REFERENCE TITLE: workers' compensation rates; deviation





State of Arizona

House of Representatives

Fifty-sixth Legislature

Second Regular Session





HB 2204


Introduced by

Representative Livingston









An Act


amending sections 20-343 and 20-359, Arizona Revised Statutes; relating to rates and rating organizations.





Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 20-343, Arizona Revised Statutes, is amended to read:

START_STATUTE20-343. Definitions

In this article, unless the context otherwise requires:

1. "Association" means a domestic nonprofit corporation with a professional, commercial, industrial or trade character of business.

1. 2. "Board" means the workers' compensation appeals board established by section 20-367.

2. 3. "Classification plan" means the plan or system that groups industries, occupations or operations with a similar exposure to loss into rate classifications for workers' compensation rating, rate making and statistical reporting purposes.

3. 4. "Designated rating organization" means the rating organization selected by the director pursuant to section 20-371, subsection F.

4. 5. "Designated statistical agent" means the organization designated by the director under section 20-371, subsection D.

5. 6. "Experience rating plan" means a mandatory rating plan for all eligible insureds that establishes a workers' compensation rating procedure that compares the actual loss experience of individual insureds to the industry average for the same classification with differences reflected in the insured's premium.

6. 7. "Schedule rating plan" means a rating plan by which an insurer increases or decreases workers' compensation rates to reflect the individual risk characteristics or the loss ratios of the subject of insurance.

7. 8. "Statistical plan" means the plan, system or arrangement used in collecting workers' compensation data.

8. 9. "Uniform plan" means a workers' compensation statistical plan, classification plan or experience rating plan designated by the director pursuant to section 20-371, subsection J.

9. 10. "Uniform rate filing" means the rate filing that is made by the designated rating organization and that includes all of the workers' compensation rates to which insurers transacting workers' compensation insurance in this state shall adhere except as provided in section 20-359, subsections A and B. Uniform rate filing also includes the expected loss ratios, ballast factors and other factors promulgated by the designated rating organization for the uniform experience rating plan.

10. 11. "Workers' compensation rates" means rates for workers' compensation and employers' liability insurance incident to and written in connection with workers' compensation. END_STATUTE

Sec. 2. Section 20-359, Arizona Revised Statutes, is amended to read:

START_STATUTE20-359. Deviations from filed workers' compensation rates

A. Every insurer shall adhere to the filings made by the rating organization of which it is a member, except that any member insurer may file with the director:

1. Up to six uniform percentage deviations that decrease or increase the statewide rate portion of the rating organization's rate filing. If more than one deviation is filed by an insurer, each deviation must be established consistent with the underwriting rules that are based on criteria that would lead to a logical distinction of potential risk.

2. A subclassification rate related rule that deviates from the rules or schedule rating plan filed by the insurer's rating organization.  An insurer shall not simultaneously apply a deviation and a schedule rating to the same insured risk.

3. A premium credit of not more than five percent from the rating organization's UNIFORM rate filing based on a policyholder's MEMBERSHIP in an association.

B. In addition to the six uniform percentage deviations authorized under subsection A, paragraph 1 of this section, insurers covering firefighters and fire investigators may file one uniform percentage deviation that increases the statewide rates under the rating organization's rate filing for the class codes associated with firefighters and fire investigators to address the anticipated increase in losses and expenses for claims that are compensable pursuant to section 23-901.09.  The deviation filing shall be accompanied by an analysis from an actuary that substantively illustrates the basis for the rate increase, including information made available by the industrial commission of Arizona pursuant to section 23-971 and the anticipated and, when available, actual combined loss ratio, claim frequency and claim severity associated with these claims.  The supporting documentation submitted with the filing must be sufficient to allow the department to assess the reasonableness of the insurer's assumptions and justification for the deviation and shall include data related to workers' compensation indemnity and medical claims and administrative expenses associated specifically with presumptive coverage related to workers' compensation claims. The insurer may use data or analysis analyses from any of the following sources:

1. The insured or insurer.

2. Self-funded employers providing workers' compensation.

3. The industrial commission of Arizona.

4. A risk retention pool.

5. Studies and information illustrating the state and national frequency of cancer among firefighters and fire investigators.

6. The assigned risk pool or assigned risk.

7. Claims and expense data from other relevant lines of insurance such as long-term disability insurance, group or individual major medical insurance or long-term care insurance.

8. Other available cancer-related statistics.

9. Relevant incurred but not reported workers' compensation claims data.

C. The director may use independent contractor examiners to analyze the supporting justification of a requested deviation under subsection B of this section pursuant to section 20-358, subsection D.

D. Notwithstanding subsection A, paragraph 2 of this section, in addition to the deviation filing authorized under subsection B of this section, insurers may file and apply a schedule rating plan to adjust premiums associated with firefighters and fire investigators class codes, based on loss control programs or activities undertaken by the insurer to reduce losses associated with section 23-901.09.  The schedule rating plan must be filed with and approved by the director and shall be in addition to and separate from any other schedule rating plan available to the insurer.

E. Each deviation filed shall be on file with the director for a waiting period of at least thirty days before it becomes effective, except that a deviation filed pursuant to subsection B of this section shall be on file with the director for at least sixty days before it becomes effective. On written application by the insurer making the filing, the director may authorize a filing to become effective before the waiting period expires. A deviation that is filed pursuant to subsection A, paragraph 1 of this section and that is not disapproved by the director expires the following December 31 at midnight in this state unless the director terminates the deviation sooner. A deviation that is filed pursuant to subsection A, paragraph 2 of this section continues until the insurer withdraws the deviation or the director determines that the deviation no longer meets the standards prescribed in section 20-356, paragraph 1. At any time the director may require an insurer to actuarially support a deviation. The insurer that files the deviation shall simultaneously send a copy of the filing to the rating organization of which it is a member and to any designated rating organization.

F. A rating organization shall notify the director if the organization disapproves any deviation relating to workers' compensation insurance. The director shall notify the industrial commission of Arizona of the disapproval within ten days after receipt of the disapproval from the rating organization. END_STATUTE