OHA Response to the WSIB Rate Framework Consultation

Transcription

OHA Response to the WSIB Rate Framework
Consultation Document
April 2013
The Ontario Hospital Association
The Ontario Hospital Association (OHA) is the voice of Ontario’s public hospitals. Founded in 1924, the OHA uses
advocacy, education and partnerships to build a strong, innovative and sustainable health care system for all
Ontarians.
The OHA is a not for profit organization representing 149 hospitals in Ontario. We welcome the opportunity to
provide insight and thoughts on Policy and Operational decisions.
The OHA has consulted with:
• OHA Health and Safety Advisory Committee members
• Hospital Occupational Health and Safety and Disability Management Professionals
• Hospital Chief Human Resources Officers and Chief Financial Officers
Based on these consultations we are offering the recommendations set out below, on behalf of our member
hospitals.
OHA Response to WSIB Rate Framework Consultation Document
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Contents
Summary of Options Selected ...................................................................................................................... 3
Introduction .................................................................................................................................................. 4
Health and Safety in Ontario’s Hospitals .................................................................................................. 4
Background ............................................................................................................................................... 4
Structure ................................................................................................................................................... 5
Responses to Questions in the WSIB Rate Framework Consultation Discussion Paper ............................... 6
Section 3. Employer Classification ............................................................................................................ 6
Employer Classification ......................................................................................................................... 6
Section 4. Premium Rate Setting .............................................................................................................. 6
Premium Rate Setting ........................................................................................................................... 6
Claims Cost Measure for Premium Rate Setting ................................................................................... 7
UFL Apportionment .............................................................................................................................. 8
Section 5. Experience Rating ..................................................................................................................... 8
Insurance Equity.................................................................................................................................... 8
Premium Rate Adjustments .................................................................................................................. 9
Special Situations – Employers with Limited or No Claim Costs ......................................................... 10
Additional Questions for Consideration ................................................................................................. 10
2. Setting the Context for Dialogue..................................................................................................... 10
3. Employer Classification ................................................................................................................... 11
4. Premium Rate Setting ..................................................................................................................... 12
5. Experience Rating............................................................................................................................ 13
Conclusion ................................................................................................................................................... 16
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Summary of Options Selected
Based on discussions with OHA members and submissions to the WSIB, the OHA recommends the
following options:
Classification and Rate Groups
Option 2: Move to a North American Industry Classification System (NAICS) based classification
system.
Premium Rate Setting
Option 3: Set premiums based on both business activity and costs
Claims Cost Measure for Premium Rate Setting
Option 4: Weighting of accident years
UFL Apportionment
Option 3: Blended charge/levy
Experience Rating
Option 3: Replace the current experience rating programs with a rate-setting model
incorporating both risk banding and experience rating
Premium Rate Adjustment
Option 2: Prospective premium rate adjustment
Special Situations: Employers with little or no claims costs
Option 4: Use sector/industry average as a benchmark
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Introduction
Health and Safety in Ontario’s Hospitals
It has been recognized by several sources that Ontario’s hospitals have invested considerable time and
resources to continually improve health and safety for both patients and employees (Tullar, et al, 2010,
p. 200), most recently by the Chief Prevention Officer for Ontario (Gritziotis, 2012) and others.
This has not always been the case. In his report, The Spring of Fear, Justice Archie Campbell (2006, p.13)
reprimanded hospitals by stating, “Hospitals are dangerous workplaces, like mines and factories, yet
they lack the basic safety culture and workplace safety systems that have become expected and
accepted for many years in Ontario mines …” This statement was based in part on WSIB indicators such
as Lost Time Incident (LTI) frequency. In 2003, the LTI frequency for hospitals was 1.8, a rate higher than
mines (1.6). This simple comparison suggested hospitals were statistically more dangerous than mines.
Among Justice Campbell’s recommendations, perhaps the two most important were, “if the Commission
has one single take-home message it is the precautionary principle that safety comes first, that
reasonable efforts to reduce risk need not await scientific proof. Ontario needs to enshrine this principle
and to enforce it throughout our entire health system (Campbell, 2006, pp. 13-14).” The second was,
“that the Ministry of Labour conduct a meaningful review of the Occupational Health and Safety Act and
related regulations in consultation with workplace parties and worker safety experts to examine how
the Internal Responsibility System (IRS) can better be implemented in the unique conditions of the
health care system (Campbell, 2006, p. 54).”
Following the SARS outbreak in the spring and summer of 2003, there has been a fundamental paradigm
shift in Ontario hospitals’ approach to health and safety. Hospitals did not wait for Justice Campbell’s
final report released in 2006, but initiated system-wide change based on a more rigorous interpretation
of the Health Care and Residential Facilities regulation. These efforts have, in turn, led to greater
awareness of workplace health and safety, the IRS, the empowerment of joint health and safety
committees (JHSC), and improved engagement of individual health care workers.
As new challenges emerged in health and safety, Ontario’s hospitals took on a leadership role in
addressing and researching issues such as workplace violence (Laschinger & Grau, 2011), needle safety
(Stringer & Haines, 2011), and biological hazards and communicable diseases (Quach, et al, 2012 and
Deonandan, et al, 2012), well in advance of legislation. Hospitals have now begun to consider new
frontiers, including the impact of shift work on health and psychological health and safety.
Background
In December, 2012 the Ontario Hospital Association (OHA) was provided with an opportunity to meet
Mr. Douglas Stanley, and discuss concerns related to the current design and cost of workers
compensation insurance in Ontario, managed by the Workplace Safety and Insurance Board (WSIB). The
recommendations made to Mr. Stanley at that time can be found in Appendix A.
In January 2013, the WSIB Consultation Secretariat released the WSIB Rate Framework Consultation
Discussion Paper by Mr. Stanley. The purpose of this paper is to engage stakeholders from across all
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industries and sectors in Ontario, regarding the WSIB’s Rate Framework. This includes the classification,
rate setting, and experience rating systems. This response by the OHA addresses the specific questions
asked by Mr. Stanley in his consultation paper, confirming the positions set out in our discussion from
December 2012.
Structure
This paper has been structured to specifically address the questions asked by Mr. Stanley in his
consultation paper, with a primary focus on the questions noted for “Discussion and Analysis of
Options.” It should be noted that the responses provided by the OHA do not include the details of all
available options provided by Mr. Stanley. Instead, for brevity, we have included only the preferred
option of the OHA and our reasoning. In addition, Mr. Stanley asked several questions as points for
consideration. Following our responses to the main questions, the OHA has included responses to some
of these discussion questions, as they impact upon hospitals. The responses set out in this document are
in the order set out in Mr. Stanley’s paper.
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Responses to Questions in the WSIB Rate Framework Consultation
Discussion Paper
Section 3. Employer Classification
Employer Classification
“As already mentioned, the WSIB‘s existing classification is based on the SIC codes for business activities.
The WSIB has a four-tier classification scheme (CU‘s, Rate Groups, Sectors, and Classes). While employers
are initially assigned to a CU, premium rates are set at the rate group level.
A classification scheme can have a single or multiple tiers. Similarly, employers can be classified based
on a single or multiple criteria. For workplace insurance purposes, employers are usually initially
classified based on their business activity.”
OHA Response
Options 2, the application of the NAICS (North American Industry Classification System) classification
used by most other jurisdiction in Canada and North America is the most suitable solution. This system
would provide Ontario’s WSIB a means to accurately classify all business types in a format understood
and comparable to other jurisdictions. This, in turn, would allow for a more accurate comparison of
hazards, risks, and claim costs in similar sectors across other jurisdictions.
Also, as noted by Mr. Stanley, NAICS is reviewed and updated every five years. This would allow the
WSIB to update classifications, following emerging and changing trends in the business environment,
without the added cost of continuous internal review and revisions.
Using NAICS, hospitals would initially fall into a general classification with other healthcare and social
assistance organizations. Further classification levels within the system would categorize all hospitals
together, and then break them down into general medical and surgical hospitals, paediatric hospitals,
mental health and addiction hospitals, and other specialized hospitals (e.g. complex continuing care).
Given our current understanding of the difference in OHS concerns between these various types of
organizations, this breakdown would allow for more accurate assessment of risk, based on hazards, and
therefore determination of insurance premiums.
Section 4. Premium Rate Setting
Premium Rate Setting
”While the WSIB sets and publicly reports an average rate for all Schedule 1 employers, for reasons of
premium pricing fairness, as discussed in the section above, employers carrying on different business
activities pay different rates. The WSIB, along with other Canadian jurisdictions, takes the position that
premium rates should, to some degree reflect the differential claim costs risk imposed on the workplace
insurance system”.
