RETRO Program

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Services:

• Claim management assistance & representation from 6 State Fund & Self-Insured Senior claims consultants who know the RCW’s, WAC’s, Case Law, L&I policies, & internal practices to advocate for you, expedite action, and resolution of your claims. We can provide representation and negotiate settlements on your behalf up through the mediation hearing at the Board Industrial Insurance Appeals (BIIA).

   

• 2 Safety Professionals who provide jobsite and paperwork audits to ensure your company policies and programs meet and/or exceed WISHA standards are effective in practice.

   

• Analysis of claim loss history to target safety concerns and customize safety programs.

   

• Assistance with EMR (experience rating) reduction plan: safety program analysis, EMR appeals, etc.

   

• Assistance with segregating liability on occupational disease claims, case reserve reductions, third party claim liability, segregation of pre-existing medical conditions, etc.

   

• “Return to Work” services: Because we know it can be difficult to provide meaningful light duty work, we provide a place to send injured employees where they receive useful instruction in construction safety practices, policies, and WAC’s without risk of additional injury or pressure from peers at the jobsite to work outside of their physical restrictions. After the initial study of the construction safety codes, activities may include: First Aid/CPR certification, Flagger Certification (MUTCD), GED preparation & testing, OSHA 10-Hour training, CDL preparation testing, L&I Safety and Loss Control workshops, etc. AGC Modified Duty Site Resource Centers are fully staffed and available in Everett, Seattle, Tacoma, Spokane, & Yakima. Some materials are portable for use at the jobsite or home and there are materials available in Spanish.

   

• Shared learning @ quarterly “Think Tank” meetings where members share their “tried and true” personnel, safety, & claims practices, discuss claims issues, and help define program priorities.

   

• Information on the latest L&I changes, successful practices via our newsletter, “The Retro Ranger”

   

• Representation on Safety and Workers’ Compensation Legislative issues.

Underwriting:

• Annual underwriting by an independent insurance underwriter, H.P. Sargent, CPCU, ARM, Retro Director, and Retro Committee who review 3-year premium & loss history, refund performance, & compliance w/plan requirements: 1) qualify for Safety Team® (per jobsite & paperwork audit to ensure safety programs meet or exceed WISHA standards & are “effective in practice”), 2) provide light duty work accommodation, 3) provide 30-day salary in lieu of L&I timeloss payments to injured workers, & 4) company commitment to work with AGC consultants to resolve claim issues.

Fees: Lowest of ALL plans @ 4-6% of the Group Refund - No Quarterly Fees!

• A one-time refundable deposit of $2,000 (rolls over every year you qualify for AGC Retro).

   

• Administrative cost=4-6% of the group refund & authorized by Retro Trustees: 4 Chief Financial Officers & 4 Safety Professionals.

Rewards:

• Safer job-sites, increased employee morale, and productivity!

   

• Decreased experience rating (EMR) helps you to bid more competitively in a tighter marketplace!

   

• A performance-based refund formula: 75% of the refund based on your individual performance & 25% based on your premium contribution to the refund compared to the total group premium.

AGC has distributed net refunds of 50% or more in 8 of the last 9 final refund years and this year is no exception.  Top performers in Plan Year 11 are earning net refunds of 55%.

For those of you who are being marketed by competing programs, you will be interested to know that AGC maintains an average group refund of 41% over 9 years and our 2004 first adjustment relative to competing plans first adjustments in 2004, put us as a top performer.

AGC had a 44% group refund and charges 6-7% administrative costs.   

A smaller construction group had a 36% group refund and charges 5.5% annual premium for claim management to a Third Party Administrator (5.5% of premium is equal to approximately 11% of refund assuming 50% refund).

The largest construction group allocates the refund between 2 groups and received a 24% group refund and charges 20% of the refund for admin. fees.

Another group has 2 construction groups.  One group had a 27% group refund and charges 10% of the refund in addition to 1-2% of premiums paid on a quarterly basis. The second group had a 47% group refund and charges 10% of the refund in addition to 1- 2% of premiums paid on a quarterly basis. Both groups pay back all participants their quarterly premium fees out of the refunds; thus reduce the refunds by another 2% prior to distribution.  AGC net refunds are higher due to our lower costs. Disclaimer: costs/fees regarding competing plans are based on our review and interpretation of prior participation agreements. 

