RD637 - Virginia Department of Human Resource Management Report on Recommended Workers’ Compensation Premiums for FY 21 - FY 22; Status and Recommendations of the Loss Control Program; and Number, Amount and Impact on Reserves of Settlements in FY 19 – December 3, 2019
Executive Summary: WORKERS’ COMPENSATION PREMIUMS – SECTION 1 The Department of Human Resource Management (DHRM) recommends workers’ compensation premiums equal to the cash flow needs of the program. Actual FY 2019 and FY 2020 premiums shown for comparison. Actual FY 2019 Premium: $82,969,455 Actual FY 2020 Premium: $83,235,679 Actual FY 2019 Premium Plus WCA Repayment: $83,668,012 Actual FY 2020 Premium Plus WCA Repayment: $84,444,146 Recommended FY 2021 Premium: $78,905,496 Recommended FY 2021 Premium Plus WCA Repayment: $80,624,887 • The statewide experience modification factor dropped from 1.10 to 1.06. • The required statewide premium calculated for FY 2021 decreased 5.2% from FY 2020 premiums (approximately $4.3 million before settlement repayment). • The updated estimated undiscounted reserve is calculated to be $82.5 million lower than last year’s calculation. • The Working Capital Advance settlement pilot is proving to be a significant contributor to the lower than expected incurred loss development during the fiscal year and the reduction in the undiscounted reserve can be at least partially attributed to these settlements. SETTLEMENTS – SECTION 2 Third Party Settlements Three Workers’ Compensation claims involved in third party suits settled during Fiscal 2019, avoiding $50,732.56 in expected future costs. Exhibit C provides a list of all settlements reached during the course of third party settlements(*1). Cost avoidance is calculated as follows: Total Case Reserves (Future Exposure): $107,503.61 Working Capital Advance Settlements In FY 2019, the Department of Human Resource Management • Completed settlements on 39 workers’ compensation claims under the Working Capital Advance authorized in Item 81 F.3 of Chapter 2, 2018 Special Session I, Virginia Acts of Assembly; • Produced $13.36 million in cost avoidance due to accelerated closure of the claims; and • Continued to evaluate claims for accelerated closure. Recommendation The Department of Human Resource Management recommends continuing a budget provision for the Working Capital Advance to support accelerated closure of certain claims. The Working Capital Advance settlement pilot has proved to be a significant contributor to the lower than expected incurred loss development during the fiscal year and the reduction in the undiscounted reserve can be at least partially attributed to these settlements. The joint effort by the Department of Human Resource Management staff who suggested cost containment through settlements and the Department of Planning and Budget staff who developed the Working Capital Advance vehicle to make the idea possible has produced better than expected results: • Actual results achieved by settling 143 claims have already produced documented cost avoidance of $36.88 million, exceeding the low end cost avoidance projected in the 2014 Marsh study. That study suggested cost avoidance between $31.97 million and $54.77 million was possible; results to date suggest even deeper cost avoidance is probable. • The required statewide premium calculated for FY 2021 decreased 5.2% from FY 2020 premiums (approximately $4.3 million before settlement repayment). • The updated estimated undiscounted reserve is calculated to be $82.5 million lower than last year’s calculation. LOSS CONTROL PROGRAM – SECTION 3 The program’s actuary, Oliver Wyman produced an updated actuarial report entitled 2019 Workers’ Compensation Experience Statistics by Agency based on reported losses as of June 30, 2019 (Exhibit E). Agencies with the most adverse loss history identified in the 2019 report are: • Department of Motor Vehicles • Virginia State Police • Department of Juvenile Justice • Department of Behavioral Health and Developmental Services o Mental Health Treatment Centers • Department of Corrections • Department of Veterans Services • Virginia Alcoholic Beverage Control Authority • Department of Game and Inland Fisheries The University of Virginia Medical Center dropped off of the selected agencies and the Department of Game and Inland Fisheries was added. Recommendation The Department of Human Resource Management recommendation is: • Continue development of agency-specific action plans and consulting work to reduce the frequency and severity of workers’ compensation claims; • Continue the loss control consulting work initiated in FY 2019 with the previously identified agencies; and • Begin consulting work with the Department of Game and Inland Fisheries. |
Menu
Published Documents