OHA Response
Option 3, the use of business activity and cost (risk) is the most appropriate means of setting and
adjusting premiums. This approach was recommended by the OHA to Mr. Stanley in preliminary
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discussions, as it reduces rate group shopping and stabilizes rates regardless of organization size. Thus
small and large hospitals pay a premium consistent with their activities and new claim costs (NCC), not
simply their designation as a hospital.
For example, a small hospital such as Smooth Rock Falls Hospital, with 14 acute care beds, would have
significantly different hazards than Princess Margaret Hospital in Toronto, with over 130 inpatient beds
and significant research facilities. At this specialist facility, antineoplastic drugs are used to treat cancer
patients, laboratories work with chemical and biological hazards, and radiation treatment is provided.
As it relates to hospitals, it is important to note the current system is essentially a payroll tax because it
has fixed rates based on payroll, with little incentive to improve performance. The classification system
is blind to any differences in practice or risk between organizations. The WSIB policies do not recognize
the diversity, capacity and limitations that size and location impose on hospitals, as well as the range of
activities which may or may not be ongoing at any given site. There needs to be some recognition of the
variability in the operations and capacities of hospitals when setting a premium or applying policies. A
business activity and risk based assessment would more accurately classify hospitals based on scope of
patient care activities and associated hazards, not simply on the hospital designation.
Claims Cost Measure for Premium Rate Setting
Every year the WSIB derives an average premium rate for all Schedule 1 employers based on claim costs
(current and past), administrative and legislative expenses. Claims costs include charges for:
- The UFL
- Gains and losses, based on the previous six years of premium rate setting experience by rate
group
- Bad debt expenses, determined based on the expected bad debts provision by industry class
- Expected net payout from experience rating and other incentive programs
The WSIB presently relies on the previous six years of claims costs to calculate the average rate per rate
group. Other jurisdictions have varying approaches and review periods for their premium setting
calculations.
OHA Response
Option 4, the weighting of accident years for experience rating purposes would generate a more reliable
cost measure as it would take into account improvements made by organizations or, conversely, poorer
performance over the shorter term. This would allow for a more accurate reflection of true cost to the
system and reflect a much more nimble system.
This being said, as the true cost of claims becomes more apparent over time (i.e. less of the claim cost is
comprised of predicted future costs), the weighting must be based on current, best practice guidelines
on the treatment and rehabilitation from injuries. In other words, as the most recent years of weighting
will include significant assumptions of future costs, the estimates of these costs must be based on
accurate, objective medical understanding of expected outcomes. Currently, Ontario Regulation 175/98
says the WSIB must apply The American Medical Association Guides to the Evaluation of Permanent
Impairment (third edition revised) as it read on January 14, 1991 as the rating schedule for
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determination of permanent impairment. Given the changes in medical knowledge and best practices in
rehabilitation and return to work have changed since 1991, it can be assumed the costs determined
based on the outcomes indicated in this guideline are out of date.
UFL Apportionment
The UFL basically measures the monetary difference between future benefits owed to injured workers
(i.e. liabilities) and the value of the investments available to pay those benefits (i.e. assets).
In accordance with the WSIB‘s current top-down approach to rate setting, the UFL charge is first
determined for Schedule 1 as a whole and subsequently apportioned to each rate group based on their
new claim costs. In short, the higher a rate group‘s expected new claim costs, the proportionally higher
its UFL charge. The opposite is also true. The underlying primary assumptions are: i) rate groups with
high expected costs also generated high claim costs in the past which were not sufficiently funded; and ii)
the rate groups continue to be largely populated by the same employers who generated the old claim
costs.
OHA Response
Option 3, a blended charge / levy, which charges a fixed rate plus a surcharge based on past estimated
contribution and responsibility for the UFL, is the most appropriate solution. This rate may be based on
the historical contributions to the Unfunded Liability (UFL) by various sectors and industries, while
taking into account the fundamental principle of collective liability. This methodology would support the
idea of collective responsibility, while still reducing the degree of cross-subsidization currently occurring
within the system.
For example, as discussed with Mr. Stanley in December 2012, recent information from the WSIB
indicated the UFL attributed to Rate Group 853 stands at $400-430 million, or 3.3-3.6% of the total UFL,
as of December 2010. In addition, data for Schedule 1 employers from 2005 to 2009 shows hospitals
only account for 0.7% of bad debt expenses. Comparatively, the construction sector accounts for 46.5%,
the service sector for 17.3%, and the transportation sector for 14.5%.
Furthermore, the health and safety record of hospitals, based on WSIB criteria (i.e., Lost Time claim
frequency and severity), has been constantly improving over the last several years at a rate of 5% to 7%.
Taken together, the high portion of premiums allocated to the UFL combined with the relatively small
share of the total UFL contribution; the low percentage of bad debt attributed to hospitals; and rate
increases inconsistent with the performance improvement seen in hospitals leads to the conclusion that
hospitals are paying for part of the UFL attributed to organizations within other rate groups and sectors.
As public sector organizations, the use of limited public funds for the cross-subsidization of costs
attributed to other industries and sectors directly impacts funds available for the provision of services.
Section 5. Experience Rating
Insurance Equity
Insurance equity, predominantly an actuarial concept, is about premium pricing fairness. To actuaries,
insurance equity and fairness are achieved when the premiums paid by an insured/policy-holder are
fairly adjusted to more accurately correspond with the insured‘s expected claims costs and related
expenses. Hence, employers with different perceived risk levels should pay different premium rates
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based on their individual risk profiles, usually empirically reflected using a measure of actual past cost
experience.
OHA Response
Option 3, replacing the current experience rating programs with a rate-setting model incorporating both
risk banding and experience rating is the best option for Ontario and Ontario hospitals. As discussed
earlier, correctly classifying organizations by business activity and risk would allow for a more
transparent, understandable and accurate means of determining base rate. With these measures in
place, risk banding could then be used to further distinguish the level of performance, relative to similar
organizations.
For example, within the hospital sector, after division by the NAICS classification system, organizations
could be further grouped by their business activities. This would distinguish the large, multi-faceted
hospitals with bespoke services from the community hospitals, and further distinguish the small
hospitals which offer a narrower range of services aimed at acute care. With this division in place, each
grouping could be individually assessed in comparison to peers within the same grouping, providing a
more accurate insight into performance.
Premium Rate Adjustments
Employer-specific premium rates can be adjusted in one of two ways - through either a retrospective
adjustment or prospective adjustment.
OHA Response
The OHA feels Option 2, a prospective premium rate adjustment system, would be more appropriate for
Ontario than a retrospective system similar to the current model. Hospitals require stable, predictable
rates in order to plan and administer healthcare provision for Ontario on limited budgets. There are
many negative implications when lump-sum surcharges or rebates are required of financiallyconstrained organizations, when these payments cannot be predicted or planned for.
In other words, a prospective system allows organizations to budget for known costs and predict
potential future costs based on performance. (i.e. poor performers could assume rate increases, and
would be able to budget accordingly, while strong performers would be able to maintain or decrease
their costs). Conversely, with a retrospective system such as NEER, organizations may have to pay large
penalties over a short time period. Hospitals, as an example of financially-constrained public sector
organizations, have difficulty incorporating these unknown variables into their budgets. As a result,
these lump-sum costs can have an immediate impact upon service provision. While it is understood that
retrospective systems provide a means to highlight costs to Senior Management, this benefit does not
provide enough positive reinforcement to merit the negative impacts on budgeting and allocation of
resources.
Prospective insurance systems within workers compensation systems may also positively reinforce good
behaviours and prevention activities, similar to the way in which prospective car insurance promotes
safer driving, the purchasing of vehicles with safer rating standards, and an understanding amongst all
consumers that poor performance or risk taking will lead to higher rates.
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Special Situations – Employers with Limited or No Claim Costs
Generally, all employers in the same rate group should pay the same premium rate, subject to experience
rating adjustments, which can consider employers’ claim costs history and frequency. However, three
types of employers potentially fall outside of this general rule, at least for experience rating purposes.
New and small employers as well as those with limited or no claim costs may not have enough
experience to be statistically relevant.
OHA Response
In these situations, Option 4, the use of sector /industry average as a benchmark would provide a means
of determining initial insurance rates. The banding of organizations based on activities and risks, as
recommended earlier, should provide a suitable means to initially evaluate new businesses. As these
businesses develop, more experience would allow for an accurate assessment of their true costs and
performance, which could then be used to refine their costs.
