On January 1, 2020, the Workplace Safety and Insurance Board (the “WSIB”) will implement a new rate framework, and will move from its current business classification structure to the North American Industry Classification System (NAICS). The NAICS is an industry classification system used across Canada, Mexico and the United States, and is already being used by Statistics Canada and the Canada Revenue Agency. The transition to NAICS is intended to simplify and standardize WSIB business classification and increase transparency in how premium rates are set and adjusted. The 155 rate classification groups currently used by the WSIB will be reduced to 34 classes or subclasses under the NAICS system.
Employers should have already been informed of the NAICS code their business will fall into based on their business activities. If not, or if an employer believes the NAICS code does not match their business activities, they should contact the WSIB.
The Merit Adjusted Premium Program (MAP), the New Experimental Experience Rating (NEER) and CAD-7 rate-setting programs will be discontinued and replaced by the WSIB New Rate Framework.
The new model is based on a two-step approach to setting and adjusting premium rates for Schedule 1 employers. An employer’s overall premium rate will be based on both industry risk, and individual claim history:
- An industry class average is set based on that industry’s risk profile and share of responsibility to maintain the insurance fund; and
- Individual claim histories will be compared to other businesses in the same industry class, to determine a business’s overall rate.
The Transition to the New Rate Framework
The New Rate Framework transition will occur over a period of three years. Initial premium rates will be based on a business’s claims experience and their 2019 rate group rate under the WSIB’s old rate-setting process.
Starting Point Rate
Starting point rates will be based on whether business was previously in an experience rating program, any experience rating adjustments made for that business’s claims experience between 2016 and 2018, and the number of premium rates the business had.
For a business that was not previously in an experience rating program:
- If that business had one premium rate, their 2020 starting point rate will be the rate that closest reflects their 2019 rate group rate.
- If that business had multiple premium rates, the starting point rate will reflect its 2019 rate group rates, weighted by its payroll.
For a business that was previously in an experience rating program:
- If that business had one premium rate, the starting point rate will also include any experience rating adjustments made for their claims experience between 2016 and 2018.
- If that business had multiple premium rates, the starting point rate will reflect the 2019 rate group rates weighted by payroll, including experience rating adjustments made for its claims experience between 2016 and 2018.
The WSIB provides the following example of what it means for a rate to be “weighted by payroll”: if a business includes electrical and HVAC repairs, with 70% of payroll going to HVAC staff and 30% of payroll going to electrical staff, the 2019 rate group rates will be weighted 70/30 to create a single starting group rate.
Projected Premium Rate
Businesses will also be assigned a projected premium rate based on previous rates, claims experience, the size of the business, the NAICS classification, and whether they were previously in an experience rating program. Over the course of three years, business’ premium rates will move towards their projected premium rate via “risk bands.” Each NAICS class has an associated series of risk bands, each with their own rate, either above or below the class rate. A business’s risk band rate includes rate adjustments based on individual experience, with the difference between successive risk band rates being approximately five percent.
From 2020 to 2023, a business’s premium rate will increase incrementally by its risk band rate to move from a business’s 2020 starting point rate, to its projected premium rate by 2023.
- 2020: Businesses are assigned a starting point rate and a projected premium rate. Rate decreases will be applied immediately.
- 2021: Businesses with projected premium rate increases will move up one risk band (a maximum of 5%) from their 2020 risk band rate.
- 2022: A business’s premium rate will increase a maximum of two risk bands (a maximum of 10%) from their 2021 risk band rate.
- 2023: A business’s premium rate will increase a maximum of three risk bands (a maximum of 15%) from their 2022 risk band rate, to bring them to their projected premium rate.
The WSIB’s Employer Premium Adjustments Policy outlines the circumstances in which premiums billed, payable, or previously paid by employers may be adjusted. Premium rates may be adjusted where an employer notifies the WSIB of a premium issue requiring adjustment or where the WSIB identifies a need for adjustment (such as, for example, where there is a correction or revision to interest charges, insurable earnings, status decisions for executive officers and contractors, or a change in predominant class).
The rate framework overhaul is the biggest change to the WSIB system in well over 30 years. For employers used to the MAP, NEER and CAD-7 rate-setting programs, there may be some growing pains during the transition to the new framework. For employers frustrated by the old programs, the new framework may come as a relief. Either way, change is on its way. As the new rate framework promises to simplify, and bring consistency and transparency to a previously complex regime, it will hopefully be a change for the better.
The WSIB is offering monthly webinars to ensure Ontario businesses are prepared for the New Rate Framework. More detailed information and helpful animations illustrating these changes can be found on the WSIB website.