1 WORKERS' COMPENSATION DIVISION

2 STATE OF

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10 TRANSCRIPT OF MEETING

11 September 11, 2019

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-1- 1 INDEX OF ATTENDEES

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3 Attending

4 Fred Bruyns Workers' Compensation Division

5 Trent McGath City County Insurance Services

6 Bob Brandkamp AVISTA

7 Diana Burnette KPD Insurance

8 Jeff DeHaan Hays Companies of Oregon

9 Jaye Fraser SAIF Corporation

10 Sue Quinones City of Portland

11 Sean Staub SEIU

12 Rolanda Webb AVISTA

13 J.P. Agnesse Portland General Electric Company

14 Chris Hill S | D | A | O

15 Denny Carter Tire Centers

16 Daija Tucker KPD Insurance

17 Sarah Key Les Schwab Tire Centers

18 Aaron Fellman Workers' Compensation Division

19 Dave Dahl Division of Financial Regulation

20 Jason Cupp Workers' Compensation Division

21 Jody Howatt Workers' Compensation Division

22 Adam Breitenstein Workers' Compensation Division

23 Sally Coen Workers' Compensation Division

24 Daneka Karma Workers' Compensation Division

25 Barbara Belcher Workers' Compensation Division

-2- 1 TRANSCRIPT OF MEETING

2

3 (00:09) So welcome to all of you. Thank you very

4 much for joining us this afternoon. We have more people in

5 attendance than I thought we would have. Is there anyone on the

6 telephone with us? I'm not sure they can hear me. Anyone on

7 the telephone with us.

8 (00:31) Yes.

9 (00:33) Yes.

10 (00:34) Okay, excellent.

11 (00:35) Les Schwab Tire enters has representatives on

12 the phone.

13 (00:35) Okay, wonderful. And just a moment ago when

14 I was talking, could you hear me okay?

15 (00:45) Yes, we can.

16 (00:46) Oh, good. Okay. So again, 17 thank you very much for coming. I think most of you have been 18 involved in advisory committees before but I just want to tell you that 19 it's more of an informal process than, say, a public hearing, which we 20 will also have on these rules later in the process. But this is an ideal 21 time to help us shape the rules that will eventually be proposed for 22 public testimony. 23

24 So, let us -- just give us your best 25

-3- 1 advice, and we will do our best to consider all that

2 advice and craft proposed rules that we will send out

3 to all of you later on in the process.

4 As we're going through the agenda, if there

5 are potential rule changes that will have fiscal

6 impacts to you or the people that you represent,

7 please let us know. We do rely on that information.

8 And we do have to file a fiscal impact estimate with

9 the Secretary of State when we file proposed rules, so

10 please give us the best information you have. I know

11 sometimes it will be difficult to put an actual dollar

12 amount on anything but if you can give us just some

13 idea of the extent of the impact, that will be very

14 helpful. Thank you for that as we go forward.

15 If you're on the telephone with us, there

16 isn't much to keep in mind, except if you have to

17 leave for any reason, please do not put us on hold, as

18 we may end up getting your background music. You may

19 dial into the meeting again if you'd like, if you do

20 need to leave.

21 My name is Fred Bruyns and I coordinate the

22 rulemaking process for the workers' compensation

23 division. And with that, I'd like to go around the --

24 let's actually first start with our telephone folks so

25 we don't forget you. Please introduce yourself to the

-4- 1 committee, and I want you to fully participate.

2 You're welcome just to listen, of course, but we want

3 you to have, you know, the kind of participation level

4 that you would have if you were here in person. So

5 could you introduce yourself to the committee.

6 (2:46) Sure, I'll go first. My name is

7 Denny Carter. I'm the (unintelligible) service

8 manager for Les Schwab Tire Centers. And we have two

9 other representatives joining us today and I'll let

10 them introduce themselves.

11 (02:59) Welcome, Denny. Anyone else?

12 (03:05) This is Diana Burnette from KPD

13 Insurance.

14 (00:39) Welcome, Diana.

15 (03:11) Thank you, and I'm

16 joined by Daija Tucker from our office as well.

17 (03:16) Okay. Welcome to you

18 both. Anyone else? Hearing no one, let's begin with

19 Bob. If we can go around the table and introduce

20 yourselves.

21 (03:30) Sure.

22 Bob Brandkamp, risk manager with AVISTA Corp out of

23 Spokane, .

24 (03:36) Rolanda Webb with AVISTA Corp.,

25 payroll and HRS manager.

-5- 1 (03:40) J.P. Agnesse, risk manager,

2 Portland General Electric.

3 (03:45) Chris Hill, I'm an underwriter

4 with Special Districts Association from Oregon

5 (03:50) David Dahl, I'm an

6 actuary with the Division of Financial Regulation.