Additional Questions for Consideration
Throughout the Rate Framework Consultation Discussion Paper, Mr. Stanley poses several Questions for
Consideration. The questions, as they are written, fit into the context of the discussion and are not
meant to be answered as stand-alone questions. In providing these responses, the OHA has taken into
consideration the context of the question and would recommend the related section of the Rate
Framework Consultation Discussion Paper be reviewed in conjunction with our replies.
2. Setting the Context for Dialogue
Question for Consideration
Is there some other viable and objective measure of an employer’s relative performance in order to rate
their relative contribution to the system?
This question addresses the use of past performance and cost to the workers compensation insurance
system as a means of determining any given employer’s performance and therefore their premiums.
And, as mentioned by Mr. Stanley, the use of past performance (i.e. injury cost) as a reliable proxy for
risk may only be reliable when an organization is large enough or has a long enough history for the
injury rates to be stable.
While historical costs and past performance should definitely be considered as contributing factors
when determining an employer’s relative contribution to the system, there are other factors which
should also be considered such as safety initiatives, inter-jurisdictional comparisons and emerging
trends in risk prevention.
To assess safety initiatives, recognition should be given when employers sustain third-party safety
accreditation such as the Canadian Standards Association (CSA) Z-1000 or British Standards Institute
(BSi) 18001 standards. Similar to the way in which an individual’s car insurance may decrease if they
have shown participation in driver safety training, or home insurance may decrease if they have a
burglary alarm system in place, preventative measures taken to reduce claim costs should be
recognized when determining insurance premiums.
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The relative risk of organizations working within any given industry should also be compared to similar
organizations in other jurisdictions. For example, if hospitals within Ontario are compared to hospitals in
other jurisdictions, and injury rates are lower, it can be assumed that prevention initiatives are in place
and effective. Conversely, if injury rates are higher as compared to other jurisdictions, it shows room for
improvement in performance. This measure would allow for assessment of performance by sectors
relative to their own peers, instead of in comparison to other sectors with significantly different hazards.
This would help ensure risks are kept as low as reasonably possible, reducing costs to the system overall.
The third factor that could be considered is emerging trends in risk and prevention. In other words,
while historical performance is important, implementation of new equipment, techniques or safety
practices can significantly improve performance quite quickly. For example, in 2005 the Ontario
Government invested in patient lift assists for all hospitals, which help workers lift and move patients.
This initiative significantly reduced the number and severity of back injuries to hospital staff caused by
lifting patients. However, even with the reduction in hazard exposure, resulting reduction in risk and
subsequent decrease in injuries and work-related injury absence costs to the system, there was no
change in hospital premiums.
3. Employer Classification
\
Is rate shopping a problem or is it a symptom of a problem? Does it lead to an inconsistent application of
the classification policy?
While this does not have an impact within our Rate Group (a hospital can only be classified as a
hospital), the OHA believes rate shopping is a symptom of inequality within the system, and an
employer response to perceived inconsistencies in determination of rates. If, as noted earlier, rate
setting is based on the NAICS classification system, and experience rating based on business activity and
risk instead of the current classification system, there would be less likelihood of questioning rates.
Classifications with similar business activities and risks would have similar rates, reducing inconsistencies
in base rates and the reason for many of the current requests to change. Further to this, the application
of risk bands would focus employers’ attention on their own performance and moving to, or remaining
in, a low-risk band. Therefore, organizations would have less incentive to request changes.
Does the system today still achieve the objective of ensuring employers pay a fair share of injury costs
and align premiums to claims costs?
No, the workers’ compensation insurance system in place today does not ensure employers pay a fair
share of injury costs, and does not align premiums to current claim costs. As discussed with Mr. Stanley
in December, 2012, several inconsistencies within the current system can be noted when looking at the
cost of insurance for hospitals, relative to use. These inconsistencies include:

Frequent amendments to the NEER rating tables, reducing rebates and increase surcharges. As a
result, these changes have removed safety incentives, fairness, and equity from the system.
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

Further, these changes have made it impossible for hospitals to predict costs, resulting in
significant budget concerns.
Between 2006 and 2011, hospitals paid between 39.54% and 61.72% more in premiums than
used for benefits payments annually. In fact, there are several cases where the cost of premiums
far exceeds the cost of benefits; even then, the hospitals’ low expected cost factor and 100%
rating factor (components of the NEER rebate and surcharges calculation) ensure the hospital
will pay a NEER surcharge. These gross inconsistencies undermine the objectives of the program,
which is to incent employers to strengthen their occupational health and safety practices and
their environment.
According to WSIB Premium information, approximately 26% of premiums paid by hospitals are
in place to cover the cost of the UFL. However when looking at hospital premium allocation,
while funds allocated to payment of the UFL decreased from 2011 to 2012 (35% to 26%), the
percentage allocated to administration rose to 29% from 25%. The increase in overhead costs
raises the question of how the WSIB calculates these administrative fees, and whether or not
the cost of the premium is determined first by the desired, across-the-board rate increase, after
which the allocation of funds is determined. This inconsistency again brings into question the
fairness within the rate setting process.
4. Premium Rate Setting
Do we still accept the principle that every year employers pay the costs of injuries in that year?
As discussed by Professor Harry Arthurs in the WSIB Funding Review, when determining cost allocation
it is important for sectors and employers to be charged the cost of claims when they occur. If the cost of
claims is not incurred by employers at the time of the injury or within a short timeframe thereafter, the
costs may inevitably be passed to future employers, other sectors, and contribute to the UFL.
Of course, some discretion may be necessary as annual application of claims charges may not be feasible
if based within a prospective insurance system and working towards stability of costs and employer
premiums. Currently, the WSIB sets its rates annually, which contributes to short notice for employers
and an inability to plan future costs. For this reason, allocation of new claims costs on an annual basis
may not be possible, without leading back to the instability seen in the current NEER system. This said,
accurate determination of premiums in a prospective system would ensure employers are covering their
costs.
Questions for Consideration
What is your reaction to this comment about a rationale for placing limits on rate increases? To what
extent does that infringe on the principle against passing costs to future employers?
The OHA agrees with the position stated, that subjective limits placed on the premiums of certain
sectors and industries places an undue hardship on others. While we understand the political and
economic reasons for placing limits on rate increases, the interference of political and economic
interests in the setting of benefit levels and premium rates inhibits the WSIB’s ability to manage costs
relative to income. This interference, in part, has resulted in costs being passed on from employers no
longer in business to current employers. Should the practice continue these costs may be passed on to
future employers. More care should be taken to ensure costs are allocated appropriately, as would be
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expected of any private sector insurance company. Political and economic influences on the system
should be addressed through the promotion of injury-reducing preventative measures, not the capping
of insurance rates based on true costs to the system.
The Issue of Rate Responsiveness
How important is it that the premium rate be reflective of a rate group’s recent cost experience?
What kind of rate volatility are employers willing to live with as a trade-off to linking the premium rate to
most recent experience?
It is very important for premium rates to be reflective of a rate group’s recent cost experience. As
discussed earlier, significant changes in claims experience, positive or negative, can occur over a short
term. This was seen in 2005 with a significant investment in patient lifts. If premium rates do not reflect
investments in prevention or significant changes in performance, employers may lose the ability to
relate their performance to their costs, reducing incentive to improve. However, with respect to
premium rate volatility, recent claims experience should not create such volatility within the insurance
system that it disrupts operations. Implementation of a prospective insurance system may help reduce
volatility while allowing for the system to account for recent experience.
For example, within the current NEER retrospective system there are frequent changes to rating tables.
This impacts the ability of employers to determine their costs to the system, and therefore their
potential rebate or surcharge. Further to this, within public sector organizations, such as hospitals, the
inability to determine these costs directly impact operations as funding is limited.
Conversely, a prospective system would allow organizations to budget costs over the year (or a few
years, as the system is designed). Should poor performance result in increased premiums, these future
costs could be more predictable, and funding could be appropriately allocated. The degree of volatility
within the system must take into account the source of the funding; public funds must be accounted for
and allocated responsibly, and for this to occur the ability to budget is paramount.
5. Experience Rating
Could an experience rating plan be an instrument through which workers’ compensation may be
modified towards a fairer allocation of the costs of industrial accidents among employers as a group?
If experience rating is simply a further tweaking of the system to ensure everyone is simply paying their
“fair share” should it be integrated into the rate setting process?
