|Date Requested: February 22, 2016
Time Requested: 01:03 PM
||Insurance Commission |
||Insurance, Workers Compensation|
7173, 7152, 7150
Sources of Revenue:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
As drafted, Senate Bill 553 permits volunteer fire departments (VFDs) to enter the State Agency Worker's Compensation Program (SAWC) which is administered by the Offices of the Insurance Commissioner (OIC).
If enacted, SB553 would have a significant negative impact on the existing program designed to insure the worker's compensation risk of the currently participating state agencies. All currently participating agencies are likely to experience significantly higher premiums if VFDs are included. It is also possible that the current insurance carrier, Zurich Insurance Company may be unwilling to write the VFD exposure and may cancel the current policy.
SB553 could also negatively impact WV VFDs because participation in the SAWC by VFDs may result in significantly higher premiums, loss fund allocation participation and greater fixed / administrative costs.
It is not possible to quickly quantify the precise amount of increased costs that will be incurred by the state agencies or by the VFDs, as the amount of increase will vary from agency to agency and VFD to VFD. However, a conservative estimate of at least $12 million in additional costs has been calculated as of the filing of this fiscal note.
Fiscal Note Detail
|Effect of Proposal
|1. Estmated Total Cost
|Repairs and Alterations
|2. Estimated Total Revenues
Explanation of above estimates (including long-range effect):
Assigned Risk Estimated Premium" SAWC (FY2016) $30,135,858
VFD (FY2013) $2,558,135
Total Combined Policy
Estimated Premium $32,693,993
Current Premium SAWC $18,424,962
Total Combined $21,029,433
Total Increased Costs $11,664,560
- Premium projection only
- SAWC using current FY2016 billing file with Pinnacle agency e-mods, no schedule rating and 1.01 ARAP;
Assigned risk rates in effect in July 2015."
- VFD using FY2013 audited premium obtained from NCCI. Increased by 14% surcharge. Unknown
ARAP factor and e-mods. Assume all other policy components remain unchanged."
- FY2013 7711 rate = $13.49; Current 7711 rate = $13.25 - VFD estimated premium reduced by 1.78%
due to rate decrease."
- Unable to determine minimum premium adjustments to VFD policies
- VFD coverage such as increased EL and deliberate intent are unknown. Combined policy may incur additional premium dependent on coverage needs.
- Does not include additional staffing required to administer a consolidated policy; data unavailable at this time
- Does not include premium subsidies for VFD premium
Senate Bill 553 provides the opportunity for volunteer fire departments (VFDs) to enter the state agency workers’ compensation (SAWC) program administered by the West Virginia Offices of the Insurance Commissioner (WVOIC) and written by Zurich Insurance Company.
The current SAWC plan structure includes 108 state agencies with nearly 900 locations throughout the state. There are approximately 24,000 state employees covered under the SAWC policy. The premium and loss fund costs for the policy are allocated among all members based on their payroll, classification and claims experience. If additional loss fund premium is due, the additional portion is only allocated among agencies that experienced losses during the policy period.
Due to the high safety risk, volatility and hazardous exposure of the volunteer firefighting operations, none of the 262 insurance carriers offering workers’ compensation coverage in WV are willing to write VFD policies. This is a national trend as carriers are unwilling to assume the liability of writing these types of policies. Therefore, all WV VFDs are currently in the assigned risk pool where there is a minimum premium of $1,250 for a guaranteed cost policy. The minimum premium covers all losses and other administrative fees. Under the SAWC plan, VFDs may be subject to substantially higher premiums, loss fund allocations and other fixed and/or administrative costs.
Impacts to the VFD if merged into the SAWC program include:
When a claim is incurred by a volunteer, claim benefits are paid based on the volunteer’s regular or “day” wages. Estimated losses could vary extensively depending on a volunteer’s wages.
As noted above, carriers are not offering coverage to VFDs in the voluntary market. The SAWC program carrier, Zurich Insurance, may be unwilling to write the VFD exposure and may cancel the SAWC policy. As no other carrier has an appetite for writing VFD coverage, it could be detrimental to all state agencies and the program as a whole and could potentially force the plan into the assigned risk market.
The WVOIC is not adequately staffed to administer the policy with the inclusion of > 400 VFD locations. Administration includes agency invoicing, policy renewal, claims reviews, providing safety measures and inspections, implementing return to work policies, audit processing and general agency updates. The current system invoices state agencies for their portion of the policy costs and the agencies pay via IET (Internal Exchange Transaction). As VFDs are not state agencies and cannot access the State's wvOASIS system, additional resources would be required to process and reconcile checks from each VFD.
