March 1, 2012 Terri Bimm & Rosanne Madio

Is the WSIB heading for bankruptcy?

What is the issue

The WSIB (Workers Safety Insurance Board) has control over our employer paid safety insurance premiums, programs and benefits for Ontario. There are groups that claim the WSIB is mismanaging this system which will create a huge debt for future employers to compensate. This debt known as the Unfunded Liability (UFL) has ballooned its highest amount ever approximately $12 billion. The Unfunded Liability is essentially the difference between its assets and what it needs to satisfy the estimated lifetime costs of all claims After several unsuccessful action plans and reviews, it has become apparent to all that there is a real problem on how the system and the fund is being managed and a scramble to find out how to fix it.

Organizations like the Canadian Federation of Independent Businesses, Ontario Network of Injured Workers Groups and the Auditor General etc. have all called for more responsible management and answers to why the board is in such disarray, especially when other provinces seem to handle the task with success.

Background
In 1915 the Workers Compensation Board (WCB) was created to administer the Workers Safety Insurance Act of Ontario (WSIA). It became known as the Workers Safety Insurance Board (WSIB) in 1998 following a revision to the WSIA.

The WSIB is funded entirely by the premiums paid by the employers of Ontario and receives no government funding. There are currently 237,300 registered employer accounts, classified in 154 rate groups covering approximately 4.5 million (approx.70% of) workers in Ontario.

The WSIB
The WSIB Workers Safety Insurance Board is a no-fault workplace insurance for employers and their workers.
Provides: Disability benefits & survivor benefits Monitoring of the quality of health care Assists in early, safe return to work for workers injured on the job or who contract an occupational disease. Employers - are provided no-fault collective liability insurance and access to industry-specific health and safety information Workers - are provided loss of earnings benefits and health care coverage

Continued.
Most businesses in Ontario that employ workers (including family members and sub-contractors) must register with the WSIB within 10 days of hiring their first full or part-time worker. It's the law. Even if your company is in one of these categories, you can still choose to insure your workers through the WSIB. Private Insurance - for all firms and sub-contractors working in industries that have mandatory coverage under the Workplace Safety and Insurance Act, private insurance coverage is not a substitute.

Determining the premiums

Every year the WSIB sets one premium rate for each rate group know as the standard rate. WSIB premium rates for employer rate groups are made up of three key components:

1. Costs of new injuries and illnesses 2. Administrative costs, including legislated obligations (Occupational Health and Safety Act, etc.) 3. Unfunded liability amortization charge

Explanation of the 2011 premium rate components

6% 11%

43%

40%

New Claims

Past Claims

Overhead

Legislative Obligations

Maximum Insurable Earnings Ceiling

a workers average earnings for workplace insurance purposes cannot exceed 175% of the Ontario average industrial wage for the year. the WSIB to calculate this yearly Maximum Insurable Earnings Ceiling based on the most recent Ontario average industrial wage on July 1 of the preceding year. the WSIB uses a standard formula to calculate calculate the Maximum Insurable Earnings Ceiling $([average weekly earnings aggregate] x 365)/7 x 1.75

History of Change .
UFL vs. Average Premium
14 12.4 12 11.5 11.8

10 8.1

7.1 6.4 5.7 5.7

6.6

7.1 6.4 6.5 6.0

4 2.59 2 2.42 2.29 2.13 2.13 2.19 2.19 2.19

2.26

2.26

2.26

2.3

2.35

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Premium in Dollars UFL in Billions

Checks and Balances

On March 4, 2004, the board of the WSIB approved the charter of the Fair Practices Commission. The Commission provides an independent, neutral and confidential service for injured workers, employers and service providers with complaints about the service they receive at the WSIB. The charter (revised in 2007) protects the Commissions independence by stating that the commissioner can be fired only for just cause.

The rest of the story

Lack of intervention by Association of Workers Compensation Boards of Canada (AWCBC) and interference by the Ontario Government The WSIB says that the investment crash in 2008 as well as Health Care costs rising at 7% are reasons for huge increase in UFL. The ONIWA (Ontario Network of Injured Workers Association) believe that the government directed WSIB to keep the premium rates low as a platform to gain popularity with business owners for their own political gain.

Jurisdictional comparison

*The recalculated new claim cost based on latest estimate of projected 2011 assumptions including 6% discount rate not published in the Association of Workers Compensation Boards of Canada (AWCBC).

Impact on Payroll
Although premium rates fluctuate depending on classification or rate group, the maximum insurable earning ceiling continually increases (earnings that premium rates are based upon)

New claims costs and Experience Rating (ER) will effect premium rates
Compliance: not paying premiums on time or at all, can incur undue penalties and fines

Impact on Organizations
a company that previously has not paid WSIB premiums, will have a huge impact with the exposure to the new expense. it may make it marginally more difficult to remain competitive in the national labor market. companies may choose to enforce stricter guidelines on work place safety awareness, employee incentives and introduce new procedures to keep claims minimized and improve their experience ratings.

Possible Solutions..
WSIB 2011-2013 Plan
Will rely on the Independent Funding Review to determine how best to achieve sufficient funding Optimize its premium and investment revenue Reduce benefit costs through reduction of incidents with better education including early return to work Increase efficiency in their administration Best customer satisfaction ever

Public Opinion
Its simple there are only 3 ways to address the liability 1. Raise premiums 2. Reduce benefits 3. Increase investment funds Need to stick to mandate and not be influenced by political agendas Reduce the number of claims and promote early return to work

Conclusion
It is our belief that the WSIB has a long way to go to correct the situation they have gotten themselves (and us) into. For certain then need to improve the financial position by eliminating the UFL and move toward a fully funded system. This will secure future benefits and ensure employer premiums are lower. A properly managed and funded system means a fair system for all who rely on it. It will help maintain Ontarios reputation as being one of the best places in the world to live, work and succeed in business.

March 1, 2012 Terri Bimm & Rosanne Madio

Q&A