As discussed earlier, the integration of classification, the rate setting process, and experience rating
would best suit the workers compensation system in Ontario. This would help ensure organizations are
grouped with others performing similar business activities and with similar hazard profiles, while
allowing for movement between “risk bands” to address performance and costs to the system.
Are the three principles (definition of costs, insurance features, simplicity) that Weiler identified above
still valid principles to build experience rating on?
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Yes, these are still valid principles; however they should be incorporated into the entire rate setting and
classification system, not just the experience rating component. Further to this, if considering these
three principles in conjunction with the premise that workers compensation is morally neutral (i.e. it
does not matter why one organization has higher or lower costs; their premiums should be based on
their cost to the system), the placement of the WSIB as an arm’s length organization overseen by the
Ministry of Labour should be reconsidered; oversight by the Ministry of Finance may be more suitable.
Is it possible to test that assumption once classifications are established and make further adjustments
based on the results?
Yes, it will be important to test any classification system put in place, and refine the system based on
results, as well as changes and trends in both risk and business activities. Similar to the way in which the
WSIB and MOL promote a continuous improvement cycle for preventative safety measures, the WSIB
should incorporate a means to evaluate and improve their classification and rate setting processes. The
continuous updating of NAICS every five years will help facilitate these improvements.
Is it clear which category WSIB’s current programs fall into?
No, when considering the WSIB’s current experience rating programs, it is not clear which category
(insurance-based or practice-based) they fall into. In some cases, the experience rating programs in
place at the WSIB are discussed as insurance-based, used to properly allocate cost of claims between
employers. However, at other times the experience rating programs are described as practice-based,
and in place to promote positive OHS behaviour and activities.
For example, it is our understanding that NEER was put in place to properly allocate cost of claims.
However, in April 2011, at a meeting of the WSIB Industrial and Manufacturing Advisory Committee,
David Marshall stated that rating tables were amended to reduce the amount of rebates and increase
surcharges. This shift runs counter to the presumed fairness within the system, and the premise that
NEER is in place to allocate costs appropriately.
What should the WSIB’s focus be going forward?
The sole focus of the WSIB moving forward should be the retirement of the UFL with sustainable policies
going forward and the administration of workers compensation insurance, as an insurance company not
a social benefits program or a provider/administrator of prevention programs.
The operation of the WSIB should be overseen by the Ministry of Finance, not the MOL, as the WSIB is a
financial body responsible for a significant financial portfolio. Should the WSIB want to recognize the
importance of prevention activities into the determination of insurance rates, their involvement should
be limited to the recognition of initiatives undertaken by organizations who participate in prevention
activities, such as hospital accreditation, safety accreditation, or a Safety Groups program run by the
Ministry of Labour. This would be similar to the way in which car insurance providers recognize drivers
who have taken safe driving training, but do not provide safe driver training themselves.
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Could you design ER programs or features within the rate setting process with an insurance equity
objective which avoid the incentives for undesirable behavior that are a feature of the existing
programs?
The design of a rate setting or ER program may lead to some employers to make bad choices when
looking for ways to reduce their costs. These activities are not condoned by the OHA, and we would
expect the WSIB to administer the penalization system they have available to them accordingly.
With that in mind, the only way to incent good behaviour is to make the cost and benefits of good
behaviours more lucrative than undesirable behaviours and activities. To this end, the cost of
participation in prevention initiatives must be realistically feasible for smaller employers, and the direct
cost of non-compliance must be visible and communicated.
Should experience rating be used to correct deficiencies in classification and rate setting systems?
As discussed earlier, experience rating should be a component of classification and rate setting, not a
separate entity.
Retrospective or Prospective Experience Rating?
Do either of these approaches have a tendency to encourage the undesirable claim suppression behavior
identified as problematic by Arthurs?
No, as discussed earlier, some employers will choose to participate in undesirable behaviours, such as
claims suppression, regardless of the type of experience rating in place. To reduce claims suppression,
insurance costs must be fair, transparent, and reflect behaviours in such a manner that positive
behaviours such as prevention activities are more financially beneficial than undesirable behaviours.
One of the principles underlying experience rating systems identified by Weiler was that they should be
simple, easy to administer and to comprehend.
Does the current WSIB retrospective system meet those criteria?
No, the current WSIB retrospective system does not meet the criteria of being simple, easy to
administer and comprehend. This can be seen in the degree to which employers have begun managing
‘the system’ instead of focusing on return to work. Simplicity within the system would allow for
employers to control their costs simply by focusing on returning employees to work as early and safely
as possible. However, the intricacies within the NEER system do not allow for this to occur. For example,
if an employee returns to work on December 31, the costs of that claim are significantly different than if
they return January 1, simply as a result of the claim entering a new year. This could contribute to an
employer bringing an employee back to work too early, increasing the risk of re-injury. Clarity and
simplicity within the system could help refocus efforts on prevention of injury and safe return to work.
Revenue Neutrality in Experience Rating
15
Is revenue neutrality an important fundamental principle of any experience rating system? Does is it
have to be applied on an annual basis?
Yes, revenue neutrality is an important fundamental principle of not only experience rating, but the
entire workers compensation system. While it may not be essential to apply neutrality on an annual
basis, a lack of foresight into future economic conditions would make it risky to assume any losses can
be corrected over time. This, in part, has contributed to the current financial situation of the WSIB. The
practices of private sector insurance companies should be reviewed and considered with respect to the
management of revenue and neutrality.
Conclusion
The Ontario Hospital Association represents the interests of 149 hospitals in Ontario, with over 198,000
employees. In order to ensure that this document accurately reflects the opinions of a broad range of
key decision makers in the sector, we solicited input from health and safety professionals, disability
management and occupational health professionals and Chief Human Resource Officers. The
recommendations in this report were endorsed by our members.
Whatever conclusions are drawn by Mr. Stanley from our response and the responses of other
stakeholders across the Province, the OHA would like to reiterate the importance of recognizing the
position of public sector employers with limited resources and operating budgets remaining at net-zero
increase. Any cost increases, specifically those which increase cross-subsidization with other sectors,
disadvantage good performers in the public sector and have a direct impact on organizational
operations and services available to the public.
We thank you for the opportunity to comment and contribute to this consultation.
16
Appendix A
OHA Response to the WSIB
Rate Framework Consultation
WSIB Redesign Project –December 2012
17
Appendix A
The Ontario Hospital Association
The Ontario Hospital Association (OHA) is the voice of Ontario’s public hospitals. Founded in 1924, the
OHA uses advocacy, education and partnerships to build a strong, innovative and sustainable health care
system for all Ontarians.
The OHA is a not for Profit organization representing 149 hospitals in Ontario. We welcome opportunity
to provide insight and thoughts on Policy and Operational decisions.
The OHA has consulted with:
• OHA Safety Group members
• Hospital Occupational Health and Safety Professionals
• Hospital Chief Human Resources Officers
Based on these consultations we are offering seven recommendations made on behalf of our member
hospitals
18
Appendix A
Table of Contents
Executive Summary..................................................................................................................................... 20
Introduction: Health and Safety in Ontario’s Hospitals .............................................................................. 21
WSIB Costs to Hospitals .............................................................................................................................. 22
Practice-Based Insurance System ....................................................................................................... 22
NEER Rebates and Surcharges ............................................................................................................ 22
Concerns Regarding Transparency ..................................................................................................... 25
Costs under Schedule 1 ....................................................................................................................... 26
Premium Setting ................................................................................................................................. 27
The UFL as a Component of Premiums ............................................................................................... 27
Other Hospital Concerns and Recommendations....................................................................................... 29
Amend the “Locked-in Clause”, Section 44 of the WSIA ........................................................................ 29
Operational and Administrative Issues ................................................................................................... 30
Cost of Care and Drugs............................................................................................................................ 31
Conclusion ................................................................................................................................................... 32
References .................................................................................................................................................. 34
19
Appendix A
Executive Summary
In this response to the Workplace Safety and Insurance Board (WSIB) Rate Framework Consultation, the
OHA outlines a number of important concerns raised by Ontario hospitals with respect to the current
WSIB system and its practices. These include:






Hospitals represent the largest publically funded sector remaining in Schedule 1, which is an
outdated designation and costs hospitals more. Hospitals have been classified under the Workplace
Safety and Insurance Act (WSIA) as Schedule 1 employers dating back to Ontario’s original Workers
Compensation Act of 1914.