Impacts to state agencies if VFDs are merged into the SAWC program include:
Many state agencies are currently under budget cut mandates and hiring freezes in order to balance the state budget. By including VFD experience, all members would most likely experience increased premiums.
The WVOIC and the state agency members have implemented safety programs and processes that are already showing positive trends. The program’s experience rating factor has decreased from 1.28 to 1.10 due to these efforts in providing safer work environments for state employees. With over 400 de-centralized VFD locations added to the program as well as the losses the VFDs will experience, it is quite plausible to conclude that the experience rating factor will increase thus erasing all current progress.
As the program administrator, the WVOIC has no regulatory authority to mandate SAWC members comply with safety recommendations, plans and processes or to return audit information, provide policy renewal data, etc. By merging the VFDs into the program, administration costs of the policy may significantly increase due to the time and efforts that may be needed to provide safety services and invoicing procedures to all VFD locations. In addition, with no authority to ensure compliance with the safety programs, loss fund, fixed costs and true up costs may increase significantly thus causing all members to experience much higher policy premiums and costs.
The WVOIC has concerns over the solvency of the VFDs and the capability to “pay their share” as well as to provide policy information needed for adequate policy pricing due to the nature of premium determination for volunteers. If any member of the program defaults on their premium and other policy costs or needs, the remaining members must carry the financial burden – a burden that budget strapped agencies may not be able to cover.
In summary, it is our belief that by including volunteer fire departments within the SAWC plan it would put a strain on the entire program and all state agencies by most likely increasing claims costs and premiums, potentially losing a 25% credit all agencies are currently receiving in addition to finding a carrier willing to write a policy with VFD exposure.
These estimates do not include coverage for deliberate intent. This coverage is provided by BRIM. We are unable to estimate the impact for this coverage and BRIM should be consulted for the deliberate intent impact.
The following is a list of state agencies who currently participate in the SAWC, whose budgets would be negatively impacted if Senate Bill 553 is enacted:
AIR & ENVIRONMENTAL QUALITY BOARD
ALCOHOL BEVERAGE CONTROL ADMINISTRATION
BOARD OF COAL MINE HEALTH & SAFETY
CIVIL CONTINGENT FUND
COAL HERITAGE HIGHWAY AUTHORITY
COMMISSION FOR NATIONAL & COMMUNITY SERVICE - VOLUNTEER WV
DEPARTMENT OF VETERANS ASSISTANCE
DEPT OF COMMERCE OFFICE OF THE SECRETARY
DIVISION OF JUSTICE AND COMMUNITY SERVICES
DIVISION OF PROTECTIVE SERVICES
DIVISION OF PUBLIC TRANSIT
DIVISION OF TOURISM
GOVERNOR's Office OF WEST VIRGINIA
HEALTH CARE COST REVIEW AUTHORITY
JACKIE WITHROW HOSPITAL
JOHN MANCHIN SR HEALTH CARE CENTER
MILDRED MITCHELL BATEMAN HOSPITAL
