montana—state advisory forum—june 14, 2017 (pdf) - · pdf filenancy butler,...

© Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved.

MontanaJune 14, 2017

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Montana State Advisory Forum▪ Opening Remarks

▪ AIS Bill Donnell Video Excerpt

▪ Countrywide Workers Compensation System

▪ Montana Workers Compensation System and Filing Activity

▪ A Cautionary Tale: The Danger of Comparing Average Loss Costs Across States

▪ Countrywide and Montana Economic Outlook

▪ Nancy Butler, Montana State Auditor, Commissioner of Securities and Insurance

▪ Legislative Issues: Nationwide and Montana

▪ Emerging Issue: Air Ambulances and Workers Compensation

▪ Proposed Item Filings: B-1431 and B-1435

▪ Closing Remarks

2


AIS Presentation Video ExcerptBill DonnellNCCI President and CEO


CountrywideWorkers Compensation (WC) System


CountrywideWorkers Compensation System—

An Overview

5

The combined ratio continues to show favorable results

After five years of growth, premium is flat in the most recent year

Medical and indemnity severity are increasing modestly

Frequency declined again


WC Combined Ratio—Underwriting Gain Achieved

Private Carriers

p PreliminarySource: NAIC’s Annual Statement data

94 94

85

90

95

100

105

110

115

120

125

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Percent

Calendar Year

3% lower

6


WC Combined Ratio ComponentsPrivate Carriers


54 53

14 14

25 25

1 1

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Loss Ratio

Loss Adjustment Expense (LAE) Ratio

Underwriting Expense Ratio

Percent

Calendar Year

Dividends

7


WC Net Combined RatiosCalendar Year vs. Accident Year As Reported

Private Carriers

p PreliminarySource: NAIC’s Annual Statement dataAccident Year information is reported as of 12/31/2016Includes dividends to policyholders

94 9496

98

80

90

100

110

120

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p

Percent

Calendar Year

Accident Year

8


WC Net Written PremiumPrivate Carriers and State Funds

p PreliminarySource: NAIC’s Annual Statement data; includes state insurance fund data for the following states: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, and UTEach calendar year total for state funds includes all funds operating as a state fund in that year

37.8 39.7 40.1

47.845.5 45.5

0

10

20

30

40

50

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

$ Billions

Calendar Year

State Funds ($B)

Private Carriers ($B)

9


WC Approved Changes in BureauPremium Level

By Effective Year for NCCI States

p PreliminarySource: NAIC’s Annual Statement Statutory Page 14Bureau premium level changes reflect approved changes in advisory rates, loss costs, assigned risk rates, and rating values, as of 5/12/2017, relative to those previously approved in NCCI states onlyIN and NC are filed in cooperation with state rating bureaus

-2.5

-6.7

-10

-5

0

5

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17p

Percent

Calendar Year

10


WC Impact of Discounting on PremiumPrivate Carriers—NCCI States

p PreliminarySources: NAIC’s Annual Statement Statutory Page 14 and NCCI’s Financial Call data NCCI benchmark level does not include a profit and contingency provision or expense constantBased on data for all states where NCCI provides ratemaking services, excluding TX

2.60.5

-25

-15

-5

5

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Percent

Policy Year

11


WC Impact of Discounting on PremiumPrivate Carriers—NCCI States

p PreliminarySources: NAIC’s Annual Statement Statutory Page 14 and NCCI’s Financial Call data Dividend ratios are based on calendar year statisticsNCCI benchmark level does not include a profit and contingency provision or expense constantBased on data for all states where NCCI provides ratemaking services, excluding TX

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Policy Year

Rate/Loss Cost Departure

Schedule Rating

Dividends

12


WC Average Indemnity Claim SeverityPrivate Carriers and State Funds—NCCI States

p Preliminary based on data valued as of 12/31/2016Source: NCCI’s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015Values displayed reflect the methodology underlying the most recent rate/loss cost filingIncludes all states where NCCI provides ratemaking services; WV is excluded through 2007

$2

3.2

$2

3.9

+0.9%+3%

5

10

15

20

25

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Severity ($ Thousands)

