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.
Recommended FY 2020: $83,235,679
Recommended Premium FY 2021: $85,825,748
Recommended FY 2020 Premium Plus WCA Repayment: $84,444,146
Recommended FY 2021 Premium Plus WCA Repayment: $87,034,215
• The statewide experience modification factor dropped from 1.16 to 1.10.
• The required statewide premium calculated for FY 2020 decreased approximately $2 million compared to the figure projected in last year’s study (before settlement repayment).
• The updated estimated undiscounted reserve is calculated to be $41.5 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
Six Workers’ Compensation claims involved in third party suits settled during Fiscal 2018, avoiding $513,988.91 in expected future costs. Exhibit C provides a list of all settlements reached during the course of third party settlements(*1). Savings are calculated as follows:
Total Case Reserves (Future Exposure): $780,259.47
Total Settlement Amounts: $266,270.56
Cost Avoidance due to Settlements: $513,988.91
Working Capital Advance Settlements
In FY 2018, the Department of Human Resource Management
• Completed settlements on 42 workers’ compensation claims2 under the Working Capital Advance authorized in Item 84.F.3 of Chapter 836, 2017 Acts of Assembly;
• Produced $8.79 million in cost avoidance due to accelerated closure of the claims;
• Continued to evaluate claims where the injured worker or their counsel submitted a settlement demand; and
• Transferred the analysis and negotiation of settlements from a DHRM staff member to the Workers’ Compensation Services (WCS) program’s Third Party Administrator for workers’ compensation claims, while retaining settlement authority authorization within the WCS program.
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 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.
• Actual results achieved by settling 108 claims have already produced documented cost avoidance of $23.52 million. Based on these results, it would appear that the potential for even deeper cost avoidance compared to the 2014 Marsh study is probable.
• The required statewide premium calculated for FY 2020 decreased approximately $2 million compared to the figure projected in last year’s study (before settlement repayment)
• The updated estimated undiscounted reserve is calculated to be $41.5 million lower than last year’s calculation
LOSS CONTROL PROGRAM – SECTION 3
Updated actuarial report entitled 2018 Workers’ Compensation Experience Statistics by Agency
based on reported losses as of June 30, 2018 (Exhibit E).
Agencies with the most adverse loss history identified in the 2018 report are:
• Department of Motor Vehicles
• Virginia State Police
• University of Virginia Medical Center
• Department of Juvenile Justice
• Mental Health Treatment Centers
• Intellectual Disabilities Training Centers (new)
• Virginia Center for Behavioral Rehabilitation
• Department of Corrections (new)
• Department of Veterans Services
• Department of Alcoholic Beverage Control
Recommendation
The Department of Human Resource Management recommendation is
• Complete loss control surveys of the state agencies added in the most recent study as identified by the program’s actuaries,
• Continue development of agency-specific action plans and consulting work to reduce the frequency and severity of workers’ compensation claims, and
• Continue the loss control consulting work initiated in FY 2018 with the previously identified agencies.
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(*1) The settlements contained in this section do not include the settlements made under the Working Capital Advance authorized in Item 84.F.3 of Chapter 836, 2017 Acts of Assembly to settle certain workers’ compensation claims in FY 2018. Those settlements are reported in Section 2, Working Capital Advance Settlements.
(*2) One additional claim was approved by the Secretary of Administration, the Secretary of Finance, and the Virginia Workers’ Compensation Commission (Commission) in the amount of $123,000. The drawdown of funds from the Working Capital Advance was processed by the Department of Accounts (DOA) on June 16, 2018 and checks were prepared on June 21, 2018 to pay the injured worker and attorney for the settlement. Before the checks were mailed, the injured worker asked that the settlement be vacated by the Commission and the checks were voided on June 26, 2018. The drawdown was reversed by DOA on August 1, 2018 with notice that the $123,000 had been credited to the WCA and would not be considered in the repayment figure for FY 18. For these reasons, this settlement is not reflected in this report, but can be seen in year-end figures in the Cardinal system, with the credit appearing in FY 19.
