Have you ever heard of the term Retrospective Rating? It is an incentive program that the Department of Labor and Industries (L&I) created for employers. Any employer with industrial insurance and in good standing can participate in Retrospective Ratings. Employers can do this individually or by joining a “Retro Group”. Through Retrospective Rating, employers can earn a partial refund of their workers’ compensation premiums by reducing workplace injuries and lowering the associated claim costs.
What is a Retrospective Rating Group?
Very simply, Retrospective Rating is a new way of calculating employer premiums for workers’ compensation. Here, premiums are calculated retrospectively after the fact. Coverage periods last for twelve months and may begin any calendar quarter. Roughly ten months after a coverage period ends, L&I reviews the actual experience and calculates a retrospective premium.
If the claims cost for the coverage year are below expectations, the employer or retro group earns a partial refund. The refund is the difference between the retro premium and the regular premium. If costs are higher than the regular premium, the employer or retro group may be penalized with an additional assessment.
Theory vs. Reality
This seems like a fair and equitable incentive program. After all, shouldn’t employers be rewarded for increasing safety and reducing work injuries and occupational diseases? If that is how this program really worked, it would have my full and most ardent support. Unfortunately, I think more effort is spent “lowering associated claim costs” than “reducing workplace injuries”.
Since Retrospective Rating came into existence, I have seen an increase in contentious relations between retrospective rating employers and groups, and work injury claimants. This often results in tension with return to work options, breakdowns in effective communication, contentiousness throughout claim administration, and increased litigation.
Personal notes and takeaways
I’m not opposed to incentivizing employers. Far from it. But, I think the Retrospective Rating program needs to be thoroughly re-evaluated to determine if it is accomplishing what it should. Reducing claim costs is important. But at what expense? Some food for thought…