Accident Year

13


WC Average Medical Lost-Time Claim SeverityPrivate Carriers and State Funds—NCCI States

p Preliminary based on data valued as of 12/31/2016Source: NCCI’s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015Values displayed reflect the methodology underlying the most recent rate/loss cost filingIncludes all states where NCCI provides ratemaking services; WV is excluded through 2007

$2

7.7

$2

9.1

-1.4%+5%

5

10

15

20

25

30

35

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Severity ($ Thousands)

Accident Year

14


WC Lost-Time Claim Frequency—Change in Lost-Time Claims per $1M Pure

PremiumPrivate Carriers and State Funds—NCCI States

2010 and 2011 adjusted primarily for significant changes in audit activityp Preliminary based on data valued as of 12/31/2016Source: NCCI’s Financial Call data, developed to ultimate, premium adjusted to current wage and voluntary pure premium level, excludes high-deductible policies; based on data through 12/31/2015Values displayed reflect the methodology underlying the most recent rate/loss cost filingIncludes all states where NCCI provides ratemaking services; WV is excluded through 2011

-4.6-4

-10

-5

0

5

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Percent

Accident Year

Average Annual Change: –3.6%(1995–2015)

15


Montana Workers Compensation System


Montana Workers Compensation System—An Overview

17

Slightly increasing

premium volume

Fairly stable combined ratios

Lost-time frequency

continues to decline

Average severity ticked up in 2014


Montana Workers CompensationPremium Volume

Direct Written Premium in $ Millions

370.4356.0

324.4

287.4 279.7 279.3 275.7 283.6 287.3 287.4

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p

18


Calendar Year


Impact of Discounting on Workers Compensation Premium in Montana

-41%

-33%

-22%

-18%-16%

-20%-22% -21% -20%

-21%-21%

-16% -15%-14%

-12%-13%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Policy Year

Dividends Schedule Rating Rate/Loss Cost Departure

19

Based on data through 12/31/2015Dividend ratios are based on calendar year statistics

Percent


Montana Accident Year Combined Ratios by Component

20

Sources: NCCI’s financial data and NAIC’s Annual Statement data

72% 66% 67% 61% 66%

39%

31% 32%30%

29%

2%

2%4%

4%7%

2011 2012 2013 2014 2015

Loss Ratio Expense Ratio Dividend Ratio

Accident Year

112%

100% 103%96%

102%


Montana Workers Compensation Lost-Time Claim Frequency

Lost-Time Claims

21

Based on data through 12/31/2015, developed to ultimate

-3.4%

2.4% 2.1%

-6.9%

4.3%

-4.7%

-1.1%

-5.8%-5.1%

1.1%

-15.2%

-4.0%

-2.3%

-7.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Cumulative Change of –38.2%(2000–2014)

PercentChange

Policy Year


$2

3.7

$2

2.5

$2

2.1

$1

7.4

$1

8.1

$1

8.1

$1

8.6

$1

8.8

$1

9.1

$1

6.8

$1

6.6

$2

1.1

$2

0.8

$2

0.6

$2

1.3

-5.1% -1.7%

-21.5% 4.4% -0.3% 3.0% 1.0% 1.9%

-12.1% -1.5%

27.0% -1.3% -0.7% 3.3%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Policy Year

Montana Average Indemnity Claim SeverityLost-Time Claim Severity in $ Thousands

22

Based on data through 12/31/2015, on-leveled and developed to ultimate

Cumulative Change of –10.1%(2000–2014)


$2

2.5

$2

3.4

$2

4.7

$2

1.4

$2

4.1

$2

5.7

$2

7.5

$2

9.7

$2

7.8

$3

0.0

$3

0.8

$3

8.4

$3

9.9

$3

9.9

$4

2.6

4.0%5.5%

-13.3%12.6%

6.6%6.9%

8.2%-6.3%

7.7% 2.6%

24.8%4.0% -0.1%

6.7%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Policy Year

Montana Average Medical Claim SeverityLost-Time Claim Severity in $ Thousands

23

Based on data through 12/31/2015, on-leveled and developed to ultimate

Cumulative Change of +89.4%(2000–2014)