7 (03:55) I'm Sean Staub. Research with

8 SEIU local 503.

9 (04:00) Corina Spencer-Scheurich. I'm an

10 attorney with the Northwest Workers' Justice Project.

11 (04:04) Sue Quinones. Workers' Comp

12 manager for the City of Portland.

13 (04:08) Hi, I'm Jeff DeHaan. I'm with 14 Hays Companies of Oregon. We're an insurance 15 broker specializing in work comp. 16 (04:15) Trent McGath,City County Insurance 17 Services, risk information manager. 18 (04:20) Daneka Karma, policy manager with 19 the Workers' Compensation Division. 20 (04:25) Jody Howatt, Workers' Compensation 21 Division, self-insurance program. 22 (04:30) Jason Cupp, manager of 23 the self-insurance registration and reimbursements 24

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-6- 1 units with Workers' Compensation Division.

2 (04:37) And I'm Aaron Fellman, I'm the

3 policy analyst with the Workers' Compensation

4 Division.

5 (04:40) And I will leave it up to you folks,

6 but you're welcome to have -- we would like you

7 introduce yourselves to the committee if you can.

8 (04:47) I'm Barb Belcher, I'm the employer

9 (unintelligible) manager for the Workers' Compensation

10 Division.

11 (04:53) Adam Breitenstein,

12 (unintelligible) section manager, Workers'

13 Compensation Division.

14 (04:57) Sally Cohen, deputy administrator,

15 Workers' Comp Division.

16 (05:01) Jaye Fraser, SAIF corporation.

17 (05:08) Again, welcome to everyone. And do 18 you have any questions about the process? Or before 19 we begin, I'm actually going to turn everything over 20 to Aaron to take us through the agenda. But any 21 questions about the process or where we're going from 22 here? Okay, then, Aaron, take it away. 23

24 (05:25) All right. Good afternoon everybody.

25 I'm Aaron Fellman. I'm the policy analyst

-7- 1 who prepared these issue documents. Thank you all for

2 coming.

3 Just a rule of warning, we're going to be

4 jumping around a little bit in these, to try to

5 prioritize the issues which I think are going to

6 require the most discussion? So thank you in advance

7 for your patience there. We will be starting

8 straightforwardly enough with issue number one. This

9 is concerning Chapter 4-36, Division 85, Rules 32 and

10 -3. Premium assessment for self-insured employers and

11 employer groups. And the issue on the table is that

12 the method for determining accessible premium under

13 current rule, we believe may underestimate

14 self-insured employers would have paid had they been

15 insured employers.

16 Why is this relevant? Statue provides that

17 assessments for self-insured employers will be based

18 on what they would have paid had they been insured.

19 The method currently prescribed under rule for

20 determining the system premium, is that it will be

21 calculated based on the lowest rates filed by a single

22 insurer. I'm going to, really quickly, go over some

23 of the elements that go into an insurer's filed rates,

24 just for anybody who may not be as familiar.

25 Basically there's three that are relevant

-8- 1 to us. The first is base rates, which are applied to

2 payroll and reflect the direct costs of losses. The

3 costs of the indemnity and medical benefits that the

4 law requires. Base premium is then modified by a lost

5 cost multiplier, or LCM, which provides for the

6 insurers' expenses. Things like salaries, office

7 space, as well as profit.

8 And then, finally, by a premium discount

9 rate, which offsets the expense components premium for

10 larger employers, recognizing that they tend to entail

11 proportionally lower expenses for insurers.

12 So getting back to the issue, the rule

13 requires us to use the lowest rates on file. Pretty

14 much all insurers to use the same NCCI base rates. So

15 the determiner factor is usually who has filed the

16 lowest lost cost multiplier. And in recent years this

17 has usually been 1.0, or in some cases lower, which

18 has a couple of implications. It means, first, that

19 this assumed premium doesn't include any kind of

20 element for expenses or profit. And also that the

21 premium discount is kind of coming off the top from

22 the portion of premium that theoretically would be

23 paying for the costs of the losses themselves. The

24 galaxy of LCMs currently on file in Oregon ranges

25 between a little less than 1.98 and 2.1. As a general

-9- 1 rule, LCMs at the lower end of that range are

2 available to what you might called preferred

3 employers, with some combination of very high premium,

4 better than average loss history, and strong loss

5 control programs.

6 LCMs at the extreme low end of that range,

7 like the ones that we're talking about, 1.0 or less,

8 are available only to a handful of Oregon employers in

9 fairly specialized programs. At this time, insurers

10 who filed such LCMs represent somewhat less than

11 1/100th of 1 percent of the Oregon market in terms of

12 market share.

