On September 16, 2019, Division of Insurance Hearing Officer Jean F. Farrington approved a stipulation between the Workers’ Compensation Rating and Inspection Bureau of Massachusetts (“WCRIB”), the Attorney General, and the State Rating Bureau to eliminate the practice of assigning an Anniversary Rating Date to a workers’ compensation insurance policy that differs from the Policy Effective Date.
Proposal to change Workers’ Compensation Manual to eliminate dual policy dates
Most workers’ compensation policyholders have a contract where the annual rating date for rates, experience modification factors, and premiums being adjusted or changed is the renewal date of their policy.
Cancellations, policy rewrites, or other changes that affect rating can, under the present workers’ compensation manual, result in an insured have an Anniversary Rating Date differing from an insured’s Policy Effective Date.
On April 29, 2016, the WCRIB filed a proposal that would amend its workers’ compensation manual by adopting revisions proposed by the National Council on Compensation Insurance (“NCCI”). The NCCI revisions effectively eliminate this dual date issue.
Anniversary rating date endorsement advises insureds rating date different from policy renewal date
In Massachusetts, approximately ten (10%) of the workers’ compensation policies issued have a Policy Effective Date that is different from the policy’s Anniversary Rating Date.
The policyholders that have such dual dates presently have NCCI endorsement WC 00 04 02 attached to their policies.
This endorsement simply states:
ANNIVERSARY RATING DATE ENDORSEMENT
The premium and rates for this policy, and the experience rating modification factor, if any, may change on your anniversary rating date shown in the Schedule.
Schedule Anniversary Rating Date______(Month)______(Day)
The purpose of the anniversary rating date endorsement is to reconcile, contractually, the situation in which the insurance company uses the rates that were effective at the anniversary rating date rather than those effective at the renewal date. Ninety (90%) percent of Massachusetts insureds never see this endorsement because their anniversary rating date and their policy’s renewal date are the same.
Rule avoids more than one set of rates, rules or classifications applying in one policy period
The rationale for the new rule is to remove the confusion that results when the two dates are not the same, a situation that may arise, for example, when a policy covers business operations in more than one state, and to make Massachusetts rules consistent with the approach used in most other states. If the two dates are not identical, the rules, classifications and rates are applied as of the Anniversary Rating Date, with the result that more than one set of rates, rules, or classifications may apply during the policy period.
No opposition at hearing
After a public notice, on June 15, 2016, the Division of Insurance held a public hearing. At that meeting only two persons spoke, Matthew Mancini, Esq., Director of the State Rating Bureau and Mina Makarious, Esq., representing the WCRIB. No additional written comments on the proposed revisions were received in the course of this proceeding either.
The Attorney General filed an appearance, but ultimately made no comments on the filing.
At the close of the hearing, the parties, the WCRIB, the State Rating Bureau, and the Attorney General indicated that they expected to file a stipulation to resolve the issue.
Stipulation to refund increases to insureds whose premiums increase
On September 16, 2016, the parties submitted a stipulation. The stipulation proposed to eliminate the Anniversary Rating Date, effective May 1, 2017.
The mechanics of the endorsement’s elimination, as laid out in the stipulation, provided that on or before March 15, 2019, the WCRIB would identify:
- Massachusetts workers’ compensation policyholders whose workers’ compensation insurance premium increased during the period between May 1, 2017 and June 30, 2017, as the direct result of eliminating the Anniversary Rating Date on May 1, 2017; and
- the amount of the increase.
Under the stipulation, if the increase is $50 or more, the WCRIB will refund the increase to the policyholder. The stipulation also provides that the WCRIB will provide the Attorney General and the State Rating Bureau with a list of (1) policyholders whose premium increased, (2) the amount of the increase and (3) the refunds issued, and (4) any data or calculations that will allow them to verify the WCRIB’s actions.
In its filing, the WCRIB stated that it did not expect the rule change to affect statewide premiums. The filing claimed that, because a high percentage of Massachusetts policies now have identical Anniversary Rating Dates and Policy Effective Dates, the proposed rule change would not affect a large number of employers.
The WCRIB provided the hearing officer with no estimate of the economic effect of implementing the rule change on current policyholders. The WCRIB stated that it could not do so because “there is no single formula for establishing differences between Anniversary Rating Dates and Policy Effective Dates that might provide some basis for estimating the economic consequences of the rule change.”
Hearing Officer approves stipulation
The Hearing Officer approved the stipulation, as submitted, on September 16, 2016, stating: “, we approve the Stipulation, which shall apply to new and renewal policies issued on and after May 1, 2017.”
“…the Stipulation provides an appropriate method for ensuring that workers’ compensation rates for policyholders affected by the elimination of the Anniversary Rating Date endorsement as of May 1, 2017, will be ‘not excessive, inadequate, or unfairly discriminatory for the risks to which they respectively apply, and fall within a range of reasonableness.’”
