Third Quarter & 2019 Rate Presentation Outline Presentation - - PowerPoint PPT Presentation

Third Quarter & 2019 Rate Presentation

Background Report of the Task Force on WorkSafeNB Financial impact of the Task Force recommendations Current financial situation

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Outline

Drivers – what has and has not changed?

Presentation Agenda

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Background

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• 1. No fault compensation
• 2. Security of benefits
• 3. Collective liability
• 4. Independent administration
• 5. Exclusive jurisdiction

Founded on historic compromise: workers receive benefits and medical treatment, employers pay a premium but can’t be sued when workplace injury occurs.

WORKERS’ COMPENSATION IS FOUNDED ON THE MEREDITH PRINCIPLES

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WorkSafeNB is a Crown corporation reporting to the Minister of Labour, Employment and Population Growth. We are committed to preventing workplace injuries and illness through education and enforcement. We administer no-fault workplace accident and disability insurance for employers and their workers, funded solely through employer assessments.

WHO WE ARE

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Employer premiums cover costs related to:

• Occupational health and safety requirements (prevention, inspection and

compliance)

• Medical care and rehabilitation for injured workers
• Prescriptive benefits outlined in legislation(ex. wage loss compensation

benefits for injured workers)

• Discretionary benefits outlined in policy
• WorkSafeNB administration costs
• Other legislative requirements (ex. Workers’ Compensation Appeals

Tribunal, worker and employer advocates)

FULLY FUNDED BY EMPLOYERS

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APPLICABLE LEGISLATION

WO RKPL AC E HEAL T H SAFET Y C O MPENSAT IO N C O MMISSIO N & WO RKERS’ C O MPENSAT IO N APPEAL S T RIBUNAL AC T

Outlines authority and governance for both WorkSafeNB and the WCAT

O C C UPAT IO NAL HEAL T H AND SAFET Y (O HS) AC T

Act and regulations concerned with the health and safety of New Brunswickers at work

WO RKERS’ C O MPENSAT IO N (WC ) AC T

Act outlining wage replacement and medical benefits to New Brunswickers injured in the course of employment

FIREFIG HT ERS’ C O MPENSAT IO N (FC ) AC T

Act outlining wage replacement and medical benefits to New Brunswick firefighters injured in the course of employment

IDE A

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L ar gest Sector s

WHO WE SERVE

15,000 registered employers 30,000 workplaces

≈ 80% of employers have fewer than10 employees ≈ 92% of employers have fewer than 20 employees

300,000 workers

≈ 5,500 claims per year where worker misses time from work due to workplace injury ≈ 5,600 claims per year where medical treatment required for workplace injury but no time is missed from work due to workplace injury

Construction Retail Health Care

E mployer T ype by Size (payr

• ll)

L ar ge

3.5%

Medi um

15.6%

Small

80.9% >$2.5M >$0.5M

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ASSE SSE D E MPL OYE RS

• Mostly private sector
• Employer assessment rates are

determined by the in-year claim costs plus all estimated future costs (liabilities) related to injuries that

• ccurred that year
• Assessment rates are calculated per

$100 of employer payroll

• Rates vary as annual costs and

investment returns fluctuate

• Funds collected for future liabilities

are invested in an “Accident Fund”

ASSESSED VS. SELF-INSURED EMPLOYERS

SE L F

• INSURE

D E MPL OYE RS

• Most provincial and federal public

sector employers

• Pay-as-you-go
• Do not contribute to the Accident

Investment Fund

• Less focus on education and

prevention services that could be provided by WorkSafeNB

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Current Financial Situation

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5

ASSESSMENT RATE HISTORY

$2.04 $2.01 $2.12 $2.02 $1.70 $1.44 $1.21 $1.11 $1.11 $1.48 $1.70 $2.92

$0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

• July AGM – Announced 2019 range of $2.69 - $2.95 per $100 of payroll

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5

2019 ASSESSMENT RATE COMPONENTS

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2019 Assessment Rate Components New Accident Costs