-5.4%

-3.6%

-4.8%

-3.4%

-7.8%

7/1/2013 7/1/2014 7/1/2015 7/1/2016 7/1/2017

Montana Filing ActivityVoluntary Loss Cost Changes

24


MontanaJuly 1, 2017 Loss Cost Filing

25

Overall Loss Cost Level Change

–7.8%

Change in Experience

–6.2%

Change in Trend

–2.9%

Change in Benefits

+1.1%

Change in LAE

+0.1%


Montana July 1, 2017 Filing—Average Changes by Industry Group

26

Manufacturing –4.8%

Miscellaneous –8.4%

Office & Clerical –9.1%Contracting –8.3%

Overall Change –7.8%

Goods & Services –7.5%


MontanaCumulative Loss Cost Level Change

since 7/08

27

-2.2

-8.5

-32.9

-32.9

-36.6-38.8

-41.8-43.8

-48.1

-60

-50

-40

-30

-20

-10

0

7/09 7/10 7/11 7/12 7/13 7/14 7/15 7/16 7/17

Cu

mu

lati

ve L

oss C

ost

Level C

han

ge (

%)

Effective Date


Current NCCI Voluntary Market Loss Cost/Rate Level Changes

Excludes Law-Only Filings

Reflects the most recent experience filing in each jurisdiction Due to the timing of the individual loss cost/rate filings, the figures shown may include changes from prior filing seasons

28

Percent

-14.7

-14.4

-12.9

-12.8

-12.8

-12.1

-10.9

-10.7

-10.2

-9.9

-9.8

-9.1

-9.0

-9.0

-8.8

-8.4

-8.4

-7.9

-7.8

-7.8 -6

.6

-6.1

-5.5

-5.0

-4.7

-4.7

-4.5

-4.3

-4.0

-3.7

-3.7 -2

.4

-1.6

-1.2

-1.0

-0.5

1.3 2

.5

-25

-20

-15

-10

-5

0

5

10

15

WVNC IL AZ TN AL CT NV OKMD LA IN NHNM UT AR KS VT MT TX OR MS VA KY FL IA RI ME NE DCMOCO AK ID SD GA HI SC

Approved Pending


Current Voluntary Market Rates/Loss CostsWestern NAIC Zone

Hawaii 1/1/17 +1.3%

Idaho 1/1/17 –1.2%

Alaska 1/1/17 –1.6%

Colorado 1/1/17 –2.4%

Oregon 1/1/17 –6.6%

Montana 7/1/17 –7.8%

Texas 7/1/17 –7.8%

Utah 12/1/16 –8.8%

New Mexico 1/1/17 –9.0%

Nevada 3/1/17 –10.7%

Arizona 1/1/17 –12.8%

29


2.04

1.491.65

1.38

1.04

1.401.25

0.97

1.34 1.41

MT CO ID NE NV OR SD UT Region Country

Current Average Voluntary Pure Loss Costs Using Montana Payroll Distribution

Pure Loss Cost—All Classes

30

Based on the latest NCCI approved rates and loss costs in the various states


A Cautionary Tale:The Danger of Comparing Average Loss Costs Across States


Countrywide and Montana Economic Outlook


National Economic Highlights and Their Impacton Workers Compensation

33

National Economic IndicatorPotential Impact on the Workers Compensation Market

Private employment growth is expected to continue to slow

Premium increases from higher payroll and higher expected claim frequency for new workers

Wage growth is poised to accelerate Upward pressure on payroll and premium as well as indemnity severity

Medical inflation is forecast to slow slightly but still be above 3%

Increased pressure on medical costs per claim

Interest rates are expected to increase Higher interest rates mean better returns on invested funds


Change in Private EmploymentPrivate Employment Growth Is Above Average

Private Nonfarm Employment, seasonally adjustedFrequency of observation: monthly; latest available data point: March 2017; percentage change for the 12 months ending each DecemberSource: US Bureau of Labor Statistics (BLS), www.bls.gov

2.7

1.4

2.32.4

2.1

1.7

0

1

2

3

Mar 2015 Mar 2016 Mar 2017

Montana United States

Percent

34


Change in Average Weekly WagesWage Growth Is Just Below the Rest of the Nation

Wages are for Total Private IndustryFrequency of observation: annual; latest available data point: 2015Source: US Bureau of Labor Statistics (BLS), www.bls.gov

