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ARIZONA STATE SENATE

Fifty-Third Legislature, Second Regular Session

 

FACT SHEET FOR H.B. 2025

 

workers' compensation; rate deviations

 

Purpose

 

Allows an insurer to diversify workers' compensation subclassification rates for different risk groups within a single insured company.

 

Background

 

The Department of Insurance (Department) oversees insurance rate regulation to promote the public welfare and prevent discriminatory rates (A.R.S. § 20-341). Current law designates the National Council on Compensation Insurance (NCCI) as the designated rating organization for the annual making and filing of workers' compensation rates (A.R.S. § 20-371). The filing, known as a uniform plan, assigns differing rates based on industry classifications and specific job classifications.

 

A workers' compensation insurer may submit a uniform percentage increase or decrease to the uniform plan, referred to as a deviation, to the Department and NCCI. For each rate filing, the insurer may apply either: 1) a uniform percentage increase or decrease; or 2) a schedule rating plan reflecting the individual risk characteristics of the insured subject. The Department may require actuarial substantiation of a deviation at any time (A.R.S. § 20-359).

 

Legislation enacted in 2017 allows an insurer to group employers based on their respective experience and propensity for loss, also known as a tiered rating system (Laws 2017, Chapter 267). This system allows an insurer to distinguish between employers with varying risk profiles by applying one deviation to a group of employers with a historically high loss history and a different deviation to employers with a historically low loss history. Current law requires an insurer to apply either a deviation or a schedule rating plan to a single insured employer.

 

There is no anticipated fiscal impact to the state General Fund associated with this legislation.

 

Provisions

 

1.      Allows a workers' compensation insurer to apply both deviations and schedule ratings to an insured employer, but not both to a single risk group within the employer.

 

2.      Becomes effective on the general effective date, retroactive to March 1, 2018.

 

 

 

House Action

 

BI                    1/11/18     DP     8-0-0-0

3rd Read          1/29/18               59-0-1-0

 

Prepared by Senate Research

February 21, 2018

GH/lb