WAC 296-17-90402
Definitions
To reduce misunderstandings that can result by our use of certain words or phrases, we have developed definitions that govern what these words or phrases will mean for retro purposes.
Account
An individual employer's industrial insurance account and related subaccounts, or in the case of a retro group it means the sponsoring organization's industrial insurance account.
Account in good standing
A phrase we use when an employer and/or sponsoring organization is current with all payments due L&I and in compliance with L&I laws, rules and regulations at the time of enrollment or reenrollment. For an account to be in good standing you must:
- Have an active L&I industrial insurance account.
- Submit all reports required by L&I when they were due.
- Pay all industrial insurance premium payments, assessments, penalties and interest when due.
| Note: This requirement also includes the payment of other fees, fines, penalties and assessments established by the department such as safety violations and computer access fees. An account may be deemed to be in good standing if the employer or group (sponsoring organization) is current with an L&I approved written repayment agreement. |
- Not participate in the activities described in WAC 296-17-90428 concerning the direct payment of medical services.
| Note: Organizations that sponsor a group must also file the safety plan when applicable (WAC 296‑17‑90409) and the annual safety report required in WAC 296‑17‑90411 to be in good standing. |
Adjustment
The process of calculating retrospective premium, and any resulting refund or assessment.
| Note: For the first adjustment of a coverage period, retrospective premium is compared to the standard premium due. The difference will be refunded if the retrospective premium is lower than the standard premium due. You will be assessed the difference if the retrospective premium is higher than the standard premium due. In subsequent adjustments of the coverage period, the new retrospective premium is compared to the prior net retrospective premium to determine the amount of refund or assessment. |
| Example: View sample adjustment report (7 KB PDF). |
Basic premium ratio
A component of the retrospective rating premium formula. The basic premium ratio (BPR) represents a charge for administrative costs (except claims handling) and an insurance charge that covers the cost of having retrospective premium limited by the selected maximum premium ratio.
Case reserve
L&I's estimate of the cost associated with a specific claim.
Coverage period
A twelve-month period beginning January 1 and ending December 31, or April 1 through March 31, or July 1 through June 30, or October 1 through September 30. Only claims with a date-of-injury within the selected coverage period and the standard premium due for the same coverage period are used to calculate retrospective premium. Effective with the October 1, 2000, coverage period and all subsequent coverage periods thereafter, each coverage period will have three mandatory adjustments and no optional adjustments. The first adjustment will occur nine months after the coverage period has ended. Each subsequent valuation will take place in twelve-month intervals.
| Note: The coverage period for a retro group is selected by the sponsoring organization and the coverage period of an individual enrollment is selected by the employer. |
Date of enrollment or reenrollment
A phrase used by L&I to establish when participation in retro begins. The date of enrollment or reenrollment is the first day of the coverage period.
| Note: A sponsoring organization can add new group members each quarter during the coverage period. We refer to this as "staggered enrollment." Employers seeking to participate in an organization's group after the coverage period has begun must meet all of the application requirements found in WAC 296‑17‑90413. Staggered enrollment applications must be received in our Tumwater office by the 15th calendar day of the month prior to the selected quarter (i.e., December 15 for January 1; March 15 for April 1; June 15 for July 1; or September 15 for October 1). If the due date falls on a weekend or holiday, the application will be due on the next business day. Employers that participate in a retro group on a staggered enrollment basis are required to participate for the remainder of the coverage period unless they sell or close the enrolled business or become self-insured. |
Developed losses, a.k.a. total incurred losses (developed)
A component of the retrospective rating premium formula. Based on historical trends we know that the total incurred losses for claims in a coverage period tend to increase over time. This can be the result of claim reopenings, changes in time loss duration, increased medical utilization, etc. The developed losses computation anticipates and distributes these increases among all the participants in a coverage period.
| Note: Developed losses for pension claims are determined by multiplying their incurred losses by the applicable performance adjustment factor. For nonpension claims, developed losses are determined by multiplying their incurred losses by the applicable loss development factors. |
Freeze date
See valuation date.
Group
Employer members of an organization who have agreed to have their retrospective premium calculated using the combined applicable standard premium and related developed loss data of the participants as a whole.
Homogeneity
A word used to convey the requirement that retro groups be made up of like businesses.
Incurred losses
A cost measure of a claim. For open claims, incurred losses are the total of costs paid-to-date which have been assigned to a given employer account, or the case reserve established by the department, whichever is greater. For closed claims, incurred losses are the total of costs paid-to-date which have been assigned to a given employer account, regardless of any case reserve that may have been established.