1.4

3.7

3.0

1.1

3.1 3.1

0

1

2

3

4

2013 2014 2015


Percent

35


Headline Unemployment RateThe Unemployment Rate Is Below Average

Headline Unemployment Rate, seasonally adjusted Frequency of observation: monthly; latest available data point: March 2017Source: US Bureau of Labor Statistics (BLS), www.bls.gov

4.1 4.23.8

5.45.0

4.5

0

2

4

6

8

Mar 2015 Mar 2016 Mar 2017


Percent

36


Change in Employment by IndustryEmployment in Most Industries Has Increased in the Past 12 Months

37

Percentage change for the latest 12 months as of March 2017Current Employment Statistics Survey, seasonally adjusted; frequency of observation: monthlySource: US Bureau of Labor Statistics (BLS), www.bls.gov

MT +3.3 75,800 16 +2,400US +2.3

MT +6.6 28,900 6 +1,800US +2.6

MT +3.2 42,100 9 +1,300US +3.2

MT +1.3 91,900 19 +1,200US +0.7

MT +0.9 96,500 20 +900US +0.7

MT +1.4 64,800 14 +900US +1.7

MT +3.6 20,300 4 +700US +0.3

MT +1.7 24,100 5 +400US +2.2

MT +4.8 6,600 1 +300US –1.2

MT +1.1 18,400 4 +200US +1.0

MT –1.4 7,000 1 –100US +0.4

Construction

Industrial Sector 12-Month Percent Change, March 2017

Sector

Size

Natural Resources and Mining

12-Month

Change

Education and Health Services

%

Share

Information

Other Services

Professional and Business

Services

Government

Trade, Transportation, and

Utilities

Leisure and Hospitality

Manufacturing

Financial Activities


Montana’s Economic Highlights

▪ Montana’s unemployment rate is below the US rate

▪ Employment growth is above the US rate:

▪ Education and Health Services added the most jobs

▪ Construction grew at the fastest rate—more than twice the national pace

▪ Only the Natural Resources and Mining sector has declined

▪ Montana wage growth is just below the US average

38


Guest Speaker:Nancy Butler

Montana State AuditorCommissioner of Securities and Insurance

© Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 40

Legislative Issues:Countrywide and Montana


2017 Overview

41

Countrywide, legislative activity has increased over prior years both in volume and content.

Regulation changes thus far concern medical cost management, claim handling, and effectuating enacted legislation.

Year to date, there have been fewer workers compensation-related cases at the state supreme court level than there were in 2016.

The 2016 General Election resulted in a net gain for Republicans in state government, where they now control both chambers of the legislature and the governor’s office in 26 states.


2017 Workers Compensation Legislative Activity

42

As of 5/1/2017

0–10 Bills Introduced 11–20 Bills Introduced 21–30 Bills IntroducedMore Than 30 Bills

Introduced

CA

ORID

WA

MT

NV

AK

UT

AZ

CO

NM

WY

TX

OK

KS

NE

SD

ND

MN

IA

MO

AR

LA

IL

WI

MI

IN OH

MS AL GA

FL

TN

KY

SC

NC

VA

WV

PA

NY

NJ

ME

VT

NH

MD

DE

CTRI

DC

MA

HI


Key Workers Compensation-Related Themes in Introduced Legislation

43

▪ First Responder Presumptions

▪ Indemnity Benefits

▪ Medical Cost Management

▪ Definitions


Montana Legislative Environment

44

Enacted Legislation for 2017 includes the following workers compensation bills:

▪ HB 346—The approved and authorized fiduciary, agent, or other person acting as a fiscal agent under IRS code is considered to be the employer of the workers for whom the fiscal agent is making payments. The client of the fiscal agent is not considered the employer of those workers under the Workers’ Compensation Act.

▪ HB 449—Redefined what is included in the definition of wages, including when board, lodging, rent and housing are considered wages.

▪ SB 142—Employers must annually notify their volunteer firefighters and emergency medical technicians if they do not provide workers compensation coverage.

▪ SB 275—“Construction industry” is defined as those classifications filed by the advisory organizations and approved by the commissioner to comply with the contractors’ premium adjustment program.

▪ SB 312—Prescription drug formularies are allowed to be adopted by the Department of Labor and Industry by rule.