$1.81

Funding Required to Return Accident Fund to 110% ( $380 million payable over 8 Years)

$0.52

Administration*

$0.52

Reorganization & IT Systems Transformation

$0.08

Average Assessment Rate

$2.92

IMPACT OF 2019 ASSESSMENT RATE INCREASE ON EMPLOYERS

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• 7,000 small employers will pay an average of $700 more than in 2018
• 6,500 medium size employers will pay an average of $5,000 more than in 2018
• 1,100 large size employers will pay an average of $45,000 more than in 2018
• 120 largest employers will pay an average of $327,000 more than in 2018
• Large and largest employers will pay 71% of the increase - 1,220 employers will

pay about $90 million more than in 2018

KEY FINANCIAL METRICS

($ MILLIONS)

2014 2015 2016 2017 2018 F

• r

e c ast Asse ts

$1,521 $1,520 $1,594 $1,709 $1,728

L iabilitie s

$1,108 $1,234 $1,422 $1,671 $1,898

Ne t Inc ome $7

• $126
• $114
• $134
• $207 to -$237

F unding Position $413 $287 $172 $37

• $170 to-$200

F unding L e ve l 137% 123% 112% 102% 88% - 91%

From 2014 to end of 2018:

• Liabilities increased by $800M
• Funding position decreased by about $600M
• Assets increased by roughly $200M due to strong investment

performance

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139 144 146 146 149 150 158 169 187 208 221 37 13 10

• 13

14 38 104 127 191 178 153 156 168 162 139 116 99 94 97 135 159

• 162

130 93 25 111 176 104 55 105 132 34

• 200
• 100

100 200 300 400 500 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ Millions Expenses paid in year Expected change in future payments Assessment revenue Investment revenue

projected

177

• 9

156 157 285 164 250 149 187 132 262 400 202 314 149 273 203 196 292 268 193 399

Over 4 years, expenses expected to exceed income by $573 million Over 7 years, income exceeded expenses by $338 million

BENEFIT COSTS AND REVENUE

ASSESSED EMPLOYERS

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32 30 31 32 32 36 43 44 55 60 69 14 5 1 (4) (7) 6 6 22 61 62 51 32 30 31 32 32 36 43 44 55 60 69 14 5 1

• 4
• 7

6 6 22 61 62 51

(30) (10) 10 30 50 70 90 110 130 150 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ Millions Expenses paid in year Expected change in future payments Paid Increase in liability

projected

35 46 32 27 25 42 49 66 115 123 120

Estimated liability increase of $196M based on WorkSafeNB’s discount rate. Liabilities will be higher when valued at lower discount rate used by GNB for its financial statements.

Legislative change April 1, 2015

BENEFIT COSTS AND REVENUE

SELF-INSURED EMPLOYERS

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In 1992, WorkSafeNB was underfunded with a funding level of 77%. To return to full funding, significant measures included: 1. Reduction in benefit (Ex. loss of earning coverage as a % of wages for workers was reduced from 90% to 80% for the first 39 weeks then 85% thereafter) 2. The three-day unpaid waiting period was introduced 3. Steep surcharges were added to already high employer premiums Ontario, Nova Scotia and Newfoundland have all faced difficult decisions in last 15 years due to underfunding.

UNDERFUNDED LIABILITY

WORKERS’ COMPENSATION BOARDS HAVE BEEN HERE BEFORE

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Drivers – what has and has not changed?

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WHAT HAS NOT CHANGED?