13 So to kind of summarize this, since these

14 rates that we're talking about -- the ones in the 1.0

15 or less range -- would not be available to most

16 self-insured employers, possibly not to any

17 self-insured employers, we're concerned that they may

18 not be consistent with the statutory requirement, that

19 assessments be based on the premium of what the

20 self-insured employer would have paid had they been

21 insured.

22 It appears to us that intent of the statute

23 is that self-insured employers and insurers would be

24 somewhat on an equal footing for assessment purposes.

25 And we're concerned that the current rules don't

-10- 1 accomplish that. So what we're proposing is that, for

2 a given fiscal year, assessable premium will be

3 calculated using, first, the current manual rates

4 published by NCCI, which is essentially where we are

5 now, modified by a multiplier no greater than the

6 average of all LCMs on file with DFR, which would be

7 weight by market share, and that finally the director

8 would be able to consider additional factors when

9 determining what that multiplier would be. What

10 factors exactly those would be is still kind of a

11 topic of discussion. But this would allow us, among

12 other things, to phase this in over several years,

13 which is something that we're discussing doing.

14 Something not included here, but that maybe

15 should be, is that we -- the assessable premium would

16 also be modified by a premium discount and an

17 experience modification. As of now, we haven't been

18 talking about changing that, but I thought that it

19 might not be clear based on this, that that was

20 staying in. So apologies for any confusion that may

21 have caused. And with that, I'll open it up for

22 discussion.

23 (11:06) The claims history you're looking

24 at when you're calculating our experience rating --

25 (11:09) Yeah.

-11- 1

2 (11:09) -- comes from Bulletin 209; right?

3 Bulletin 209 report?

4 (11:13) Correct.

5 (11:14) Okay. So that then gets

6 audited by your reserve auditors. And their advice,

7 basically, for self-insured employers, is to reserve

8 all of our claims to the worst case scenario.

9 So in general, our experience rating is

10 probably actually going to be higher than an insurance

11 company's average experience rating for all of the

12 clients. Kind of hard to quantify, obviously,

13 because the self-insured -- there's no insurer that

14 has exactly (unintelligible) ownership to really

15 compare that. However, it is a fact that we are

16 expected to reserve our claims higher, where a SAIF or

17 a Liberty is more reserving towards what they may

18 actually see. So there's that to consider as well.

19 (12:03) Thank you.

20 (12:12) Bob Brandkamp, with AVISTA. A couple

21 questions. One, given the universe of the LCMs that

22 you have now, what is the weighted average that you

23 would -- if this came into effect today, what's the

24 weighted average that you all would be using?

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-12- 1 (12:29) Yeah. So based on the numbers that

2 are in effect today, we think that it would be

3 something like 1.38. And to provide just a little

4 bit of context around that, as I said, we're looking

5 at a range between 0.98, 2.1, with the median and

6 average both hovering around 1.6. 1.38 is at about

7 the 25th percentile, in terms of what's been filed.

8 Obviously, as you say, this is the number

9 as of this moment. It will probably have changed by

10 the time any of these rules are implemented.

11 (13:10) And then, can you speak to -- you

12 referenced a phased-in approach.

13

14 (13:17) Yeah.

15 (13:17) Can you elaborate a little bit more 16 on what you foresee in terms of how that would be 17 phased-in over time? Have you gotten into that 18 level of detail in terms of what that might look 19 like?(13:29) I'm afraid that we haven'treally gotten 20 past preliminary discussions there. 21 (13:37) Can you speak to what exactly the 22 premium funds? What it funds for the State? 23

24 (13:46) Well, mostly it's funding the 25

-13- 1 administrative activities of this department. I

2 think, and there might be others in the room who can

3 speak to this with a little more authority than I can,

4 but things like reimbursements of various kinds would

5 not, for instance, be included in what's being funded

6 by these assessments. Yeah.

7 (14:10) So this is paid directly into the

8 premium assessment operating account, which pays for

9 Workers' Compensation Division, Workers' Compensation

10 Board, (unintelligible) and OSHA. But they don't get

11 paid for by the (unintelligible).

12 (14:23) And is that fund audited? I mean,

13 is that fund in trouble, or is it fully funded? I

14 mean, I'm just trying to get to the reasoning behind

15 --

16 So we just issued our notice yesterday, our

17 press release about the rate filing that was made.

18 And we are having a public hearing,

19 (unintelligible) in a month, to discuss the premium

20 assessment rate. So that is upcoming. It's not in

21 trouble, no. But it's an exercise we go through every

22 year in on that funding, that assessment rate should

23 be (unintelligible). But we invite you to participate

24 in that.

25 (15:03) So the current

-14- 1 assessment, which I think is 0.8 percent, is that

2 pretty good?

3 (15:08) It's a -- someone correct me on

4 this, (unintelligible) on this -- 8.4 or something.

