Experience Rating System Policy 23-605 | Effective Date: January 31, 2013

Purpose 

The purpose of this policy is to:

  • Provide guidelines for determining individual employers’ assessment rate rebates or surcharges based on accident cost experience; and
  • Communicate to employers the method used for calculating experience rates. 

Scope 

This policy applies to employers covered under Part 1 of the WC Act, who have met the participation criteria outlined in this policy.  

Statements 

1.0 General Statement 

The health, safety, and compensation system in New Brunswick is funded primarily through employer assessments, which are levied annually to ensure that sufficient revenue exists to pay for the costs of accidents today and in the future. In setting basic assessment rates, WorkSafeNB operates on the principle of collective liability, which means that the revenue from the entire assessed employer population is combined to maintain the workers’ compensation system. For more information, see Policy 23-600 - Setting Basic Assessment Rates

When determining assessment rates for individual employers, WorkSafeNB takes into account an employer’s accident history through WorkSafeNB’s Experience Rating System (ERS). 

The objective of the ERS is to improve equity in sharing the costs of the system among employers by:

  • Increasing employers’ accountability for their individual claim costs; and
  • Providing an incentive for implementing accident prevention measures and promoting early and safe return to work. 

The ERS provides employers with a rebate or surcharge on their assessment rate depending on their individual claim cost experience relative to their assigned rate group’s claim cost experience. 

The ERS is designed to be revenue neutral. As such, the rate rebates applied are approximately equal to rate surcharges. This ensures that:

  • Assessment premiums are sufficient to cover the revenues required to maintain the workers’ compensation system; and
  • Employers, who are not eligible to participate in the system, are not impacted by the ERS system. 

2.0 Qualifying to Participate in the Experience Rating System 

Employers qualify to participate in the ERS if their basic average annual assessment premium is $2,000 or more over the exposure period. 

WorkSafeNB determines an employer’s level of participation based on the historical payroll and rates for their current industry. Employers with an average assessment of $2,000 participate at the minimum level of 25%. To participate at a 100% level, an employer’s average assessment premiums must be equal to or higher than $58,250. 

Employers who do not meet the minimum participation criteria are assessed at the basic rate. For more information, see Policy 23-600 - Setting Basic Assessment Rates

3.0 Applying the Experience Rating System 

Surcharges and rebates are determined by comparing the employer’s cost ratio to the cost ratio of the rate group to which the employer is assigned. More specifically, rebates or surcharges are determined by:

  1. Calculating the employer’s cost ratio and the rate group’s cost ratio (for more information, see section 3.1 Calculating Cost Ratios);
  2. Adjusting the rate group cost ratio until the effect of the experience rate adjustment is approximately neutral;
  3. Determining the variance between the employer’s cost ratio and the rate group’s adjusted cost ratio;
  4. Adjusting the employer’s rate up or down by 1% for every 2.5% variance between the employer’s cost ratio and the rate group’s cost ratio to a maximum rate rebate of 40% or a maximum rate increase of 80%; and
  5. Prorating the rebate or surcharge according to the employer’s participation level. 

WorkSafeNB notifies participating employers of their individual rate for the forth-coming year.

3.1 Calculating Cost Ratios 

WorkSafeNB calculates the employer’s and the rate group’s cost ratio for the exposure period using the following formula.  

Cost ratio = New injury costs

Total assessable payroll

New injury costs include the total costs for injuries and illnesses up to maximum claim costs. The maximum claim cost is applied in the event of a fatality. 

For the purpose of this policy, the maximum claim cost is equal to the maximum assessable earnings for the assessment year, rounded to the nearest $2,500.

 

Accident – includes a wilful and intentional act, not being the act of a worker, and also includes a chance event occasioned by a physical or natural cause, as well as a disablement caused by an occupational disease and any other disablement arising out of and in the course of employment, but does not include the disablement of mental stress or a disablement caused by mental stress, other than as an acute reaction to a traumatic event. (WC Act) 

Appeals Tribunal – means the Workers’ Compensation Appeals Tribunal established under the WHSCC & WCAT Act. 

Assessment premium – is equal to the assessment rate multiplied by $100 of assessable payroll. 

Cost Ratio – refers to the new injury costs during the exposure period divided by total assessable payroll during the same time period. 

Experience rate – is the adjustment applied to the basic rate to reflect employers’ cost experience. 

Exposure period – for the purpose of this policy, it is a period of time containing the data used for setting experience rates. This period is equal to the three most recent completed calendar years preceding the year of calculation. For example, the rates for 2013 are calculated in 2012 taking into account data from 2009 to 2011. 

Fatality – an occurrence of death as a result of an accident that arose out of and in the course of employment. 

Net rate – is the sum of the base rate and the experience rate. 

New injury costs – total direct claim-costs arising as a result of an accident that arose out of and in the course of employment that occurred within the exposure period. Costs associated with accidents that occurred outside the exposure period are not included as new injury costs in the experience rating process. 

Rebate – a discount on assessment premiums. 

Surcharge – an additional charge on assessment premiums. 

WorkSafeNB – means the Workplace Health, Safety and Compensation Commission or "the Commission" as defined by the WHSCC & WCAT Act.

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