• No major transformation in economy
• Essentially similar group of employers
• Essentially similar profile of workers
• Investment income generated gains of $309 million since 2008

(exceeding target)

• Administration expenses excluding OHS comparable to other

Worker Compensation Boards of similar size in Canada

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LOST-TIME CLAIMS ASSESSED EMPLOYERS

500 1000 1500 2000 2500

Spr ain, str ain and pain Br uise s, Contusions Se ve r e and E xte r nal

47% dr

• p sinc e 2002,

unc ha ng e d sinc e 2013 32% dr

• p sinc e 2002,

unc ha ng e d sinc e 2011 F a ir ly ste a dy in most ye a r s, mode st r e c e nt inc r e a se s

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IF EMPLOYERS ARE NOT ANY LESS SAFE, WHAT HAS HAPPENED?

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• NB system outcomes very comparable to rest of Canada from 2000 to about 2015
• In 2015, legislation was implemented that established an independent, external Appeals

Tribunal , consistent with other provinces, essential for fairness, sober second thought

• The legislation granted the authority to the Appeals Tribunal to overturn Board policy

and bind WorkSafeNB in all matters. This is unique to only NB and Quebec and has resulted in unintended consequences

• The Workers’ Compensation Appeals Tribunal does not have visibility on the

substantial collective change resulting from an individual decision and its binding effect on WorkSafeNB policies

• Claiming patterns and associated costs
• Effective broadening of the Wo rke rs’ Co mpe nsatio n Ac t to cover social health

costs

PRIMARY ISSUES DRIVING COSTS HIGHER #1 COST DRIVER: LONGER CLAIM DURATION

• Duration – length of time that benefits are paid
• Unable to cease benefits
• More long-term disability

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DURATION CONTINUES TO INCREASE

45% 60%

0% 10% 20% 30% 40% 50% 60% 70%

% of workers off more than 26 weeks

2013 2018

12% 18%

0% 5% 10% 15% 20%

% of workers off more than 2 years

2013 2018

• Each long-term disability claim costs more than $150k

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50.0% 55.0% 60.0% 65.0% 70.0% 75.0% 80.0% 85.0% 90.0% 95.0% 100.0%

NB PE NL QC NS SK BC AB MB ON

2012 2016

RT W Pe r for ma nc e

Source: Association of Workers’ Compensation Boards of Canada

RETURN TO WORK (RTW) OUTCOMES AT SIX MONTHS

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DURATION OF NEW LOST-TIME CLAIMS LASTING MORE THAN 30 DAYS

• Significant increase in days lost over all age groups for sprains, strains, and pain type claims.
• Average increase of 60 days or 50% for sprains, strains and pain vs 12 days for bruises, cuts and

fractures or 10%

91 132 125 135 131 121 125 149 185 180 212 190 181 137

50 100 150 200 250 younger than 35 35 to 44 45 to 54 55 to 59 60 and older Average 2012 2016 Average bruises, cuts & fractures

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Days Spr a ins, str a ins, a nd pa in

NUMBER OF LOST-TIME CLAIMS

MORE THAN 30 DAYS

191 235 348 386 180 242 284 400 464 127

100 200 300 400 500

Very small employers Small employers Medium employers Large employers Very large employers

2012 2016

• Very large employers experienced a 29% improvement
• Very small, small, medium and large employers experienced higher claim volumes

by 27%, 21%, 15% and 20% respectively

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Days

INCREASE IN PAYMENTS FOR LOST TIME CLAIMS LASTING MORE THAN 30 DAYS

2012 VS 2016

60% 56% 37% 56% 26%

0% 10% 20% 30% 40% 50% 60% 70% Ve r y Small E mploye r s Small E mploye r s Me dium E mploye r s L ar ge E mploye r s Ve r y L ar ge E mploye r s

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WHY ARE CLAIMS LASTING LONGER?

Let’s explore some examples

Polic y Be fore Se pte mbe r 2015 Polic y Afte r Aug ust 2015 Loss of earnings ceases (worker returns to work) Loss of earnings ceases (worker returns to work) Worker turns 65 Worker turns 65 Another illness (not work related) is primary reason for off work Retirement removing themselves from workforce Relocating outside of province removing themselves from the workforce Not fully participating in rehabilitation

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IMPACT OF CONDITIONS UNRELATED TO THE WORKPLACE INJURY

• Employee injured and receiving wage loss compensation.
• During rehabilitation, injured worker is diagnosed with a non-work related illness

such as cancer.