5 (15:15) Okay. So, effectively, that's not

6 necessarily -- it doesn't sound like it's actually

7 paying for, if Company X goes out of business, to

8 fund those outstanding liabilities. It's just

9 basically your overhead expenses.

10 (15:28) It's to pay for the

11 administration of the workers' compensation system.

12 (15:37) Has there been any consideration

13 by the Department to exclude non-profits, such as

14 City of Portland?

15 (15:48) That's not something that we have

16 discussed so far, but it's certainly something that

17 we could discuss.

18 (15:55) Because there already is -- for

19 groups, anyways, there's already a separate rate for

20 private groups as compared to public groups. So

21 certainly, there is some areas where we do

22 differentiate between a public entity and a private

23 entity.

24 (16:12) Jason? MR. CUPP:

25 (16:13) Yes.

-15- 1 (16:14) Jaye Fraser, SAIF Corporation -- I

2 promised myself I'm going to watch -- I just want to

3 make it clear that that assessment is the same

4 assessment that every insured employer in the state of

5 Oregon pays, including not for profits. The State of

6 Oregon -- I mean it goes on and on and on. Everybody's

7 paying the assessment. I think what you all are

8 talking about is the base rate upon which the

9 assessment is applied.

10 (16:51) That 1.38 number was maybe a

11 percentile number and not one weighted by market

12 share, as this rule would suggest. Was it -- did I

13 miss something?

14 (16:58) No. I'm sorry. The 1.38 is the

15 number out weighted by market shares. My comment

16 about the percentile was just trying to put that into

17 -- to sort of talk about its position among all the

18 other LCMs that have been filed. It's about the 25th

19 percentile mark.

20 Does anybody else have anything that they'd

21 like to raise while we're -- 22

23 (17:30) Yeah. Fred, this is Denny Carter 24

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-16- 1 from Les Schwab. I have a question. Are there any

2 other states that you are aware of that are

3 (unintelligible) LCM-type of formula, or is this

4 something new that you guys have adopted?

5 (17:50) I'm sorry. I'm not quite following

6 the question. Are you asking if other states also

7 have an assessment that is based on --

8 (18:02) Right. In a lot of other states

9 we operate in, we get experience modifiers basically.

10 And that's what we use to assess our premium in most

11 cases. But it looks like you guys are adopting this

12 loss cost multiplier. And I'm just curious if this is

13 just something that is unique to Oregon, or if you're

14 modeling this after what is being done in another

15 state per se.

16 (18:28) Well, so something I would say

17 there is that the -- we are actually using a loss cost

18 multiplier for assessment purposes under the current

19 rules. It's just that its effect is kind of

20 negligible because, under the current rules, we're

21 required to use the lowest rates. So it's in there.

22 It's just very low. The proposal is more about

23 changing how we select that LCM than it is about

24 adding a new mechanic to that. As far as the use of

25 this in other states, I'm sorry, I don't have any

-17- 1 information on that. But that's something that I can

2 look into.

3 (19:17) No, that's fine. I was just

4 curious if there was a model of (unintelligible) that

5 you were following from another state.

6 (19:26) So I have a quick question. So is

7 it premium discount in modifiers? Are they going to

8 be primarily the same or are those going to change as

9 well?

10 (19:33) I think they would be the same.

11 At the moment, we're just using the ones published by

12 NCCI. We haven't discussed changing those.

13 (19:53) Okay.

14 (19:54) Maybe I'll just chime in for a

15 moment and say again that, obviously, this one would

16 have some kind of fiscal impact. So any information

17 that you can provide to us about that will be helpful

18 when we file. We want to take it all into

19 consideration.

20 (20:29) Well, all right. Unless anybody

21 else has something to add, I'll move on to the next

22 issue.

23 (20:39) Maybe I could ask one last

24 question?

25 (20:40) Please.

-18- 1 (20:41) Is the LCM going to be comped or

2 will that be evaluated? Is there going to be an

3 annual (unintelligible.)

4 (20:51) So it would probably be evaluated

5 on the same schedule that we determine the rates for

6 these assessments currently. So it's a fiscal year

7 between July 1st to June 30th.

8 (21:14) Okay. I'd like to jump forward a

9 bit, if you don't mind, to issue number five. So this

10 is concerning Division 50, probably Rule 200,

11 self-insured certification cancelation and revocation.

12 And the issue on the table here is what rulemaking

13 will need to be done to implement House Bill 3003.

14 As you all know, self-insured employers are

15 required to deposit security to cover their

16 liabilities under Chapter 656. And in the event of

17 any sort of default or insolvency, the director can

18 draw on that to ensure that payments are made.