The following bills were vetoed:

▪ HB 358 permits an insurer, when a claimant has refused or failed to sign a medical release or authorization, to deny liability if liability has not been accepted or terminate payment of benefits if liability has been accepted.

▪ SB 116 bars WC benefits (medical and wage loss) to an employee if the employee knowingly or willfully makes a false representation of a relevant medical condition, the employer relied on the false representation, and the condition and the injury or occupational disease are causally connected.

▪ SB 184 allows the insurer to terminate payment of workers compensation benefits if the claim was accepted because of fraud or mutual mistake of a material fact, or the insurer receives clear and convincing evidence that the insurer was not liable for the compensation benefits.

45



SJR 27 requests that the Economic Affairs Interim Committee be designated to study:

▪ The role and costs of the Montana State Fund in providing the guaranteed market

▪ Alternate options available for providing cost effective workers compensation insurance

The study is to be concluded prior to September 15, 2018, and the results reported to the legislature.

46


Emerging Issue: Air Ambulances and Workers Compensation


Air Ambulances

▪ The issue of air ambulances and their associated costs is under discussion in numerous states and the US Congress

▪ Some states have fee schedules regulating WC reimbursement rates for air ambulances

▪ Overview of the issue:

▪ Whether the federal Airline Deregulation Act of 1978 (ADA) preempts state WC laws as to reimbursement rates for air ambulances

▪ McCarran-Ferguson reverse preemption: Does McCarran-Ferguson, which grants authority to the states to regulate the business of insurance, preempt other federal law that may be applicable?

48


Air Ambulances—Judicial Activity

There have been several ADA preemption challenges to state reimbursement rates:

▪ Most recent cases in Texas (state and federal courts) and West Virginia federal court

▪ In some cases, ADA was found to preempt state WC laws regulating air ambulance reimbursement rates

49


Air Ambulances—Legislative Activity

▪ Several states considered air ambulance legislation in 2017

▪ Montana—HB 73 and SB 44—Passed

▪ New Mexico—HB 402—Failed

▪ West Virginia—SB 276—Failed

▪ Federal legislation introduced in 2017 (S 471)

▪ Introduced by Senator Jon Tester (D-MT)

▪ Intended to preserve state authority to regulate air carriers providing air ambulance services

50


Air Ambulances

▪ The National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) are proponents of federal legislation that would allow air ambulance services and rates to be regulated at the state level

▪ NCOIL has created an Air Ambulance Task Force

▪ NAIC requested that NCCI provide aggregated, countrywide information on air ambulance usage and costs for service years 2011 to 2015

▪ NCCI collects air ambulance information through the Medical Data Call

51


Air Ambulances—Medical Data

Basically, there are five Current Procedural Terminology (CPT) or Healthcare Common Procedure Coding System (HCPCS) codes used to describe air ambulance services:

▪ A0430—Ambulance service, conventional air services, transport, one way (fixed wing)

▪ A0431—Ambulance service, conventional air services, transport, one way (rotary wing)

▪ A0435—Fixed wing air mileage, per statute mile

▪ A0436—Rotary wing air mileage, per statute mile

▪ T2007—Transportation waiting time, air ambulance and non-emergency vehicle, one-half hour increments

52


Air Ambulances—Countrywide Medical Data

▪ Code A0430—fixed wing, one way transport

Service Year: medical payments for services provided from January 1 to December 31

53

Service Year 2011

Billed: $2,908,292

Paid: $2,541,667

Transactions: 259

Service Year 2015

Billed: $3,893,449

Paid: $2,603,749

Transactions: 254

▪ Code A0431—rotary wing, one way transport

Service Year 2011

Billed: $20,117,771

Paid: $15,357,216

Transactions: 1,550

Service Year 2015

Billed: $32,902,966

Paid: $19,016,379

Transactions: 1,534



▪ Code A0435—fixed wing—air mileage


54

Service Year 2011

Billed: $3,478,506

Paid: $2,835,795

Units: 60,788

Service Year 2015

Billed: $6,222,170

Paid: $3,623,582

Units: 59,959

▪ Code A0436—rotary wing—air mileage

Service Year 2011

Billed: $12,346,054

Paid: $8,944,936

Units: 98,595

Service Year 2015

Billed: $20,907,090

Paid: $10,989,492

Units: 92,388



▪ Code T2007—wait time, air ambulance and non-emergency


55

Service Year 2011

Billed: $924,585

Paid: $843,918

Units: 44,775

Service Year 2015

Billed: $1,114,980

Paid: $939,032

Units: 59,686


Air Ambulances—Summary

▪ Workers compensation regulators have been trying to control air ambulance costs by capping the amounts payable in the fee schedules