Loss conversion factor
A component of the retrospective premium formula, the loss conversion factor (LCF) represents an expense charge for claims handling and the present value of developed losses.
| Note: LCFs can be found in WAC 296‑17‑90493 (www.leg.wa.gov) through 296‑17‑90497 (www.leg.wa.gov). |
Loss development factor
These are actuarially determined factors that are multiplied by incurred losses of nonpension retro claims to produce developed losses. Loss development factor (LDF) are unique to each coverage period, but are the same for every nonpension retro claim in the coverage period.
| Note: LDFs are periodically recalculated. LDFs shown on retro reports have already been adjusted by the applicable performance adjustment factor. |
Loss ratio
The numerical result of dividing developed losses by standard premium.
| Note: The retrospective premium calculation will generate a net refund if the basic premium ratio (BPR) + (Loss Ratio x the Loss conversion factor (LCF)) is less than 1. The BPR and LCF are determined by the plan selected by the individual enrollee, or in the case of a group by the sponsoring organization and the premium size of the individual enrollee or the group. Once these have been selected the retro group can only influence the loss ratio to determine the amount of refund. L&I suggests an evaluation of each claim to determine if there are trends and patterns and that the sponsoring organization implement workplace safety measures to eliminate or reduce loss regardless of the loss ratio. |
Maximum premium ratio
A factor preselected by the organization (group) or individually enrolled employer. The maximum premium ratio (MPR) is multiplied by the standard premium (SP) to determine the maximum retrospective premium requirement for a given coverage period.
| Note: MPRs can be found in WAC 296‑17‑90493 (www.leg.wa.gov) through 296‑17‑90497 (www.leg.wa.gov). |
Member of a group
These are the individual employers that participate in a group plan of a sponsoring organization.
Minimum premium ratio
An actuarially determined factor applicable to plans A1, A2 and A3. The minimum premium ratio (MnPR) is multiplied by the standard premium (SP) to determine the minimum retrospective premium requirement for a given coverage period.
| Note: MnPRs can be found in WAC 296‑17‑90494 (www.leg.wa.gov) through 296‑17‑90496 (www.leg.wa.gov). |
Pension claim
A claim designated as a fatality or total permanent disability.
Performance adjustment factor
The performance adjustment factor (PAF) is an actuarially determined factor unique to each retro coverage period that ensures that aggregate refunds reflect the relative performance of retro versus non-retro state fund employers.
Plan
A numeric table developed by L&I used to calculate the retrospective premium requirement of a group or individually enrolled employer.
| Note: A group or individually enrolled employer preselects from one of five plans (A, A1, A2, A3 or B). The selected plan (along with the MPR and standard premium volume) determines the minimum premium, basic premium and the loss conversion factor that is applied to the developed losses used in the retrospective premium calculation. |
Premium
Money paid (due) from an employer for workers' compensation insurance. It does not include money paid as fees, fines, penalties or deposits.
Qualified employer
A phrase used by L&I to describe an employer that has an industrial insurance account and that the account is in good standing at the time of enrollment or reenrollment.
Retrospective premium
The net premium for a group or individually enrolled employer after an adjustment for a given coverage period. The retrospective premium is determined using the formulas and provisions found in WAC 296‑17‑90446.
Standard premium
A phrase used by L&I to denote the total accident fund and medical aid fund premiums paid (due) by a group or individually enrolled employer for a given coverage period.
| Note: The supplemental pension assessment portion of total premiums due (paid) is not included. If the group includes employers subject to the staggered enrollment provision of the retro rules, the standard premium is the total accident fund and medical aid fund premiums due (paid) for the calendar months in which they have been accepted into a group. |
Valuation date
The date selected by L&I in which incurred losses for applicable claims are measured and captured for the purpose of calculating retrospective premium.
| Note: Changes in incurred losses that occur after the valuation date will not be considered until the next applicable valuation date. The first valuation date is nine months after the coverage period ends. All subsequent valuations will occur in twelve-month intervals. |
[Statutory Authority: RCW 51.18.010(1) (www.leg.wa.gov). 02-23-089, § 296-17-90402, filed 11/20/02, effective 1/1/03. Statutory Authority: RCW 51.18.010 (www.leg.wa.gov). 00-11-060, § 296-17-90402, filed 5/12/00, effective 7/1/00.]
This rule applies to retro coverage period(s) established prior to January 1, 2011.
The courts can take judicial notice of the Washington Administrative Code (WAC) only as published by the Office of the Code Reviser (www.leg.wa.gov). The text contained in this Web page may reflect minor changes when compared with the WAC.