19 Under current statute, the director is

20 required to obtain that security for at least 62

21 months after self-insured employer exits

22 self-insurance. At the end of that period, the

23 director can accept a paid-up insurance policy

24 covering the remaining liability in lieu of security.

25 House Bill 3003 essentially eliminates that 62-month

-19- 1 waiting period, allowing the director to accept one of

2 these paid-up policies at any time after an insurer

3 leaves self-insurance.

4 And so to implement this bill, we've

5 identified a need to adopt some rules. First,

6 specifying the conditions that a paid-up policy must

7 meet to be acceptable. And second, kind of laying out

8 what the process for releasing security will look

9 like.

10 And we have a couple of interests in that.

11 The first is to ensure that securities only release

12 following a complete irrevocable transfer of the

13 former self-insured employer's liability. Since we'd

14 be releasing the security that would ordinarily be

15 covering that liability, we want to make sure it's

16 accounted for in a way that will be lasting.

17 Second, relatedly, we have an interest in

18 making sure that these policies are only accepted when

19 issued by insurers that are financially sound. In the

20 event of an insurer's insolvency, it's not completely

21 clear what party will be responsible for the liability

22 assumed under a paid-up policy. So we'd like to avoid

23 that issue arising in the first place. So in terms of

24 what we're proposing here, there's kind of three

25 buckets essentially. The first bucket, which is

-20- 1 options one, two, and three, are the baseline

2 qualifications that a policy must meet to be

3 acceptable. And those are, first, that it assume all

4 of the self-insured employer's responsibility and

5 liability under Chapter 656, known or unknown, for the

6 period of self-insurance. Second, that it be issued

7 by an insurer that is authorized to transact workers'

8 comp insurance in Oregon or SAIF Corporation. Third,

9 that the policy be non-cancelable. And these all

10 speak, again, to our interest in ensuring that

11 complete, irrevocable transfer of liability.

12 The second bucket is largely procedural

13 issues dealing with how security will be released once

14 a policy is accepted. And those are option five --

15 I'm sorry, option four, that security will not be

16 released until the paid-up policy takes effect.

17 Option five, that the release will be documented in

18 writing. And finally, option six and seven speak to

19 our desire to ensure that the insurers that write

20 these are fully solvent. Option six, allowing the

21 director to consider the relative sizes of an

22 insurer's reserves and a former self-insured

23 employer's security deposit when deciding whether to

24 accept these. Option seven, allowing the director to

25 consider regulatory enforcement actions taken by DFR

-21- 1 or by an insurance regulator in another state. Our

2 thought there is simply that an insurer may be

3 currently authorized to write in Oregon, but there

4 might be some red flags for possible solvency issues.

5 This being the case, we'd like to reserve the option

6 of not accepting their policy.

7 I realize there's quite a bit there. I'll

8 open it up for discussion now, and we can tackle these

9 however people want.

10 (25:57) Is number six basically saying

11 that if I'm a company that wants to sell off my

12 liabilities for whatever reason, they'll do a stamp of

13 approval, will be at the discretion of the director?

14 (26:14) That's true. And that's true

15 under the current statute as well. Under the sort of

16 current regime for dealing with these though are

17 requirements for paid-up policies are internal.

18 We've dealt with these. We know what we're looking

19 for. But in the interest of making sure that

20 everybody understands what the requirements are, we'd

21 like to build some of this into rule.

22 (26:44) Hey, Aaron, have we done an

23 analysis of the collateral that's put into the state?

24 Is it mostly being done with Surety bonds or is it

25 letters of credit? Do you have any feel for

-22- 1 what the collateral is that's up currently on former

2 self-insured employers?

3 (27:00) So at the moment, the only forms

4 that we'll accept are either a Surety bond or an

5 ISLOC. As to sort of the ratio between those and

6 between older security that we might be holding, I

7 can't actually speak to that. Can someone from --

8 (27:18) I can speak to that. This is

9 Jodie Howatt. Thanks for the question. In terms of

10 the inactive self-insured employers, the majority of

11 security holders are a mechanism of a Surety bond

12 in that we did not start accepting irrevocable

13 standby letters of credit until 2000.

14 (27:46) Okay.

15 (27:47) So I hope that answers your

16 question.

17 (27:48) And after the 62 months, the

18 division will always accept, or always, after looking

19 at it, a tail policy. So up until recently your

20 former self-insured, some of them, have purchased tail

21 policies that you guys have reviewed. But it's been

22 after the 62 months.

23 (28:05) That's correct.

24 (28:07) And how many have done that?

25 (28:08) Less than 20. I don't know

-23- 1 exactly.

2 (28:15) So many of them then would still

3 have some type of Surety bond out for if they -- if

4 you judge that there are still potential claims

5 coming in, even after 62 months?