▪ In some cases, fee schedules were challenged and ruled unenforceable

▪ Workers compensation insurance carriers are required to pay the high air ambulance charge unless they can negotiate a lower price

▪ Injured workers are not balance-billed by the air ambulance providers, unlike those insured under a health insurance plan

▪ Billed charges may differ from paid amounts in workers compensation due to reasons such as unchallenged fee schedules and negotiated payments

56


Item B-1431—Revisions to Basic Manual Classifications and Appendix E—Classifications by Hazard Group


Item B-1431

National classification filing, focused on two areas:

1. Eliminating low credibility classifications

▪ Mapping eliminated classifications

2. Reformatting classifications in NCCI’s Basic Manual

58


Credibility

▪ Credibility is the degree of reliance assigned to a certain body of data, expressed as a weight ranging from 0 to 1

▪ The higher the number, the more credible the data

▪ Lower credibility numbers mean that the data is less reliable (more volatile)

▪ Due to limited premium volume, certain claims in low credibility classes can result in significant year-to-year swings of rates or loss costs

59


Eliminating Classifications

▪ Not unique to any single industry group

▪ Represents varied groups such as construction, retail, farming, logging, mining, municipalities, maritime, and manufacturing

60


Mapping Classifications

▪ Eliminated classifications may have a small amount of remaining exposure, or the possibility of generating exposure in the future

▪ In these cases, NCCI recommends where that exposure should be classified

▪ This is referred to as mapping

61

* The indicated national phraseology currently applies in this state. Therefore, no national exhibit is proposedfor approval.


Low Credibility Classifications to be Eliminated

▪ 8 national classifications eliminated

Examples:

▪ 1852—Asbestos Goods Mfg.

▪ 2386—Lace Mfg.

▪ 2913—Rattan, Willow or Twisted Fiber Products Mfg.

▪ 1 Montana special classification eliminated

▪ 6365—Irrigation Pipe Installation—Agricultural—Above Ground & Drivers

62


Reformatting Classifications

▪ Improved online search results = added value

▪ Some classifications will need to be reworded, but the meaning will not change

▪ No impact to rates, loss costs, or premium

63


Item B-1435—Revisions to Basic Manual Classifications and Appendix E—Classifications by Hazard Group, Including Trucking and Towing


Item B-1435

National classification filing, focused on two areas:

1. Eliminate low credibility classifications currently existing in multiple industry groups

▪ Reassign those eliminated classifications to other classifications with similar operations

2. Propose a classification change for the Trucking and Towing industries

65


Low Credibility Classifications to be Eliminated

▪ 14 national classifications eliminated

Examples:

▪ 1741—Flint or Spar Grinding & Drivers

▪ 1853—Mica Goods Mfg.

▪ 4439—Lacquer or Varnish Mfg.

▪ 1 Montana special classification eliminated

▪ 9552

Sign Installation, Maintenance, Repair, Removal or Replacement—Outside of Buildings & Drivers

Sign Manufacturing—With Installation Outside of Buildings & Drivers

Sign Painting or Lettering—Outside of Buildings & Drivers

66


Trucking Industry Changes

▪ Eliminate Codes:

▪ 7228—Local Hauling Only—All Employees & Drivers

▪ 7229—Long Distance Hauling—All Employees & Drivers

▪ Reassign 7228 and 7229 to reestablished national Code 7219—Trucking NOC—All Employees & Drivers

▪ Montana currently uses Code 7219

67


Towing Industry Changes

▪ Establish Code 7225—Automobile Towing & Drivers and cross-reference Roadside Assistance & Drivers

▪ Revise the following codes to separately rate towing for others and roadside assistance

▪ Code 8380—Automobile Service or Repair Center & Drivers

▪ Code 8393—Automobile Body Repair

68


Closing Remarks


Supplemental Information:Loss Cost Filing Support


MontanaIndemnity and Medical Loss Ratios

71

Based on NCCI’s financial data at current benefit level and developed to ultimate

0.49

0.31

0.78

0.61

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2007 2008 2009 2010 2011 2012 2013 2014

Loss

Rat

io

Policy Year

Indemnity Medical


Frequency (Claims/

Premium)

Medical Severity

(Loss/Claim)

MedicalLoss Ratio

(Loss/Premium)

Frequency (Claims/

Premium)

Indemnity Severity

(Loss/Claim)

Indemnity Loss Ratio

(Loss/Premium)

What Drives Indemnity and Medical Loss Ratios?

