By: Bob Hopkins
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NEER vs. Rate Framework – Claims Management
NEER vs. Rate Framework: A Hospital wanted to know if there would be a financial impact from a returning employee after a 4-year absence.
A Hospital contacted my office this week to discuss a very interesting claim.
This particular Hospital operated the ambulance service for this community under a separate NEER account. They had a Paramedic who, in 2016, was granted a claim under the Board’s Presumptive Post-Traumatic Stress policy. This worker had received full Loss of Earnings benefits from the date of entitlement.
More than 4 years later this worker has been cleared by their treating physician and the WSIB to return to their pre-accident job. The Hospital has an opening that matches this worker’s skill set, and prior to their workplace illness, this worker was a model employee.
There are key points to remember with these claims:
- There is a risk of recurrence as that this employee will be returning to a patient-facing position
- The Hospital has met their re-employment obligation
This was the Hospital’s question: what is the best financial decision for the Hospital?
Under the NEER program, this claim pushed the Ambulance Rate Group beyond the maximum surcharge threshold. While this claim continued to draw cost from 2017 through 2020 their 2016 NEER year remained “maxed out”. Bringing this Paramedic back to the Ambulance service would not produce any savings for the Hospital.
However, in 2020 this claim has significant financial impact under the Rate Framework program. First, this Hospital no longer has two separate rate groups. All employees are reported under the primary business activity of the entity, in this case, the Hospital.
Note: If this employee suffered a set back in their mental health recovery due to a new workplace incident it is more than likely the new incident would reactivate the 2016 claim. In this case, this would result in no new NEER costs (as 2016 was maxed out) and would remain with a 2016 accident date (instead of a new claim in 2020) under the Rate Framework program.
In most instances, companies will be better off arguing a recurrence under the new program where this tended to have negative impacts under NEER.
Always discuss the claim cost strategy with your advisor before proceeding with a recurrence/new claim argument.
This is very important as the high claim costs of the ambulance service were co-mingled with the Hospital. The base premium rate for Hospitals is $0.87/$100 of payroll, slotting at risk band 60. The premium rate paid by this Hospital is $1.51/100 of payroll, 74% higher than the industry average, and risk band 71.
UNDER NEER ALL CLAIM COSTS ARE CHARGED TO THE YEAR OF THE ACCIDENT
UNDER RATE FRAMEWORK COSTS ARE CHARGED TO THE YEAR IN WHICH THEY ARE PAID OUT, FOR 6 YEARS POST ACCIDENT
When I reviewed the information on the Hospital’s Claim Detail statement, we saw the following:
Worker 2013 2014 2015 2016 2017 2018
NAME $0 $0 $0 $45,790 $50,302 $59,983
Weighting 1/9 1/9 1/9 2/9 2/9 2/9
Weight $0 $0 $0 $10,175 $11,178 $13,329
NOTE: The costs for 2019 will be applied in 2021, and the costs for 2020 will be applied in 2022. There is a “Gap Year” in the Framework model, just as there was in NEER
This claim will directly impact the future premium rates of this Hospital in 2019, 2020, and 2021. By re-employing this paramedic, the Hospital will reduce claim costs in 2020 and 2021. This will help reduce their premium rate in future years.
However, if the Hospital chose not to re-employing, citing that their 2-year re-employment obligation had ended this claim would continue to grow in total costs until December 31, 2021. It’s not claims management; its claim costs management.
NEER vs. Rate Framework
Rate Framework = String Theory It is critical to remember that claim costs never really go away. The best way to understand about the Rate Framework model is to compare it to a continuous length of a string. All parts of the string are connected even though they do not touch each other. While the direct costs of this claim will end in 2021, all premium rates in future years are directly connected to 2021, 2022, and every future year’s premium rate.