6 (28:26) That's correct. And then in terms

7 of our active self-insured employers, I would say the

8 ratio's about 50:50 in terms of half of them use a

9 Surety bond mechanism and the other half use

10 (unintelligible.)

11 (28:48) I mean, I think the universe of

12 insurance companies that would write a tail policy for

13 a company that was big enough to be self-insured in

14 the state of Oregon, it would take on that evergreen

15 liability forever. (Unintelligible) relatively small,

16 they wouldn't be looking at the many different

17 insurance companies in terms of what

18 (unintelligible) be willing to do this. Especially

19 less than 62 months after. After the (unintelligible)

20 self-insurance. But it would only be the biggest

21 companies that would feel comfortable doing this, I'd

22 think.

23 (29:31) Aaron?

24 (29:32) Yes.

25 (29:35) This is Diana Burnette from

-24- 1 KPD. I just wanted to clarify. On number six it says

2 adopt provision that the director may consider the

3 relative sizes of an insurance reserve, and then

4 former self-insured employer's security deposit. So

5 are you referring there to the director having input

6 in the size of the security deposit that details

7 carrier is requiring of the former self-insured

8 employer?

9 (30:12) I don't believe so. This is Jason

10 Cupp. I believe what we're talking about is if we're

11 talking about a self-insured employer that has a

12 current security of, you know, $30 million, that

13 we're comparing relative to the size of the insurance

14 reserves. We don't want to put too much liability

15 onto a smaller insurance company if, for some reason,

16 they felt the need to write a policy of this type

17 (30:43) Got it. That makes sense.

18 (30:55) I provided this feedback to Lou

19 Savage before this became an issue on this agenda, and

20 I'll say it again. SAIF Corporation is kind of

21 curious as to why the division feels it's necessary to

22 promulgate rules for a program that really has very

23 little change from the previous program. It's the

24 difference between doing it as soon as somebody's

25 coming out of self-insurance and 62 months later.

-25- 1 We've been currently making these determinations kind

2 of an ad hoc basis, and so maybe we can sort of

3 suggest that giving yourselves the flexibility to make

4 those determinations adds (unintelligible) that the

5 law says is in the director's discretion, and I'm not

6 sure why you want to limit yourselves.

7 (32:00) Thank you. Does anybody have

8 anything else to add to the discussion on issue number

9 five?

10 (32:20) I also think that an insurer's

11 surplus is something to consider because reserves is a

12 liability. Surplus is actually an ability to take on

13 more risk.

14 (32:35) Thank you. Okay. Thank you for

15 your comments on that one. We'll move on to issue

16 number six, which is unfortunately kind of anomaly in

17 terms of the subject matter. But, it's something

18 which came up in the last couple of months.

19 This is concerning Division 50, Rule 45,

20 Section 1 on non-subject workers. The issue is that

21 some stakeholders have expressed concern that the

22 current rule does not make it clear that home health

23 workers who are employed by private agencies are

24 subject to the coverage requirements in workers'

25 compensation law.

-26- 1 Statute provides that a worker engaged in

2 household domestic service by private employment

3 contract, including a home health worker, is not a

4 subject worker. Current rule clarifies that the

5 worker engaged by private employment contract includes

6 a worker in the direct employment of the owner of a

7 private home.

8 Our understanding has always been that a

9 worker is only non-subject under the statute if they

10 are directly employed by the owner of the private home

11 where they work, because -- in other words, that

12 private employment contract refers specifically to

13 these kinds of arrangements, which actually is what

14 the rule set up into 2018 or so. Because the current

15 rule uses the word "includes", it can be read though,

16 however, as providing an example, which would imply

17 that there is a larger category of workers who are

18 also non-subject under the statute.

19 Stakeholders, including SCIU and the

20 Northwest Workers' Justice Project came to us a few

21 months ago to raise the concern that private home

22 health agencies may believe that their employees are

23 not subject workers based on this rule. In response

24 to that, we put out an industry notice clarifying the

25 standing of these workers under the law. And what

-27- 1 we're now proposing is to follow that up by amending

2 the rule to make that more clear.

3 So we have two proposals along those lines,

4 both amendments to the current rule. The first is to

5 clarify that private employment contract means a

6 contract under which the worker is directly employed

7 by the owner of the private home. The second is to

8 add to the rule that home health worker, as that term

9 is used in the statute, does not include a worker

10 employed by a home health agency or in-home care

11 agency, those being the kinds of agencies that can be

12 licensed to provide home care in Oregon. Anyone who

13 works for them would never be non-subject under this

14 rule since they would be employed by an agency rather

15 than a homeowner. But since this is a term

16 specifically referenced in statute, we thought

17 additional clarification might be desirable. I'll

18 open it up for discussion.

