value for Money Audit (VFMA) will be conducted by an independent firm, to evaluate claims processing at the WSIB. This VFMA on the WSIB's Claims Administration and Adjudication process will provide an opinion on whether the WSIB's current adjudicative processes are being delivered in an operationally efficient and effective manner. This will include an assessment of:

• The effectiveness of WSIB operational policies and guidelines, and whether they provide adequate guidance to help ensure consistent and timely decisions.
• Improving the efficiency of the WSIB's claims administration and adjudicative processes.
• The adequacy of resources, information and systems to support cost-effective and efficient decisions.

The VFMA will also include inter-jurisdictional comparisons to identify current practices as they relate to policy and decision making processes that achieve appropriate, timely and consistent decisions in a financially responsible and accountable manner.

A Solid Foundation
Taken together, the WSIB's internal UFL plan, relatively modest premium increases in the short term, the Funding Review and the VFMA on Adjudication and Claims Administration will, over the next year, fully inform and complete the suite of actions which will be put in place over the next 12 to 18 months. They will form a sound foundation for achieving financial stability for the Insurance Fund.

For further information:

Christine Arnott
WSIB External Relations
[phone]
[email protected]