MILITARY AFFAIRS - OFFICE OF THE SECRETARY
MUNICIPAL BOND COMMISSION
MUNICIPAL PENSIONS OVERSIGHT BOARD
OFFICE OF ADMINISTRATIVE HEARINGS
OFFICE OF ECONOMIC OPPORTUNITY
OFFICE OF MINORITY AFFAIRS
OFFICE OF TAX APPEALS
PUBLIC PORT AUTHORITY
STATE BUDGET OFFICE
STATE RAIL AUTHORITY
WELCH EMERGENCY HOSPITAL
WEST VA SCHOOLS FOR THE DEAF & THE BLIND
WEST VIRGINIA BOARD OF ACCOUNTANCY
WEST VIRGINIA BOARD OF OPTOMETRY
WEST VIRGINIA BUREAU OF SENIOR SERVICES
WEST VIRGINIA DEPARTMENT OF AGRICULTURE
WEST VIRGINIA DEPARTMENT OF CORRECTIONS
WEST VIRGINIA DEPARTMENT OF EDUCATION
WEST VIRGINIA DIV OF JUVENILE SERVICES
WEST VIRGINIA DIVISION OF FORESTRY
WEST VIRGINIA DIVISION OF HIGHWAYS
WEST VIRGINIA DIVISION OF MOTOR VEHICLES
WEST VIRGINIA DIVISION OF NATURAL RESOURCES
WEST VIRGINIA HEALTH INFORMATION NETWORK
WEST VIRGINIA HOSPITAL FINANCE AUTHORITY
WEST VIRGINIA LAKIN STATE HOSPITAL
WEST VIRGINIA LOTTERY
WEST VIRGINIA MILITARY AUTHORITY
WEST VIRGINIA OFFICE OF MINERS HEALTH SAFETY AND TRAINING
WEST VIRGINIA RACING COMMISSION
WEST VIRGINIA REAL ESTATE COMMISSION
WEST VIRGINIA STATE FIRE COMMISSION
WEST VIRGINIA STATE POLICE
WILLIAM R SHARPE JR HOSPITAL
WORKFORCE WEST VIRGINIA
WV ADJUTANT GENERAL DEPARTMENT
WV AERONAUTICS COMMISSION
WV ATTORNEY GENERAL'S OFFICE
WV BOARD OF ARCHITECTS
WV BOARD OF CHIROPRACTIC EXAMINERS
WV BOARD OF DENTISTRY
WV BOARD OF EXAMINERS FOR REGISTERED PROF NURSES
WV BOARD OF EXAMINERS IN COUNSELING
WV BOARD OF EXAMINERS OF PSYCHOLOGISTS
WV BOARD OF PHARMACY
WV BOARD OF PHYSICAL THERAPY
WV BOARD OF PROFESSIONAL SURVEYORS
WV BOARD OF REG FOR PROF ENGINEERS
WV BOARD OF RESPIRATORY CARE
WV BOARD OF SOCIAL WORK
WV BOARD OF SPEECH PATHOLOGY AND AUDIOLOGY
WV BOARD OF VETERINARY MEDICINE
WV CIVIL AIR PATROL
WV COURTHOUSE FACILITIES IMPROVEMENT AUTHORITY
WV DEP - OIL & GAS CONSERVATION COMMISSION
WV DEP - SOLID WASTE MANAGEMENT BD
WV DEPARTMENT OF EDUCATION WORK BASED LEARNING
WV DEPARTMENT OF ENVIRONMENTAL PROTECTION
WV DEPARTMENT OF HEALTH AND HUMAN RESOURCES
WV DEPT OF EDUCATION & THE ARTS - CENTER FOR PROFESSIONAL DEVELOPMENT
WV DEPT OF EDUCATION & THE ARTS - EDUCATIONAL BROADCASTING AUTHORITY
WV DEPT OF EDUCATION & THE ARTS - EDUCATIONAL BROADCASTING WNPB TV
WV DEPT OF EDUCATION & THE ARTS - GRANDVIEW ED TV WSWP TV
WV DEPT OF EDUCATION & THE ARTS - OFFICE OF THE SECRETARY
WV DEPT OF EDUCATION & THE ARTS - WEST VIRGINIA PUBLIC RADIO
WV DEPT OF FINANCE & ADMINISTRATION
WV DEVELOPMENT OFFICE
WV DHHR - NURSING HOME ADMINISTRATORS LICENSING
WV DHHR SECRETARY'S OFFICE
WV DIV OF HOMELAND SECURITY AND EMERGENCY MANAGEMENT
WV DIVISION OF CULTURE & HISTORY
WV DIVISION OF ENERGY
WV DIVISION OF FINANCIAL INSTITUTIONS
WV DIVISION OF LABOR
WV DIVISION OF REHABILITATION SERVICES
WV ECONOMIC DEVELOPMENT AUTHORITY
WV GEOLOGICAL-ECONOMIC SURVEY
WV HUMAN RIGHTS COMMISSION
WV INSURANCE COMMISSIONER
WV LIBRARY COMMISSION
WV MASSAGE THERAPY LICENSURE BOARD
WV MEDICAL IMAGING & RADIATION THERAPY TECHNOLOGY BOARD OF EXAMINERS
WV PAROLE BOARD
WV REAL ESTATE APPRAISER LICENSING & CERTIFICATION BOARD
WV REGIONAL JAIL & CORRECTIONAL FACILITY
WV STATE TAX DEPARTMENT
WV STATE TREASURER'S OFFICE
WV WATER DEVELOPMENT AUTHORITY
Person submitting Fiscal Note:
Email Address: Melinda.Kiss@wvinsurance.gov