WSIB premiums are a payroll tax on these publically funded institutions. The projected premium
increases for hospitals is up to $175,000,000 by 2020, which comes directly from the public purse.
Since 2003, Ontario’s hospitals have achieved significant reductions in both the number of WSIB
claims and claim persistence. They have been dependable, early adopters of preventive measures
including the introduction of ceiling lifts, needle safety, and workplace violence prevention
programs. Yet, hospital WSIB premium rates continue to increase and hospitals have been required
to pay large New Experimental Experience Rating (NEER) surcharges even when safety records show
marked improvements year over year.
NEER rating tables have been amended to reduce rebates and increase surcharges, and as a result,
these changes have removed safety incentives, fairness, and equity from the system. Further, these
changes have made it impossible for hospitals to predict costs, resulting in significant budget
concerns.
From 2006 and 2011, hospitals have paid between 39.54% and 61.72% more in premiums than have
been used for benefits payments annually. In fact, there are several cases where the cost of
premiums far exceeds the cost of benefits; even then, the hospitals’ low expected cost factor and
100% rating factor (components of the NEER rebate and surcharges calculation) ensure the hospital
will pay a NEER surcharge. These gross inconsistencies undermine the objectives of the program,
which is to incent employers to strengthen their occupational health and safety practices and their
environment.
Issues related to, but not directly addressed by the Rate Framework Consultation, include significant
customer service related issues that directly impact the duration, complexity, and cost of claims; and
the cost differences between health care services for WSIB workers’ compensation claims versus
similar health care services provided through the Ontario Health Insurance Plan (OHIP).
OHA member hospitals believe the current insurance system requires serious reform. As such, we
support the Stanley Report as an appropriate effort to address significant issues within the WSIB. The
OHA offers the following recommendations to help support effective reform:
1. Development of a Practice-Based Insurance System and a reclassification of organizations
within their respective Rate Group.
2. Adoption of a Prospective Experience Rating system.
3. Establishment of a Transparent Premium-Setting process, which takes into account the
practice-based assessment.
20
Appendix A
4. Allow hospitals the option to pay off their share of the UFL individually and immediately be
provided with a lower insurance premium to reflect the fact that amortization costs are no
longer being paid.
5. Amendment of section 44(2), No Review After 72-Month period, of the WSIA; the so called
“locked-in” clause.
6. Resolve operational and administrative issues; in particular, the need to ensure consistent
adjudication practices, improve the quality of customer services and communications.
7. Review cost of care and drugs to match industry standards and improve control of health care
costs for employers.
Practice Based
Insurance
System
Prospective
Experience
Rating System
Transparent
Premium
Setting
Introduction: Health and Safety in Ontario’s Hospitals
It has been recognized by several sources that Ontario’s hospitals have invested considerable time and
resources to continually improve health and safety for both patients and employees (Tullar, et al, 2010,
p. 200), most recently by the Chief Prevention Officer for Ontario (Gritziotis, 2012) and others.
This has not always been the case. In his report, The Spring of Fear, Justice Archie Campbell (2006, p.13)
reprimanded hospitals by stating, “Hospitals are dangerous workplaces, like mines and factories, yet
they lack the basic safety culture and workplace safety systems that have become expected and
accepted for many years in Ontario mines …” This statement was based in part on WSIB indicators such
as Lost Time Incident (LTI) frequency. In 2003, the LTI frequency for hospitals was 1.8, a rate higher than
mines (1.6). This simple comparison suggested hospitals were statistically more dangerous than mines.
Among Justice Campbell’s recommendations, perhaps the two most important were, “if the Commission
has one single take-home message it is the precautionary principle that safety comes first, that
reasonable efforts to reduce risk need not await scientific proof. Ontario needs to enshrine this principle
and to enforce it throughout our entire health system (Campbell, 2006, pp. 13-14).” The second was,
“that the Ministry of Labour conduct a meaningful review of the Occupational Health and Safety Act and
related regulations in consultation with workplace parties and worker safety experts to examine how
the Internal Responsibility System (IRS) can better be implemented in the unique conditions of the
health care system (Campbell, 2006, p. 54).”
21
Appendix A
Following the SARS outbreak in the spring and summer of 2003, there has been a fundamental paradigm
shift in Ontario hospitals’ approach to health and safety. Hospitals did not wait for Justice Campbell’s
final report released in 2006, but initiated system-wide change based on a more rigorous interpretation
of the Health Care and Residential Facilities regulation. These efforts have, in turn, led to greater
awareness of workplace health and safety, the IRS, the empowerment of joint health and safety
committees (JHSC), and improved engagement of individual health care workers.
As new challenges emerged in health and safety, Ontario’s hospitals took on a leadership role in
addressing and researching issues such as workplace violence (Laschinger & Grau, 2011), needle safety
(Stringer & Haines, 2011), and biological hazards and communicable diseases (Quach, et al, 2012 and
Deonandan, et al, 2012), well in advance of legislation. Now, hospitals have now begun to consider new
frontiers, including the impact of shift work on health and psychological health and safety.
WSIB Costs to Hospitals
Practice-Based Insurance System
It is important to note that the current system is essentially a payroll tax because it has fixed rates. The
classification system is blind to any differences in practice or risk between organizations; therefore, a
hospital is a hospital. The WSIB policies do not recognize the diversity, capacity and limitations that size
and location impose on hospitals. There needs to be some recognition of the variability in the operations
and capacities of hospitals when setting a premium or applying policies. A practice-based assessment
would more accurately classify hospitals based on scope of patient care activities and associated
hazards, not simply on the hospital designation.
Practice- based systems review the hospital’s overall practice and assesses the scope of services
provided. Premiums are then based on this assessment. Because hospitals are in the health services
industry, this system should be similar to professional liability insurance programs.
Recommendation:
1. The WSIB develop a practice-based system, which will reflect hospital’s overall practice and
assesses the scope of services provided. This review of the current classification system within
Rate Group 853 would match the diversity, capacity and limitations resulting from hospital size
and location. The proposal would retain the hospital rate group as a practice group. Each
member of the group would have their individual experience rating assessed to place them in a
high-, medium-, or low-risk experience rating for premium-setting purposes.
NEER Rebates and Surcharges
Most of those required to participate in Schedule 1 workers’ compensation insurance are subject to one
of three Experience Rating (ER) programs:

The Construction Industry Plan (CAD-7), which covers approximately 17% of organizations in the
Schedule 1 premium pool;
22
Appendix A


The Merit Adjustment Premium Plan (MAP), which covers all small organizations (about 16% of
the premium pool); and,
The New Experimental Experience Rating (NEER) program, which covers approximately 62% of
the premium pool1. Hospitals’ premium rates are determined through the NEER program.
As seen in Figure 1 below, The NEER program compares the expected and actual claim costs attributed
to an organization and multiplies the result by a rating factor to determine the size of the rebate or
surcharge. These amounts can be significant: rebates may be up to 40% of premiums paid, and
surcharges may be up to 100% of annual premium. The data used to determine the actual claim costs
include the benefits already paid and the projected future costs of all claims that have occurred in the
past four years, subject to claim and firm limits. This four-year timeframe is often referred to as the
‘NEER Window’. Until 2010, the NEER window was three years long.
Figure 1: WSIB NEER Determination
2
1
Workplace Safety and Insurance Board (May 16, 2011). Follow-up Questions & Information Requests to Funding
Review Technical Sessions. Retrieved from
http://www.wsib.on.ca/files/Content/FundingReviewConsolidatedResponses/ConsolidatedResponses.pdf
2
Workplace Safety and Insurance Board (June 2012). New Experimental Experience Rating (NEER) User Guide.
Retrieved from http://www.wsib.on.ca/files/Content/Downloadable%20FileNEER%20Guide/NEERGuide.pdf
23
Appendix A
With the rebates and surcharges associated with NEER, which was set up as an incentive program, one
would expect relative equity between rate group members. In other words, organizations, which exceed
their expected NEER costs, should have surcharges, and organizations, which require the insurance fund
less frequently than expected, should receive rebates.
However, this has not been the case. In 2011, expected cost factors ranged from 7.22% for small
hospitals, to 27.26% for large organizations. Low percentages, usually assigned to smaller organizations,
indicate the WSIB’s expectation that they will only use 7% of the premiums they pay. This percentage
does not account for the size of the workforce. Therefore, one or two injuries can place a small hospital
into a surcharge position. In comparison, large organizations are expected to use approximately 27% of
the premiums paid, so when faced with the same number of injuries (1-2), they will not exceed this
threshold. This is because each injury/claim logged in an organization with a smaller workforce carries a
greater weight relative to the total number of workers, compared to a large organization.
