Individual Retrospective Rating
For many employers who do not qualify for group rating programs, or just don’t see much in savings from group participation, individual retrospective rating is the BWC program that may be most appropriate. However, for the program to provide the financial benefit that is sought, both the employer and their TPA partner must commit to an aggressive, proactive approach in managing all claims occurring during any retro period.
Under this plan, the employer agrees to assume a portion of the risk in return for a possible reduction in premiums. Initially, participating employers are provided discounts in their premium levels. In return, those companies agree to assume reimbursement responsibility to the BWC for claims occurring during that year for a 10 year period.
The premise is simple enough - the greater the assumed risk, the greater the potential premium reduction. However, without an aggressive and experienced TPA as your partner, there is quite a bit of risk involved with this program. In a worst case scenario, employers with high incurred losses in a given retrospective rating year could see their estimated initial premiums doubled.
Is Retrospective Rating Right for You?
Employers considering individual retrospective rating need to take an objective look at the following:
- Their internal safety/injury prevention program
- The abilities of their TPA and/or individual claims representative at that TPA
- Their willingness to commit financial resources to assist in program management. This commitment should include set asides for Independent Medical Examinations (IME’s), medical reviews, attorney representation at Industrial Commission hearings and surveillance as needed.
Successful retro program managers budget for all of these items and use the additional cash flow generated initially to help fund them.
Companies with high injury rates and/or little ability to make an upfront investment in committing to these areas are probably NOT good candidates for retrospective rating.