• Employee is rehabilitated but cancer treatment becomes the primary reason

the employee can not return to work.

• With the pre September 2015 policy being struck down a s inc onsiste nt with

le g isla tion, wage loss compensation now continues to age 65 or the Loss Of

Earnings ceases to exist (employee returns to work).

• Costs a re distribute d to a ll e mploye rs.

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INJURED WORKER RETIRES

1. Employee injured and is receiving 85% of net income from WorkSafeNB. 2. Employee decides to retire before age 65 and removes him/herself from the workforce. 3. With the policy being struck down as inconsistent with legislation, compensation now continues to age 65 – in

addition to any pe nsion be ne fit (ex. 150% income of pre-

accident employment, no incentive to return to work).

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PRIMARY ISSUES DRIVING COSTS HIGHER #2 COST DRIVER: HEARING LOSS CLAIMS

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HEARING LOSS

LATEST PROJECTIONS

500 1000 1500 2000 2500 3000

Number of Claims

Creation Year

Projections at Aug 31 2018 by Morneau Sheppell Actual 32

HEARING LOSS CLAIMS ALSO DRIVING COSTS

1. Hearing claim liabilities increased $161M from 2015 to 2017 2. 1,793 new claims at age 70+ in the past three years 3. Over $1M in payments every month on hearing loss payments 4. Claiming rate 3 – 4x othe r c ompe nsa tion boa rds in Canada 5. As of 2017 YE there were over 10,000 he a ring loss c la ims already accepted. 6. Revised projections are that there would be about 26,000 hearing loss claims in 10 years or about 50% of NB Popula tion with hearing loss

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FUTURE CHALLENGES

• Other factors to consider:
• No margin left in accident fund
• Possibility of a for market correction sooner rather

than later

• Potential for introduction of new conditions such as

work-related mental illness

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Report of the Task Force on WorkSafeNB

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TASK FORCE RECOMMENDATIONS

• WorkSafeNB accepts all 28 recommendations from the

Ministerial Task Force

• Recommendations were compiled from equal

representation of employers and workers following robust consultation

• These recommendations will result in improvements to worker

benefits and occupational health and safety along with system sustainability measures

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#

Addr e sse d T hr

• ugh L

e gislation

4

Repeal certain sections of Act governing WCAT

• 5. a

to g

• Restrict WCAT decisions to application of WCA, regulations and policies from facts of the case
• No new evidence allowed, or if available, send to WorkSafeNB for review before hearing appeal
• WCAT cannot alter Board policies nor have jurisdiction to alter, reverse or amend any policies. Case specific decisions only.
• WCAT can postpone hearing and refer legislative and policy issues back to the Board for consideration
• WCAT can confirm, alter or reverse a Hearing Officer decision

11

Proactive role in return to work efforts

12

Functional ability forms similar to ON

13

Physicians must complete physical ability form

14

Work with New Brunswick Medical Society (NBMS) to adopt practices pertaining to opioid addictions

15

Continue efforts pertaining to work-related mental health issues, focusing on functional abilities

17

Board has exclusive jurisdiction on the establishment and enforcement of policies

18

Fair and reasonable income relevant with apportionment of other revenue sources and streamlined application to apply for benefits from other sources

19

Board has authority to determine additional benefits other than prescribed income replacement

20

Clear definitions of pre-existing and intervening conditions and applicable benefits

21

Board has final authority on benefit entitlement

28

Repeal 3-day waiting period

TASK FORCE RECOMMENDATIONS

37

TASK FORCE RECOMMENDATIONS

# Addr e sse d T hr

• ugh Boar

d Polic y De pe nde nt on L e gislative Change s Re tur ning Polic y De fe r e nc e to Boar d

1, 2

• Ensure variance in Accident Fund does not exceed 120% and surplus above 120% managed in transparent fair

manner. 3

• Provide meaningful information to stakeholders including reports on rate component, its impact and

management. 11, 12, 13, 14, 15, 16

• Return to work and rehabilitation improvements.