19 (35:43) This is Corina Spencer-Scheurich,

20 Northwest Workers' Justice Project, and I think that

21 helps clarify the concerns we've raised regarding the

22 regulation. Obviously, we think the private

23 employment contract definition basically, or what the

24 (unintelligible) intent is and how it should follow

25 the statue. So I think that --

-28- 1 and then the home health worker I think also

2 alleviates any concern that it's (unintelligible) more

3 people than it should.

4 (36:19) Thank you. Unless anybody else

5 has anything to bring up on that one, I will return

6 to issue number two, and we'll just be going through

7 these in chronological order from this point out.

8 Issue number two concerns Division 85, Rule

9 30, Section 7, premium assessment for self-insured

10 employers and groups. And the issue here is that the

11 process for waiving a self-insured employer's

12 reporting requirement is not well-described under the

13 current rule. As you all know, self-insured employers

14 are required to report and remit a premium assessment

15 each quarter, but the director can waive this

16 requirement after verifying that an employer has had

17 no Oregon payroll and thus owed no assessment for

18 consecutive quarters. This is not something which

19 happens very often, but it is a contingency that the

20 rules account for.

21 Current rule does not describe, however,

22 the process for granting one of these waivers or for

23 revoking one, which creates kind of two areas

24 procedural uncertainty. First, it's not clear from

25

-29- 1 the rule whether a self-insured employer must or can

2 request the waiver. Second, it's not clear whether a

3 self-insured employer must resume reporting premium

4 assessments if it resumes having Oregon payroll.

5 There's actually a small discrepancy there between the

6 assessment rules for self-insured employers and

7 insurers. For insurers, the rule says if you receive

8 a waiver but begin having premium again, you must

9 begin reporting again. There's no comparable language

10 for self-insured employers.

11 So just to kind of clarify, we're proposing

12 an amendment to the rule to read that the director can

13 waive the self-insured reporting requirement on

14 the self-insured employer's request and that the

15 waiver will remain in effect until the self-insured

16 employer has Oregon payroll. And I'll open that up

17 for discussion. Okay. Doesn't sound like anybody has

18 any feedback on that one, so I will move on to issue

19 number three.

20 Issue number three, still in Division 85,

21 still talking about Rule 30, Section 3, Subsection B.

22 The issue here is that the current rule does not

23 explain how the basic premium factors used in the

24 division's retrospective rating plan are determined --

25 or I should say perhaps will be determined going

-30- 1 forward.

2 Under rule, self-insured employers can

3 choose to have their assessable premium calculated

4 using either the normal method or a retrospective

5 rating plan developed by the director. Under a

6 retrospective rating plan, for anyone who is not as

7 familiar, an employer's final premium is adjusted

8 based on its actual losses during the policy period.

9 So its base or starting premium is lower than it would

10 be under the normal method in which premium is based

11 solely on expected losses and is not adjusted based on

12 the losses that actually do occur.

13 To determine an employer's base premium

14 under the division's retrospective rating plan, its

15 payroll is multiplied first by a base rate and then by

16 a basic premium factor that is less than 1.0, which is

17 the mechanism for lowering the premium. And an

18 employer's basic premium factor is based on its size

19 and the hazard group of its governing classification.

20 In the past, this was consistent with how

21 NCCI's retrospective rating plan was set up. Since

22 the two were compatible, we were able to base our

23 basic premium factors on those used by NCCI. In 2019

24 NCCI adopted a new methodology in which an employer's

25 basic premium factor is not based on its hazard group.

-31- 1 Instead, it's kind of a floating number that's unique

2 for each employer. Since the two methodologies are no

3 longer consistent, we're no longer able to base our

4 basic premium factors on NCCI's. What we would like

5 to do going forward is to have these basic premium

6 factors be determined by the Division of Financial

7 Regulation. And kind of in the interest of

8 transparency, we think that the rule should reflect

9 that method. So our proposal here is to amend the

10 rule to provide that the retrospective rating plan

11 will be developed by DFR and approved by the director,

12 in contrast to the current rule which says that it

13 will be both developed and approved by the director.

14 Any comments on that one? Yeah, please.

15 (41:54) Jeff DeHaan. Also, if you

16 (unintelligible) a retrospective rating plan that is

17 fully insured marketplace but retrospectively rated,

18 are you saying you would calculate it different than a

19 basic premium factor potentially than the insurance

20 company that's providing that? I mean because

21 (unintelligible) every retro plan is going to have a

22 basic premium factor that is agreed to or calculated

23 by the insurance company (unintelligible), is the

24 basic premium factor to be changing that in your

25 determination in terms of applying the

-32- 1 assessment?

2 (42:29) So, I'm sorry. I may not have

3 provided enough context for this. So this is -- the

4 retrospective rating plan discussed in this rule is

5 used only for calculating assessable premium for self-

6 insured employers.