Some competing plans risk 40% of premiums to get a larger refund, why don’t we? Although 3 competing plans have elevated their premium risk ratio to 1.40 (40% of premiums paid would be owed to the Department in the event of a penalty), we have determined it is more prudent to remain at the 1.10 risk ratio. There is a danger in increasing the risk as member’s experience modification rates (EMR’s) are decreasing (110 of our 213 participants are at a .79 EMR or below) as there is less premium to cover the same man-hour exposure for claim losses.  Companies with lower EMR’s receive part of their savings up-front due to decreased workers compensation insurance rates.  Another important factor is that the L&I premium/risk tables provide less incentive to assume more risk as the group premium grows.  For example, we would assume over $3 million more in penalty risk to generate an additional $300,000 in refund.  Finally, it is unclear from year to year what the actuarial calculations will be. The loss development and performance adjustment factors are calculated every year and unknown at the time of risk ratio selection. For 2005 adjustments, the Department has elevated the loss development factor more than 50% as compared to last years first adjustment refunds.  As a result, two construction Retro groups have terminated their Retro plans and one construction Retro group is threatening a lawsuit due to their penalty assessment.  We haven’t seen our first adjustment numbers, but anticipate they will be ½ of what they should be.  We also anticipate competing plans will use our 2005 numbers (available in February) to compare against their 2004 numbers vs. using our 2004 numbers.

Why don’t we have two groups? We evaluated this concept by analyzing 9 years worth of data using the Excel spreadsheets (sorting by premium size and refunds to look for trends, analyze risks, etc.).  Our conclusions:

• There is no single size premium payer that continually outperforms other premium size participants. 

• Smaller premium payers would likely find the cost of compliance with our 30-day kept on salary agreement and mandatory light duty return to work accommodation cost prohibitive. 

• We are better together at approximately $21 million than we would be divided into two groups.  The major advantage of a larger premium-based group is less volatility.  In addition, the Department provides a loss development multiplier based on risk assumed that gets better as the group premium gets larger.  For example, AGC is able to multiply our losses by .818; so we are only charged 80% of the total developed losses as opposed to 100%.

Why do we allocate the refund 75% based on individual performance/25% based on the premium contributed to the refund?  In running different distribution formulas into the Excel spreadsheets (60/40, 70/30, etc.), our calculation at 75% based on individual performance and 25% based on the percentage of premiums contributed to the refund enables all players who perform well to earn their higher refunds. 

How do we ensure companies are committed to safety and not just “lucky?” In addition to requiring 2 of 3 years of premium loss analysis to be positive, we look at the frequency and severity of injuries and require companies to qualify for the AGC Safety Team® on an annual basis.  Safety Team® helps to ensure written & jobsite safety programs are effective in practice and meet or exceed WISHA standards.

Are there ever “exceptions” in underwriting?  While we could be perceived as making exceptions, underwriting is an art, not a science.  We review historical data, as well as, make a reasoned evaluation of the applicant’s commitment to our best management practices, etc.  If an applicant’s loss history does not meet our criteria, they must demonstrate what they are going to do differently in terms of their risk management practices (i.e. hiring a safety director, drug testing, light duty return to work accommodation, kept on salary in lieu of L&I timeloss payments, Safety Team® qualification, etc.).  This involves an on-site interview, review of the actual claims to analyze trends and/or assess whether the losses were the result of one or two high cost claims that went to pension or vocational retraining versus their efforts at claims management.  The results of the interview and claim analysis are then reviewed with the Independent Insurance Underwriter, H.P. Sargent, CPCU, ARM, as well as, the AGC Retro Committee/Trustees.  These parties must all be in agreement to allow the company to participate. 

Is there a minimum EMR required?  No, an EMR does not tell the whole story.  As you know, one year of negative loss performance affects your EMR for three years.  As such, it takes time to turn your loss history around.  Our Group’s average EMR is .70, our lowest EMR is .27, and our highest EMR is over 1.  Those with lower EMR’s have been diligent in their safety programs, return to work light duty accommodation, and kept on salary efforts.  In fact, those companies with the lowest EMR’s are long time members who kept people on salary in lieu of L&I timeloss payments well beyond 30 days (several up to a year) well before this was a requirement.  Lower EMR’s = less premium to cover losses and eventually result in a company’s decreased ability to achieve high refunds.  This is why we must continually grow in group premium by bringing in QUALIFIED companies.  Last year, we brought in 18 new companies 14 were new to our Association and from competing Retro plans.  We also had to turn away 6 companies whose loss history or premium did not meet our criteria and declined one existing member from re-enrollment.

For a refund analysis, call the RETRO office at (888) 227-3876 for an "Application & Release" form.