RD669 - Report on Recommended Workers’ Compensation Premiums for FY 23 - FY 24; Status and Recommendations of the Loss Control Program; and Number, Amount and Impact on Reserves of Settlements in FY 21 – October 28, 2021
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 2021 and FY 2022 premiums shown for comparison. Actual FY 2021 Premium: $78,905,496 Actual FY 2021 Premium Plus WCA Repayment: $80,624,887 Recommended FY 2023 Premium: $74,182,847 Recommended FY 2023 Premium Plus WCA Repayment: $77,050,309 • The required statewide premium calculated for FY 2023 decreased 3.8% from FY 2022 premiums (approximately $2,938,867 before settlement repayment). • The updated estimated undiscounted reserve is calculated to be $132.3 million lower than last year’s calculation. • The Working Capital Advance settlement program is proving to be a 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. Other contributing factors to the lower than expected incurred loss development are the increased engagement of OWC’s loss control team with the agencies in our program, and the early assignment of field nurse case management on lost time claims. In addition, our new Agency Relation Representatives are working more closely with our agencies to ensure that claims are filed timely, and investigated thoroughly. They are also working to ensure that agencies have up to date return-to-work plans, and effective medical panels, while keeping the agencies updated on their loss trends. SETTLEMENTS – SECTION 2 Third Party Settlements Five Workers’ Compensation claims involved in third party suits settled during Fiscal 2021, avoiding $275,006.33 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) $ 376,657.78 Cost Avoidance due to Settlements $275,006.33 Working Capital Advance Settlements In FY 2021, the Department of Human Resource Management • Completed settlements on 45 workers’ compensation claims under the Working Capital Advance authorized in Chapter 552, 2021 Virginia Acts of Assembly, Item 83, F.3.a; • Produced $11.22 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 program 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 positive results for the program: • Actual results achieved by settling 237 claims have already produced documented cost avoidance of $61.95 million. The required statewide premium calculated for FY 2023 decreased 3.8% from FY 2021 premiums (approximately $2,938,867) before settlement repayment). • The updated estimated undiscounted reserve is calculated to be $132.3 million lower than last year’s calculation. LOSS CONTROL PROGRAM – SECTION 3 The program’s actuary, Oliver Wyman produced an updated actuarial report entitled 2021 Workers’ Compensation Experience Statistics by Agency based on reported losses as of June 30, 2021 (Exhibit E). Agencies with the most adverse loss history identified in the 2021 report are: • Department of Motor Vehicles • Virginia State Police • James Madison University • Department of Wildlife Resources • Department of Juvenile Justice • Department of Behavioral Health and Developmental Services o Mental Health Treatment Centers • Department of Veterans Services • Virginia Alcoholic Beverage Control Authority James Madison University is a new addition to the list; the Department of Corrections was removed from the list for 2021. 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 2021 with the previously identified agencies; and • Reward high performing agencies with premium discounts. |
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