In addition to these low expected use levels for smaller hospitals, the WSIB has set the rating factor for
most hospitals at or near 100%, resulting in a surcharge equal to 100% for any costs above the expected
cost. With the current system, a hospital may have claimed less than the amount of premiums paid and
still be required to pay a significant additional surcharge.
These two factors inevitably result in most hospitals ending up in a surcharge position, with the
maximum possible surcharge applied. In April 2011, WSIB President and CEO David Marshall, at a
meeting of the WSIB Industrial and Manufacturing Advisory Committee, stated that rating tables have
been amended to reduce the amount of rebates and increase surcharges. This type of adjustment runs
counter to the presumed fairness within the system. Unfortunately, the lack of transparency in the
WSIB’s premium-setting and claims analysis methods does not allow for a systematic analysis of these
costs for Rate Group 853.
Another concern with NEER as a retrospective rating system is that rebates and surcharges are
determined annually and a cheque or invoice is sent to the organization. Hospitals which are already
working within significant financial constraints, have difficulty budgeting for lump-sum WSIB surcharges.
Furthermore, due to the lack of transparency in the setting of annual expected claim costs, the
determination of rating factors and the projected costs for any given claim, year-end surcharges cannot
be pre-determined by the hospitals and planned for. These large “one-off” payments contribute to
budget concerns for hospitals.
In fact, Professor Arthurs, in his report following the WSIB Funding Review stated that the NEER
incentive program is a moral hazard. NEER is not a health and safety incentive program, nor does it
provide equity in a retrospective insurance system. There is strong evidence to support the failure of
NEER as a health and safety incentive program presented by Tompa, et al., (2012).
Finally, no discussion of NEER is complete without considering the Second Injury Enhancement Fund
(SIEF), Document № 14-05-03. If a prior disability caused or contributed to the compensable accident,
this allows for all or part of the compensation and health care costs to be transferred from the accident
employer to the SIEF. Alternatively, if the period resulting from an accident becomes prolonged or
24
Appendix A
enhanced due to a pre-existing condition, costs can be transferred to SIEF. However, changes to the SIEF
policy have essentially resulted in the denial of most SIEF claims, rendering the policy meaningless. In
addition, hospitals have noted in the wake of an aging population, SIEF requests are often reduced or
declined more and more frequently, even if the issues appear to be non-work related. The changes in
the SIEF policy is another example of an arbitrary policy change, which has all but eliminated fairness in
the compensation insurance plan.
Recommendation:
2. The WSIB adopt a prospective experience rating plan similar to other types of health benefits
programs. The OHA recommends combining a Prospective Experience Rating System and
Prospective Experience Rating Plan to establish a better workers’ compensation plan.
Concerns Regarding Transparency
The stated 2012 premium for organizations in WSIB Rate Group 853 is $1.08 per $100 of insurable
payroll. As seen in the graph below, which compares the 2012 figure to the 2011 rate of $1.06, the WSIB
states $0.488 (45% of premium) is payment towards new claim costs. $0.313 (29%) covers the cost of
administration, while the remainder - $0.276 or 25%3 is allocated towards payment of the UFL.
Figure 2: Premium Rate Components
100%
90%
0.276
80%
0.374
70%
60%
Past Claims Cost / UFL ($)
0.313
0.263
50%
40%
30%
20%
Overhead Expenses /
Administration ($)
New Claims Cost ($)
0.488
0.418
2012
2011
10%
0%
Additional data received from the WSIB4 indicates, between 2006 and 2011, Rate Group 853 has cost
the insurance fund only 38.28%–60.46% of the premiums paid. In other words, while accounting for the
lifetime costs of claims in this time period, hospitals have paid between 39.54% and 61.72% more into
the fund than they have utilized annually. This means, in terms of direct costs to hospitals from 2006-
3
Workplace Safety and Insurance Board. 2012 Premium Rates Manual. Accessed Nov 21, 2012.
http://www.wsib.on.ca/files/Content/PremiumRatesManual2012PremiumRatesManual/2012_premiumRatesMan
ual.pdf
4
Workplace Safety and Insurance Board.(Nov. 6, 2012) Rate Profile, Rate Group 853 – Hospitals. Enterprise
Information Warehouse.
25
Appendix A
2011, only 52.8% of the $593.7 million in premiums paid have been utilized to pay for claims associated
with Rate Group 853 (hospitals).
Even when accounting for administrative costs, it can only be assumed a significant amount of the
premiums paid by hospitals during this time period was allocated towards other ends, such as paying
down the UFL and claims from other rate groups.
Premiums under WSIB Schedule 1 can be expected to rise to $175 million by 2020. This projection was
calculated by using the total premiums paid by Rate Group 853 of approximately $105.6 million in 2010
as a starting point, while taking into account actuarial assumptions of an annual premium increase of 2%
(as per the increases in 2011 and 2012, and the planned increase for 2013) and payrolls escalating by
2.5% per annum. Even as premium costs rise for hospitals, it appears only a small percentage of these
funds will go toward paying their claims. Furthermore, hospital budgets are tightly controlled with little
flexibility to absorb changes in either premiums or penalties. This needs to be taken into consideration
during the premium-setting process.
Looking at Figure 2, it is also interesting to note that while funds allocated to payment of the UFL
decreased from 2011 to 2012 (35% to 26%), the percentage allocated to administration rose to 29%
from 25%. The increase in overhead costs raises the question of how the WSIB calculates these
administrative fees, and whether or not the cost of the premium is determined first by the desired,
across-the-board rate increase, after which the allocation of funds is determined.
Considering the lack of transparency in rate-setting, and the seemingly arbitrary increase to overhead
expenses, it would appear hospital rates are not being determined based on performance and true cost
to the WSIB. They are, instead, determined by the overall financial position of the WSIB and the desire
to maintain and/or increase sources of income, at the expense of publically funded organizations.
Recommendation:
3. Establishment of a transparent premium-setting process, which takes into account the practicebased assessment.
Costs under Schedule 1
Ontario’s hospitals are public sector organizations, primarily funded through a single-payer system
managed for the province by the Ministry of Health and Long-Term Care (MOHLTC). All organizations in
Ontario are accounted for under the WSIA, which specifies types of organizations not requiring
coverage, and those sectors requiring coverage under Schedule 1 or 2. With over 198,000 Full-Time
Equivalent workers in the sector and over $118 Million in WSIB premiums paid in 20115, hospitals are
currently the largest public sector employer covered under Schedule 1 of the WSIA. All other large,
public sector employers are covered by the WSIB under Schedule 2, a pay-as-you-go insurance system.
Currently, the option to switch to Schedule 2 is not open to hospitals, but should be addressed as part of
5
Workplace Safety and Insurance Board. (November 6, 2012). Rate Profile, Rate Group 853 – Hospitals. Enterprise
Information Warehouse.
26
Appendix A
reforms to the WSIB. Actuarial analysis done for the OHA in 2011 indicates that for Ontario’s hospitals,
the cost of Schedule 1 premiums significantly exceeds the cost of providing benefits to injured workers.
Given Ontario’s current fiscal environment, the option transfer to schedule 2 would offer valuable and
much-needed cost savings to hospitals, which can be diverted to improving or adding health care
services.
Figure 3: Injuries Decrease and Costs Rise
Premium Setting
The total cost of WSIB coverage for hospitals (WSIB Rate Group 853) can be broken down into three
components:
(1) Premiums, which consists of an annual estimated premium, based on payroll; surcharges and
rebates, based on performance and participation in incentive programs (both mandatory and
non-mandatory); and penalties and fines for non-compliance.
(2) Administrative costs, including legislated obligations (Occupational Health and Safety Act, etc.).
(3) An Unfunded liability (UFL) amortization charge.
The UFL as a Component of Premiums
In his 2009 report, the Auditor General of Ontario stated: “the assets in the WSIB insurance fund are
substantially less than what is needed to satisfy the estimated lifetime costs of all claims currently in the
system—thus producing what is known as an ’unfunded liability’.”