7 (42:48) Okay. Okay.

8 (42:49 Yeah, sorry about that.

9 Okay. Unless anybody else has anything to add there, I

10 will move on to issue number six -- I'm sorry, issue

11 number four. I already talked about six.

12 Again, this is concerning Division 85, Rule

13 30, Section 7. The issue here is that current rule

14 does not require premium assessment forms to be signed.

15 As we were discussing a little earlier, self-insured

16 employers report and remit payroll quarterly which they

17 do use in either forms 900 or 937. These forms include

18 a signature field. But technically, under current

19 rule, there is no requirement that they be signed.

20 Since the data reported on these forms is sensitive and

21 its accuracy is important, we feel that they should be

22 signed. I should say that, in practice, people have

23 been signing them. But sort of as a best practice,

24 we'd like the rule to reflect that that is something

25 which we

-33- 1 require. So what we're proposing there is simply to

2 amend the rule to require assessment forms to be

3 signed by an authorized representative of the

4 self-insured employer. Yes?

5 (44:17) (Unintelligible) so do we

6 accept these forms (unintelligible.)

7 (44:22) I believe we do.

8 (44:23) And we would accept them

9 (unintelligible) signature?

10 (44:25) Yeah. All right.

11 (44:40) Is there a definition of who an authorized representative of the company is? 12

13 (44:48) There is not. Sort of an

14 internal discussions we've been having about this,

15 we've not wanted, necessarily, to create a firm limit

16 on what that might look like. It could be the person

17 filling out the form, a manager, an officer, whoever

18 the self-insured employer is comfortable authorizing

19 to sign the form on their behalf.

20 (45:17) Typically, the payroll officer

21 (unintelligible) given employer will sign those and

22 submit them because they --

23 (45:28) So in other words, somebody other

24 than the person filling it out.

25 (45:31) Right.

-34- 1 (45:33) All right. I mean,

2 (unintelligible) accept the signature of any person?

3 I mean how is there any oversight?

4 (45:40) There is some oversight. I

5 recently had an assistant run it for me

6 (unintelligible) process because of some

7 cross-training and somebody did reach out to us to

8 ensure that she was authorized to sign. So

9 (unintelligible).

10 (45:53) We may have to discuss not only a

11 signature but an accompanying title that would

12 confirm that this version does indeed, you know, work

13 for (unintelligible).

14 (46:11) I think besides just oversight, it

15 also has kind of an audit purpose as far as being able

16 to identify who exactly filled out the form. And it

17 provides the (unintelligible) assessment area the

18 ability to backtrack and contact the person if

19 there's a question about what happened or the company

20 sometimes, too, because sometimes one piece of the

21 company doesn't know what the other pieces are doing

22 as far as like, you know, you get the wrong person.

23 And so I think it has multiple purposes besides just

24 being able to -- for us to confirm that they're an

25 authorized user.

-35- 1 (47:00) All right. If there's no further

2 feedback on that one, that takes us out of the

3 numbered issues. There are a number of housekeeping

4 issues in both Division 85 and Division 50. I wasn't

5 intending to go through those one-by-one, but if

6 there's anything on there that caught anybody's eye

7 which they would like to discuss, we can certainly do

8 that. Perhaps the one thing that I had mentioned with

9 respect to Division 85 is that it has not been updated

10 in some time. And we feel that it's not necessarily

11 consistent with current plain-language requirements.

12 So the updates to that one are likely to be fairly

13 extensive. Of course, you'll get an opportunity to

14 look at those in advance of the hearing. And with

15 that, I guess we'll open it up for discussion of any

16 new issues people might have brought or any discussion

17 of the housekeeping issues.

18 (Silence)

19 All right. If there isn't any new business

20 then, I will turn it back to Fred. And thank you very

21 much.

22 (48:36) I just wanted to thank everybody.

23 We really appreciate your time. If you do have

24 additional information for us, you can send it to my

25 attention. Just an e-mail is fine. It doesn't

-36- 1 have to be anything formal. You may also just pick up

2 the phone and give me a call. I have business cards

3 over on the table; or, you may call Aaron directly.

4 Basically, I'm kind of just the conduit. So it's

5 going to flow through me to Aaron and the program

6 managers that have responsibility for these particular

7 rules. So if you can get that to us in the next week

8 or two, that would be very helpful so that it gives us

9 time to prepare rules in time for a timely filing.

10 We're looking at probably filing rules next month in

11 October for a November hearing, I think is the current

12 plan, because in the case of House Bill 3003, those

13 changes are effective January 1. And so that's the

14 bottom line. We have to have everything filed in

15 terms of permanent form and effective by January 1 of

16 2020.

17 So with that, we'll let you go. And just

18 feel free to get in touch. Thanks again.

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