This service offering shows claims and payroll information that is used in the calculation of experience premium rates. The rates are displayed per manual classification and any participating rating plans and/or discount plans. The rating plans and programs are designed as a means for the employer to take a more active approach in controlling their workers' compensation premiums.

Group rating is a plan that permits employers to be a member of a group for rating purposes. Employers retain their separate risk identity, are assessed premiums as calculated using the groups’ loss information.

A participant in retrospective rating pays a discounted minimum premium for the policy year and assumes the liability for the actual costs of claims that occur during that policy year. The claims costs include compensation and medical payments and is subject to a claim limit selected by the employer. The employer is billed annually for 10 years for the incurred losses limited to the maximum premium. At the 10th year annual evaluation, reserves are calculated on the claims, final premiums are paid and the policy year is closed.

Drug-Free Workplace is a program that grants a discount on premium rates to an eligible employer that meets the Drug-Free Workplace Program (DFWP) requirements and eligibility standards.

The Premium Discount Program + (PDP+) grants a discount on premium rates to an eligible employer who meets the loss prevention program requirements and eligibility standards.

All rating plans/programs require employer application and BWC approval.

Policy rating information
The Ohio workers’ compensation system is founded upon the insurance principle of shared liability. As a first step toward developing a system of equitable sharing of liability, Section 35 of Article II of the Constitution requires that industries be classified according to hazard. The more hazardous industries produce more accidents and higher costs.

Approximately 540 classifications of hazard have been established, and into each of these classifications are placed employers who have a similar degree of hazard in their operations. (An employer may assign more than one manual number when operations require it). Comparisons cannot be made with mathematical certainty, and this fact, together with the constantly changing methods of operation, makes it necessary for periodic review of assignments of employers into the various classifications. For convenience, each classification is assigned a manual number. This number, together with the policy number that identifies the employer, appears on all orders to pay benefits to facilitate charging the cost to the proper employer and proper classification.

Under the Ohio workers’ compensation system, each classification determines its own rate. The total losses of each classification, when compared to the total payroll of the classification produce the rate of contribution from the employers within that classification. There are some costs, fortuitous in nature, such as catastrophe loss, which are not related to the normal hazard of the industry. These losses are spread over all of the classifications of an industry group. However, since these losses make up only a small percentage of the total losses, they are not sufficient to distort significantly the principle that each classification makes its own rate.

Blended rate
Blended rate is the rate that employers will see on their payroll reports. It consists of the base rate or modified rate, the administrative cost (AC) assessment, and the disabled workers’ relief fund (DWRF) and additional disabled workers’ relief fund (DWRF2) assessments. The employer is required to pay assessments for administrative cost and the Disabled Workers’ Relief Fund in addition to the premium contribution.

Experience modifier (EM) – adjustment history
4123-17-28 CORRECTION OF INACCURACIES AFFECTING EMPLOYER'S PREMIUM RATES
(A) Whenever the bureau of workers' compensation detects an inaccuracy in the recording or processing of data, records, payroll, claims, or other pertinent items affecting the risk's status, merit-rated modification or premium, such discrepancy shall be corrected. This correction shall be accomplished regardless of whether this entails increasing or decreasing the risk's merit-rated modification or premium rate. The risk or its representative will be advised of any correction and the effect thereof made under the authority of this rule.

(B) Any correction made pursuant to the provisions of paragraph (A) of this rule shall be applied to the current rating year, the immediately preceding rating year, and to all subsequent rating years as of the date on which the error was discovered by the bureau or reported to the bureau, whichever date is earlier, except in matters involving handicap reimbursement. In cases where two or more employers may be affected by such correction, the same period of adjustment will be applied to all affected employers.

Experience period detail
The pure insurance principle of sharing liability, as reflected in the basic rate, does not reward or penalize individual employers. Experience rating is a departure from the pure insurance concept of sharing liability. It is an incentive system designed to promote safety practices.

An employer who has a better than average loss experience receives a credit against the basic rate for its classification, and conversely, an employer who has a bad loss experience is penalized and has to pay a rate higher than the basic rate. Experience rating is a compromise between self-insurance and the pure insurance principle involved with the basic rate. While it can never relieve an employer who has no accidents from paying premium, it can reduce an employer's premium compared with fellow employers within the same classification. To the cost-conscious employer, this is an important factor. A single chance accident could result in a severe penalty rating for four years.