18, 19 Explicit legislation to ensure:

• Workers receive fair, reasonable and seamless income replacement and apportionment. The WC Act prescribes

the boundaries for financial benefits. How those benefits are calculated or offset by other revenue can impact perceptions of fairness.

• Define other benefit entitlements.

20 Explicit legislation to clarify:

• Definitions, entitlement and benefits related to pre-existing conditions and intervening personal conditions .

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TASK FORCE RECOMMENDATIONS

# Addr e sse d T hr

• ugh Me mor

andum Of Unde r standing

25, 26, 27

Explicit legislation to:

• Ensure relationship between WorkSafeNB and Government be transparent and respectful.
• Ensure mandate letters reflect unique nature of WorkSafeNB and its independence.
• Require a value for money audit every five years by the Auditor General.

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Task force recommendations will:

• Improve health and safety of NB workplaces
• Achieve balance between stakeholders such as elimination of the three-

day waiting period and level of costs charged to employers

• Restore system sustainability by providing exclusive jurisdiction and full

accountability for the workers’ compensation system to the WorkSafeNB Board

AREAS OF FOCUS MOVING FORWARD

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Be for e Apr il 1, 2015 Cur r e nt Afte r T ask F

• r

c e r e c omme ndations

WCAT Inte r nal body to Wor kSafe NB WCAT E xte r nal body to Wor kSafe NB WCAT E xte r nal body to Wor kSafe NB Wor kSafe NB Boar d e stablishe d polic y Wor kSafe NB boar d polic y author ity diminishe d Wor kSafe NB Boar d e stablishe s polic y Str uc tur e & powe r

• f WCAT

and Wor kSafe NB r e lationship did not align with r e st of Canada Str uc tur e & powe r

• f WCAT

and Wor kSafe NB r e lationship doe s not align with r e st of Canada Str uc tur e & powe r

• f WCAT

and Wor kSafe NB r e lationship will align with r e st

• f Canada

Wor kSafe NB boar d ability to we igh all infor mation be for e polic y c hange s inc luding c osting and impac t on asse ssme nt r ate s Wor kSafe NB boar d not able to we igh all infor mation be for e polic y c hange s inc luding c osting and impac t on asse ssme nt r ate s Wor kSafe NB boar d ability to we igh all infor mation be for e polic y c hange s inc luding c osting and impac t on asse ssme nt r ate s No inte r nal for mal r e vie w body be for e pr

• c e e ding to appe al

F

• r

mal inte r nal r e vie w body available to r e - e xamine some de c isions be for e pr

• c e e ding to appe al

E nhanc e d inte r nal r e vie w body to r e - e xamine all de c isions be for e pr

• c e e ding

to appe al Appe al T r ibunal de c isions had little influe nc e

• n Wor

kSafe NB polic y and pr ac tic e Appe al T r ibunal de c isions bind Wor kSafe NB in all matte r s be for e it Appe al T r ibunal make s r e c omme ndations to Wor kSafe NB whe n inc onsiste nc ie s in inte r pr e tation ar ise Appe als T r ibunal de c isions we r e applie d to the individual de c ision unde r appe al Appe als T r ibunal de c isions bind the Commission in all matte r s be for e it Appe als T r ibunal de c isions ar e applie d to

• nly the individual de c ision unde r

appe al

WORKSAFENB & WCAT RELATIONSHIP

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WorkSafeNB is committed to:

• Keeping people safe at work
• Continuously improve our care and support model
• Modernizing our technology and improving the client

experience

• Sustainability

AREAS OF FOCUS MOVING FORWARD

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Thank you Questions?

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