27
Appendix A
Until 1998, the WSIB tracked the UFLs of the various Employer Classifications (Classes) separately. In
1998, a change to the WSIA consolidated all of the UFLs into a single collective. Before the consolidation,
Class H – Government and Related Services which includes Rate Group 853 (hospitals), accounted for 5%
of the total UFL. Comparatively, both the construction and manufacturing sectors accounted for over
30% each6. More recently, the WSIB provided information to the OHA indicating the UFL attributed to
Rate Group 853 stands at $400-430 million, or 3.3-3.6% of the total UFL, as of December 2010. This data
was provided by the WSIB when the OHA was investigating the possibility of conversion to Schedule 2
on behalf of its members. Given the proportionately small amount of the UFL, which is attributable to
hospitals, it is appropriate the amount they pay towards the UFL be decreased.
Additional data for Schedule 1 employers from 2005 to 2009 shows hospitals only account for 0.7% of
bad debt expenses. Comparatively, the construction sector accounts for 46.5%, the service sector for
17.3%, and the transportation sector for 14.5%7.
This is in contrast to the health and safety record of hospitals based on WSIB criteria (i.e., Lost Time
claim frequency and severity) has been constantly improving over the last several years at a rate of 5%
to 7%. As a result, there is a perception among hospitals, that they have been subsidizing poor
performance by other Rate Groups and paying a higher portion of the UFL.
Taken together, the high portion of premiums allocated to the UFL combined with the relatively small
share of the total UFL contribution and the low percentage of bad debt attributed to hospitals, leads to
the conclusion hospitals are paying for part of the UFL attributed to organizations within other rate
groups and sectors. Reflecting on future costs for hospitals, it can be assumed the WSIB because of its
approximately $14 billion8 UFL, will continue to increase premium rates over the next few years,
possibly at a rate greater than the current 2.5% average per year.
Recommendation:
4. The WSIB should consider the potential for organizations to pay off their share of the UFL
individually and immediately be provided with a lower insurance premium to reflect the fact
amortization costs are no longer being paid.
6
Workplace Safety and Insurance Board (January 2011). Funding January 2011[PowerPoint slides]. Retrieved from
http://www.wsib.on.ca/files/Content/FundingReviewFundingReview/2011FundingReview.pdf
7
Ibid.
8
The estimated amount of the WSIB’s UFL has recently been amended to $16 Billion by the WSIB’s Funding Review
led by Professor Harry Arthurs.
28
Appendix A
Other Hospital Concerns and Recommendations
The OHA has included three additional concerns not explicitly included in the scope of this consultation,
but which the OHA felt would result in large-scale improvements.
Amend the “Locked-in Clause”, Section 44 of the WSIA
This section of the WSIA is the main contributing factor in the growth of the UFL. An injured worker with
a persistent claim is addressed in part by the Permanent Disability Policy. Once an injured worker has
been assessed as permanently disabled under this policy, further review of the person’s medical
condition is deemed unnecessary. However, if the injured worker’s condition has the potential to
improve, or they have some ability to work, then continued or periodic review by the WSIB is not only
reasonable, but prudent.
Typically, public service unions are not in favor of the repeal of section 44(2) as they believe it will result
in the harassment of the worker and will disadvantage the injured workers without holding the
employer accountable for the injury. But this is a misconception. As stated by the Meredith principles,
the purpose of workers’ compensation is to provide a no-fault insurance system to compensate injured
workers. The goal of the WSIB is to return the worker to their pre-injury condition and job when
possible. With the current legislation, situations occur where an injured worker may be “locked-in” to
WSIB benefits without further review and then take on additional employment, often earning
significantly more than their pre-injury wage.
Ongoing payments made by the WSIB in such cases may no longer be warranted, but without ongoing
review, such cases cannot be appropriately identified and addressed. In turn, these continued payments
contribute to the ever-increasing UFL.
Example – a laboratory worker of relatively short-term tenure sustained a Cumulative Trauma Disorder
(CTD) of the wrist. After reaching Maximum Medical Recovery, as defined by the WSIB, and being given
permanent restrictions, the hospital employer attempted to permanently accommodate the worker into
a physically light job. The WSIB deemed the work as unsuitable and the worker refused Labour Market
Reentry support, so the WSIB paid the worker benefits amounting to the difference between the
anticipated earning capacity in a new job, and what the worker was earning at the hospital. Over the
next couple of years, the hospital learned the worker was working as a teller in a bank and later, working
in a job performing phlebotomy, both jobs clearly outside of the permanent restrictions the worker was
given.
More recently, the hospital received a call from the worker indicating she now wants to come back to
work at to the hospital. Throughout this time period, the WSIB has continued to pay the worker a
weekly benefit despite the obvious evidence of improvement in her condition and earning capacity.
29
Appendix A
Recommendation:
5. The WSIB has suggested the repeal of S.44(2) of the WSIA, “No review after 72-month period, ”
and this change could result in a possible 10% reduction in premiums. However, although the
Minister of Labour proposed these amendments, prorogation of the Ontario Parliament at the
time of publication, has delayed this review from proceeding until further notice. The OHA
recommends that these amendments be passed at the earliest possibility.
Operational and Administrative Issues
Hospitals continue to report systemic issues with WSIB service delivery. While this first phase of the
WSIB redesign process is not intended to address these concerns, there is a direct impact on claim
duration, outcomes, and costs. For these reasons, concerns regarding customer services, including
adjudication and claims management decisions, should be addressed immediately. These issues are of
major concern because customer service personnel are the principle contact points for hospitals.
A significant number of OHA members have reported serious concerns and difficulty when trying to
communicate with the case managers, eligibility adjudicators, and specialist teams. Often, hospitals
Occupational Health and Safety (OHS) departments need to leave multiple voice mails and e-mails
before getting a response. The same frustration has been reported by injured workers attempting to
contact the WSIB seeking clarification regarding their benefits. In some cases, workers have reported
delayed communication for several weeks. This additional time off work increases costs to both the
employer and WSIB, and also impacts the worker’s return to work.
One hospital reported a claim submitted on September 17, 2012 which did not receive a denial letter
until November 15, 2012. Another claim submitted on December 1, 2011, did not receive a definitive
answer until February 3, 2012. A lapse of two months should not be an acceptable time frame for
receiving a response.
There is inconsistency in adjudication of claims. An important observation has been that case managers
rarely (if ever) consider previous Workplace Safety and Insurance Act Tribunal (WSIAT) appeals
decisions, thus perpetuating the same decision errors. Anecdotal evidence from one employer included
a WSIB case manager explicitly saying their decision would contradict Operational Policy; despite this,
they were not going to change it. The employer did not want to give further details for fear of problems
when working with this case manager again.
Some WSIB case managers are inexperienced, and often, employers have no choice but to take matters
into their own hands by turning to external Independent Medical Examinations (IME) and Functional
Ability Evaluations (FAE) to resolve claims which are complex and often laden with discrepancies. This
inexperience and the lack of communication between eligibility adjudicators, case managers, return- towork specialists, and at times WSIB nurses, becomes apparent when decisions are made without
objective clinical findings.
30
Appendix A
Hospitals have also reported the need to repeatedly escalate issues beyond frontline case managers to
their managers, and in some cases, to the director level, in order to resolve issues. This process is time
consuming and costly, and increases the level of frustration for both the hospital and the injured
worker.
One final concern raised by hospital is e-adjudication. Anecdotal evidence indicates the computer
system is accepting and processing claims submitted by workers and physicians without supporting
medical evidence, further investigation, or confirmation of the restrictions preventing the worker from
returning to work. As a result, claims are being accepted without sufficient information and/or medical
support.
These customer service related issues are serious in nature, not only from a client satisfaction
perspective, but due to their impact on claim duration, cost, and outcomes, which in turn, impact
hospital operations, utilization and finances. The communication gaps between parties, both internally
at the WSIB and externally with customers, must be remedied immediately.
Recommendation:
6. The OHA recommends an internal policy and procedure review, appropriate training, and
continued performance audits to ensure consistent adjudication practices, improved the quality
of customer services and communications.
Cost of Care and Drugs
Hospitals raised concerns about WSIB health care costs as compared to the cost of care under the
provincial health plan (OHIP). Hospitals are well aware of the fees paid for care under the OHIP fee
schedule and drugs under various drug plans. The OHA does not believe that there is any justification for
paying higher fees for WSIB cases that require identical procedures or medications provided under
OHIP.
Example 1: Medical costs with the WSIB tend to be more extensive and costly, with timelines for
recovery exceeding most private insurance carriers. The role of the WSIB nurse has been problematic in
certain cases because of a lack of review and monitoring of these claims. Strain claims with 12-week
programs have been extended without physical findings, medications have been prescribed, and
dependency issues have arisen.
In a similar vein, the WSIB’s Program of Care has enabled care providers to attain monies for at least 12
weeks for a minor injury such as a strain or contusion, which would otherwise be questioned by a
private insurer.
