Workers’ Comp: The “Risk” of Group Retrospective Rating – Is Perception Reality?

Columbus Chamber
The Columbus Chamber provides connections, resources and solutions that help small businesses and Fortune 500 enterprises grow Central Ohio's economy.

From CareWorks Consultants:

When group retrospective rating – commonly referred to as “group retro” – was established in Ohio five years ago, it was a “niche” program primarily used as an option for employers who were ineligible for traditional group rating plans.  In the time since, however, group retro has evolved into THE program of choice for many employers looking to reduce workers’ compensation costs.  This is definitely the case for many CareWorks customers participating in group retrospective rating programs.  In fact, our group retrospective rating program has increased more than 3oo percent over the last three years and is currently generating over $1.5 million in premium savings for our Columbus Chamber members, some of which has already been rebated to their businesses.

Despite the growing popularity of group retro, perceptions that this program is too risky continue to persist.  But is perception reality?  As a performance-based program, a certain level of risk is inherent and should not be ignored.  However, the risk management philosophy employed by CareWorks Consultants has allowed us to establish a strong track record of performance that should ease the minds of companies considering this program option.

There are two ways to evaluate the “risk” of group retrospective rating:

Who Else Is In the Group With Me?

Group retro premium savings are ultimately determined by the claims experience of each individual participant  in the pool.  For this reason, it is important to evaluate what type of employers you are being grouped with.

We think our tiered structure allows for greater predictability and stability because we pool companies with similar loss experiences together.  For example, our Platinum tier is designed for companies with minimal claim losses.  Our Gold tier may be more appropriate for companies with a low-to-moderate level of claims losses and our Silver tier is a good option for those who have the highest level of claims losses, yet are still performing better than average compared with industry peers.

This approach stands in contrast to programs who group employers into one pool.  While on the surface this may seem safer, the performance of the group is dependent on what specific mix of employers are in the pool.  For example, if you are a business with a near perfect claims record and you join a group in which the majority of its participants have several times the losses as you, then your rebate potential will be diminished.

How Much Risk Am I Willing To Assume?

A second way to evaluate the risk of group retro is by determining the level of risk each participant is willing to assume for potential premium assessments in the event the group sustains an unexpectedly high level of claims losses.  CareWorks Consultants group retro programs offer risk assumption options ranging from 10 percent to 40 percent.  Whichever level is chosen by the participant, this essentially sets a cap on how much they could be assessed for additional premium.  For example, if a company enrolled in the Platinum tier with a 40 percent risk level, the worst case scenario would be that they could be assessed 40 percent of their individual premium.  It is important to note that given the underwriting criteria used to form our groups, it would take overall claims losses several times higher than historical averages to create an assessment scenario.

CareWorks Consultants is currently enrolling businesses in our 2014 policy year group retrospective rating program.  For more information on how your business can benefit from group retrospective rating, please call Kristen Troesch at 614.526.7247.