In constructing the base rate for a particular classification, we begin with actual awards of compensation and medical benefits. These awards are made to injured workers of employers within that classification on claims with injury dates during the oldest four of the last five calendar injury years. For example, for rates effective July 1, 2006, we use awards made on claims involving injury dates from 2001 through 2004. For the July 1, 2007, rating period, the oldest injury year (2001) drops out of the experience, and a new injury year (2005) is added, affecting the experience for the first time.

Modified premium rate
Modified rate is the rate that employers, who are experience rated, pay as a percentage of their payroll. This is calculated by taking the base rate and multiplying it by the employer's experience modification (EM) factor and times the minimum premium percentage if retro rated. This rate is used to calculate the premium for an experience-, group- or retro-rated employer by multiplying the rate times reported payroll.

Administrative cost (AC) assessment
This is calculated by multiplying the administrative cost rate by the base-rated premium for base-rated employers or the modified rate premium for experience-rated employers.

Disabled workers' relief fund (DWRF) assessment
This is calculated by multiplying the DWRF rate by the payroll for base-rated or experience-rated employers.

Additional disabled workers' relief fund (DWRF2) assessment
This is calculated by multiplying the DWRF2 rate by the base-rated premium for base-rated employers and for experience-rated employers.

Calculation of experience modifier

• Total modified losses
  The total claims costs including reserves of the experience period charged to an experience-rated employer, as used in calculating the experience modifier (EM).



• Total limited losses
  The experience period limited losses are anticipated losses that an employer is expected to incur based upon their size and industrial pursuit.



• Credibility percentage
  This is a measure of the ability of a quantity of historical data to be used to accurately predict future losses. In other words, it is a measure that separates random occurrences from true expectations.



• Ratio
  Total Modified Losses minus Total Limited Losses, then divided by the Total Limited Losses.



• Experience modification (individual and group)
  The total experience modification percentage that is applied to the base rate to determine the pure premium rate. If the application of the experience modifier to the base rate is less than 100, fewer losses occurred than anticipated, and a credit will be applied against the base rate. However, if the experience modifier is greater than 100, then more losses occurred than anticipated, and a penalty will be applied to the base rate.

Experience period claims

• Compensation reserves
  Reserves are added to actual awards. Claims falling within the experience period are examined, as of the cutoff date (established annually) for that year in which rates are made, and reserves are established, based upon data found in the claims. A reserve is a prediction of the portion of the cost of a claim to be paid in the future. (The other portion of the cost is the compensation and medical paid to a specific date of those claims.) Premiums that are used to pay a claim are collected during the policy year in which the claim is incurred. The reserve is used in the calculation to establish future premium needs only, which are in turn used to pay the cost of future claims.
  
  This definition of a reserve can be stated in another manner, which defines its relationship to the claim to which it has been assigned. A reserve is a prediction of the total future cost of claims of a similar nature (same reserve code).
  
  Example:
  By assigning a reserve of $10,000 to the claims identified by Reserve Code A, on the average a Code A claim will result in $10,000 additional compensation, medical, and/or death benefits being paid until the claim is finally closed. In calculating reserve amounts, the compensation and the medical benefits on all claims in that category are used. The claim in which only a small amount of compensation is awarded is included in the average, just as the claim containing an extraordinary amount of compensation. While the application of a reserve may be difficult to understand on an individual claim basis, it must be realized that the reserve is based upon average costs of claims that are of similar nature.



• Handicap percent
  Handicap reimbursement is a percentage of the claim’s costs charged to the statutory surplus fund instead of the employer’s experience.
  
  Handicap reimbursement is a program designed to encourage employers to hire and retain an employee with a handicapped condition as defined in ORC 4123.343 (A) or an employee with a military service handicap as defined in ORC 4123.63.
  
  In the event a handicapped employee suffers a lost-time industrial injury/disease and files a workers' compensation claim, the employer may submit an Application for Handicap Reimbursement (CHP-4A) for consideration. If the application is granted, the appropriate adjustment is made to the employer’s EM calculation.



• Subrogation
  Subrogation is a basic principle of insurance that reduces a person’s ability to “double dip” benefits at the expense of another person. Subrogation also lets BWC recover some claims costs from a liable third party, but not at the expense of the injured worker. When subrogation is successful, the claim will be credited based on the recovery amount as compared to the total cost of the claim and the appropriate adjustment is made to the employer’s EM calculation.



• Maximum value
  The maximum amount chargeable to a claim in the experience period for a specific policy. The employer's maximum value is determined by a calculation of reported payroll and expected losses from a fixed value table.