72


Montana Claim Frequency

73

Based on NCCI’s financial dataFrequency of lost-time claims adjusted to a common wage level

23.2

14.3

0

5

10

15

20

25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Fre

qu

en

cy p

er

Mill

ion

of

On

-Lev

ele

d P

rem

ium

Policy Year


Montana Average Indemnity Claim Severity

74

Based on NCCI’s financial data for lost-time claims at current benefit level and developed to ultimate

38.6

23.7

21.3

4

9

14

19

24

29

34

39

44

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ind

em

nit

y A

vera

geC

laim

Sev

eri

ty (

$ '0

00

s)

Policy Year

Adjusted to Common Wage Level Actual


Montana Average Medical Claim Severity

75

Based on NCCI’s financial data for lost-time claims at current benefit level and developed to ultimate

36.6

22.5

42.6

4

9

14

19

24

29

34

39

44

49

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Me

dic

al A

vera

geC

laim

Sev

eri

ty (

$ '0

00

s)

Policy Year

Adjusted to Common Wage Level Actual


Supplemental Information:National/Regional/State Information


Medical Benefits Constitute the Majority of Total Benefit Costs in Montana

77

Regional states are CO, ID, NE, NV, OR, SD, and UTBased on NCCI’s financial data

41.4%

36.8%

31.5%

58.6%

63.2%

68.5%

Indemnity Medical


Based on NCCI’s Statistical Plan data

Montana Average Claim FrequencyFrequency per 100,000 Workers—All Claims

78

Total 5,260

Total 4,214

Total 5,307

Total 3,739

Total 5,340

Total 4,598

Total 4,686

Total 3,917

Total 4,400

Total 3,279

1,140

945

1,186

768

1,086

1,526

785

678

1,016

813

4,120

3,269

4,121

2,971

4,254

3,072

3,901

3,239

3,384

2,466

0 1000 2000 3000 4000 5000 6000

MT

CO

ID

NE

NV

OR

SD

UT

Reg

CW

Lost Time Medical Only


21

23

16

23

25

14

18

13

MT CO ID NE NV OR SD UT

PY 2014

Average Indemnity Claim Severityin the Region

Lost-Time Claim Severity in $ Thousands

79

Based on NCCI’s financial data for lost-time claims


43

31 31

38

29

17

37 37

MT CO ID NE NV OR SD UT

PY 2014

Average Medical Claim Severityin the Region

Lost-Time Claim Severity in $ Thousands

80

Based on NCCI’s financial data for lost-time claims


Montana Distribution of Claimsby Injury Type

81

Regional states are CO, ID, NE, NV, OR, SD, and UTBased on NCCI’s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist

76.0%

77.0%

78.0%

15.0%

14.0%

19.0%

9.0%

9.0%

3.0%

0.0%

0.0%

Countrywide

Region

Montana

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Medical Only Temporary Total Permanent Partial Fatal & Permanent Total


Montana Indemnity Loss Distributionby Injury Type

82

31%

24%

48%

60%

64%

48%

4%

6%

5%

6%

4%

Countrywide

Region

Montana

0% 20% 40% 60% 80% 100%

Temporary Total Permanent Partial Permanent Total Fatal



Montana Medical Loss Distributionby Injury Type

83


29%

24%

50%

48%

54%

30%

9%

8%

13%

14%

19%

1%

0%

1%

Countrywide

Region

Montana

0% 20% 40% 60% 80% 100%

Temporary Total Permanent Partial Permanent Total Medical Only Fatal


Glossary


Glossary

▪ Assigned Risk Adjustment Program (ARAP)—An assigned risk market program that surcharges residual market risks based on the magnitude of their experience rating modification.