Example 2: In some areas, the WSIB uses single-sourcing to acquire the services of specialty clinics such
as for psychiatric assessments. This is not cost-effective or considered best practice. Other providers are
given full range of diagnostic assessments with no monitoring unless requested by the employer (i.e.
Functional Restoration Programs (FRP) or work hardening programs). These outsourced FRP programs
tend to be extremely lengthy and recovery is seldom achieved. This is akin to the Labour Market Reentry (LMR) program, which has now been removed due to the poor outcomes.
31
Appendix A
In most cases, it is not possible to directly compare WSIB health care fees and the OHIP fee schedule,
but some simple examples can demonstrate the large gap between the fee schedules. One possible
solution as part of this review is to enable closer collaboration between hospitals and the WSIB, to allow
hospitals to provide diagnostic, treatment, and pharmacy services. This is an area, which will need
further exploration. However, we believe such a system could offer efficiencies and cost savings for
both the WSIB and Ontario hospitals.
Figure 4: Comparison Costs between WSIB Fee Schedule and OHIP Fee Schedule
Procedure
MRI
General Surgical Consult
WSIB Fee Schedule
OHIP Fee Schedule
$875.00 per diem
$73.50 for most routine exams
$214.01
$90.30
Laboratory Services, e.g.,
serum Lead levels
Same as OHIP fee schedule or
the agreed rate
Diagnostic Radiology
An initial Emergency Room fee of
$95.83 includes diagnostic
radiology (x-rays) if required.
Additional follow up x-ray fees
can be billed to the WSIB at the
OHIP rate or the agreed rate.
$40.00/test
OHIP fees depends on the
procedure, e.g., X-ray of broken
lower leg is between $16.05 and
$24.66 depending on the view.
Recommendation:
7. The OHA recommends a review of WSIB processes and costs with respect to medical services
providers and drugs administered, as well as related WSIB programs, to ensure these are
transparent and aligned with industry standards.
Conclusion
The Ontario Hospital Association represents the interests of 149 hospitals in Ontario, with over 198,000
employees. In order to ensure that this document accurately reflects the opinions of a broad range of
key decision makers in the sector, we solicited input from health and safety professionals, occupational
health professionals and Chief Human Resource Officers. The recommendations in this report were
endorsed by our members.
Recommendations:
1. The WSIB adopt a prospective experience rating plan similar to other types of health benefits
programs.
32
Appendix A
2. The OHA recommends combining a Prospective Experience Rating System and Prospective
Experience Rating Plan to establish a better workers’ compensation plan.
3. Establishment of a transparent premium-setting process, which takes into account the practicebased assessment.
4. The WSIB should consider the potential for organizations to pay off their share of the UFL
individually and immediately be provided with a lower insurance premium to reflect the fact
that amortization costs are no longer being paid.
5. The WSIB has suggested the repeal of S.44(2) of the WSIA, “No review after 72-month period, ”
and this change could result in a possible 10% reduction in premiums. However, although the
Minister of Labour proposed these amendments, prorogation of the Ontario Parliament at the
time of publication, has delayed this review from proceeding until further notice. The OHA
recommends that these amendments be passed at the earliest possibility.
6. The OHA recommends an internal policy and procedure review, appropriate training, and
continued performance audits to ensure consistent adjudication practices, improved the quality
of customer services and communications.
7. The OHA recommends a review of WSIB processes and costs with respect to medical services
providers and drugs administered, as well as related WSIB programs, to ensure these are
transparent and aligned with industry standards.
We appreciate the opportunity to present these proposals to Mr. Douglas Stanley for the Rate
Framework Consultation. Once again, we would like to emphasize hospitals’ ongoing commitment to
the principles of excellence in workplace health and safety. We believe the WSIB should offer incentives
to further strengthen this commitment, and also look to improved processes to ensure fairness for and
among hospitals. These efforts should be framed by the goal of achieving cost savings for hospitals,
while building on progress made within the system for the benefit of both employees and their
organizations.
Further consultation or questions regarding this document please do not hesitate to contact Tim Savage
at [email protected].
33
Appendix A
References
Occupational Disease Advisory Panel (ODAP) (2005) Background
Campbell, A, (2006) Spring of Fear, Volume 1, Executive Summary, The SARS Commission, Queen’s
Publisher for Ontario, Toronto, ON
Deonandan, R., Al-Sulaiti, G., Gajaria, A., & Suh, K. N. (2012) Factors associated with staff and physician influenza
immunization at a children’s hospital in Ontario, Canada. International Journal of General Medicine, 5, pp. 719–724.
Gritziotis, G. (2012) Chief Prevention Officer and Bill 160 Conference, October 29, 2012, Toronto, ON,
Ontario Hospital Association
Kelloway, E. K., & Barling, J. (2011) Job characteristics, role stress and mental health, Journal of
Occupational Psychology, 64(4), 291-304
Laschinger, H. K. S., and Grau, A. L. (2011) The influence of personal dispositional factors and
organizational resources on workplace violence, burnout, and health outcomes in new graduate nurses:
A cross-sectional study, International Journal of Nursing Studies, 49(3), pp. 282-291
Memorandum on Occupational Disease Issues, Chair’s Response to ODAP 2004 Public Consultation, Final
Report of the Chair of the Occupational Disease Advisory Panel, Brock Smith, Workplace Safety Insurance
Board, Toronto, ON.
Nichol, K., Kudla, I., Manno, M., McCaskell, L., Sikorski, J., & Holness, D. L. (2009) Form and function of
joint health and safety committees in Ontario acute care hospitals, Healthcare Quarterly, 12(2), 86-93
Quach, S., Pereira,A., Hamid, J.S., Crowe, L, Heidebrecht, C. L., Kwong, J. C., Guay, M., Crowcroft, N. S.,
McGeer, A., Chambers, L. W., Quan, S. D., and Bettinger, J. A. Measuring influenza immunization
coverage among health care workers in acute care hospitals and continuing care organizations in
Canada, American Journal of Infection Control, [In Press]
Quilley, A. D. (2012) The problem with zero, Canadian Occupational Health and Safety,
October/November 2012, p. 14.
Robson, L. S., Stephenson, C. M., Schulte, P. A., Amick III, B. C., Irvin, E. L., Eggerth, D. E., ... & Grubb, P. L.
(2012). A systematic review of the effectiveness of occupational health and safety training, Scandinavian
Journal of Work, Environment & Health, 38(3), 193-208
Stringer, B., & Haines, T. (2011) Ongoing use of conventional devices and safety device activation rates
in hospitals in Ontario, Canada, Journal of Occupational and Environmental Hygiene, 8(3), 154-160
Tompa, E., Dolinschi, R., de Oliveira, C., & Irvin, E. (2009) A systematic review of occupational health and
safety interventions with economic analyses, Journal of Occupational and Environmental Medicine,
51(9), 1004
34
Appendix A
Tompa, E., Hogg-Johnson, S., Amick, B. C., Wang, Y., Shen, E., Mustard, C., and Robson, L. (2012)
Financial incentives in workers’ compensation: an analysis of experience-rating programme in Ontario,
Canada, Policy and Practice in Health and Safety, 10.1, pp. 117-137.
Tompa, E., Clune, L. A., Cam Mustard C., Dewal, C. S., Amick III, B. C., and Sarnocinska-Hart, A. (2012)
OHS economic evaluation resource needs for the health care sector in Ontario Project #10022, Final
Report, WSIB Research Advisory Council, Toronto, ON, Institute for Work & Health
Tullar, J. M., Brewer, S., Amick, B. C., Irvin, E., Mahood, Q., Pompeii, L. A., ... & Evanoff, B. (2010)
Occupational safety and health interventions to reduce musculoskeletal symptoms in the health care
sector, Journal of occupational rehabilitation, 20(2), 199-219
Workplace Safety and Insurance Board (WSIB) (2012) Consultation Secretariat, [Online] Workplace
Safety and Insurance Board Toronto, ON available from
http://www.wsib.on.ca/en/community/WSIB/230/ArticleDetail/24338?vgnextoid=6bb397d3e9067310V
gnVCM100000469c710aRCRD (Accessed 09 November 2012)
Workplace Safety and Insurance Board (WSIB) (2011) Funding January 2011, Retrieved from
http://www.wsib.on.ca/files/Content/FundingReviewFundingReview/2011FundingReview.pdf
35

OHA Response to the WSIB Rate Framework Consultation

Transcription

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