▪ Calendar Year (CY)—Experience of earned premium and loss transactions occurring within the calendar year beginning January 1, irrespective of the contractual dates of the policies to which the transactions relate and the dates of the accidents.

▪ Calendar-Accident Year (AY)—The accumulation of loss data on all accidents with the date of occurrence falling within a given calendar year. The premium figure is the same as that used in calendar year experience.

▪ Claim Frequency—The number of claims per unit of exposure; for example, the number of claims per million dollars of premium or per 100 workers.

85


Glossary

▪ Claim Severity—The average cost of a claim. Severity is calculated by dividing total losses by the total number of claims.

▪ Combined Ratio—The sum of the (1) loss ratio, (2) expense ratio, and (3) dividend ratio for a given time period.

▪ Detailed Claim Information (DCI)—An NCCI Call that collects detailed information on an individual workers compensation lost-time claim basis, such as type of injury, whether or not an attorney was involved, timing of the claim’s report to the carrier, etc.

▪ Direct Written Premium (DWP)—The gross premium income adjusted for additional or return premiums, but excluding any reinsurance premiums.

86


Glossary

▪ Indemnity Benefits—Payments by an insurance company to cover an injured worker’s time lost from work. These benefits are also referred to as “wage replacement” benefits.

▪ Loss Ratio—The ratio of losses to premium for a given time period.

▪ Lost-Time (LT) Claims—Claims resulting in indemnity benefits (and usually medical benefits) being paid to or on behalf of the injured worker for time lost from work.

▪ Medical-Only Claims—Claims resulting in only medical benefits being paid on behalf of an injured worker.

▪ Net Written Premium (NWP)—The gross premium income adjusted for additional or return premiums and including any additions for reinsurance assumed and any deductions for reinsurance ceded.

87


Glossary

▪ Permanent Partial (PP)—A disability that is permanent but does not involve a total inability to work. The specific definition and associated workers compensation benefits are defined by statute and vary by jurisdiction.

▪ Policy Year (PY)—The year of the effective date of the policy. Policy year financial results summarize experience for all policies with effective dates in a given calendar year period.

▪ Schedule Rating—A debit and credit plan that recognizes variations in the hazard-causing features of an individual risk.

▪ Take-Out Credit Program—An assigned risk program that encourages carriers to write current residual market risks in the competitive voluntary marketplace.

▪ Temporary Total (TT)—A disability that totally disables a worker for a temporary period of time.

88


Appendix


NCCI’s Workers Compensation Resources

▪ Financial Aggregate Calls

▪ Used for aggregate ratemaking

▪ Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan)

▪ Used for class ratemaking

▪ Detailed Claim Information

▪ In-depth sample of lost-time claims

▪ Policy Data

▪ Policy declaration page information

90


Financial Aggregate Calls

▪ Collected Annually

▪ Policy and calendar-accident year basis

▪ Statewide and assigned risk data

▪ Premiums, Losses, and Claim Counts

▪ Evaluated as of December 31

▪ Purpose

▪ Basis for overall aggregate rate indication

▪ Research

91


Policy Year Financial Aggregate Data

92

1/1/2013 12/31/20131/1/2012 1/1/2016 12/31/2016

Policy Expiration Date

Policy Effective Date

Policy

Year

2012

Policy

Year

2013

Policy

Year

2016


Calendar-Accident YearFinancial Aggregate Data

93

1/1/2014 12/31/20141/1/2013 1/1/2017 12/31/2017

Policy Expiration Date

Policy Effective Date

Calendar-

Accident

Year

2013

Calendar-

Accident

Year

2014

Calendar-

Accident

Year

2017


Statistical Plan for Workers Compensationand Employers Liability Insurance

(Statistical Plan) Data

▪ Experience by Policy Detail

▪ Exposure, premium, and experience rating modifications

▪ Individual claims by injury type

▪ Purposes

▪ Classification relativities

▪ Experience Rating Plan

▪ Research

94


Valuation of Statistical Plan Data

95

Policy

Effective18 Months

1st

Report

Valuation

2nd

Report

Valuation

3rd

Report

Valuation

4th

Report

Valuation

5th

Report

Valuation

30 Months42 Months

54 Months66 Months

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