Terms of the Funding Review
WSIB FUNDING REVIEW TERMS OF REFERENCE: SUSTAINABLE FUNDING TO PROTECT ONTARIO’S INJURED WORKERS
WHAT’S THE PROBLEM?
Workplace injuries cost us all.
Individual workers who have been hurt on the job know about the costs to their health, their finances, and their prospects for the future. Employers know about the costs to their workforce, their productivity and their bottom line.
As a province, we share these costs and the toll that workplace injuries take on Ontario’s labour productivity, workers’ quality of life, and on corporate earnings. The work needed to secure our ability to meet these costs – as the labour market, workforce demographics, and our economy changes – is the focus of this Funding Review.
The Unfunded Liability
Ontario’s Workplace Safety and Insurance Board (WSIB) is funded by the employers of Ontario. Employers pay premiums for no-fault collective liability workplace insurance – coverage for their workers and insurance against unforeseen and potentially catastrophic loss.
Ideally, revenue from employer premiums along with investment revenue should form a fund that is equal to or greater than the costs of the system. However, over the last 25 years, revenues have fallen short of costs. The amount of money collected from employers and the income from the WSIB’s investments has been less than the cost of worker benefits and administering the WSIB.
This has created an unfunded liability (UFL) – a situation where the WSIB doesn’t have sufficient funds to cover the full future cost of claims that are currently in the system. In 1984 a plan was developed to retire the UFL – to reach 100% funding by 2014. However, a combination of benefit increases, rising health care and claim costs, artificially low premiums and financial market downturns has kept the goal of full funding out of the WSIB’s reach.
At the end of 2009, the UFL stood at $11.7 billion. It is projected to rise to $14 billion over the next three years.
Why Full Funding? Why Now?
The WSIB needs to improve its financial position by eliminating the unfunded liability and moving towards a fully funded system. This is the standard for most other Canadian workers’ compensation systems. With a fully funded system, future benefits are secure and employer premiums are lower.
Right now, the WSIB insurance fund is only large enough to cover about half of the future costs of claims that are currently in the system. Under the Workplace Safety and Insurance Act , “The Board has a duty to maintain the insurance fund so as not to burden unduly or unfairly any class of Schedule I employers in future years with payments under the insurance plan in respect of accidents in previous years.” WSIA s. 96(3)
But unfortunately, the WSIB depends on future premiums to pay for current liabilities. It has also had to draw on its long-term investment fund to cover shortfalls in current costs.
The WSIB has attempted to keep premium rates stable while maintaining worker benefit levels and paying down the UFL. In a strong economy, it was possible to make up premium revenue shortfalls with investment returns. Since 2001, however, investment returns have been insufficient to make up the shortfall in premiums to cover administration and benefit costs. The global economic crisis amplified this problem and highlighted the need for a more realistic approach to managing the WSIB’s insurance fund.
In his 2009 Annual Report, the Auditor General of Ontario commented on the challenges of matching employer premiums to benefit costs, the role of government, pressures created by changes to benefits, and the WSIB’s investment strategy. The report also raised concerns about the size of the UFL and its impact on the future viability of the workplace safety and insurance system. This has highlighted the need for immediate action and a plan to address the UFL.
HOW TO SOLVE THE PROBLEM: UNDERSTANDING THE FACTS, CONSULTING THE STAKEHOLDERS, GETTING INDEPENDENT ADVICE
Mandate
The WSIB has established an independent third party year-long Funding Review. It will consult broadly with workers, employers, representative organizations and knowledgeable experts in public meetings across Ontario, and online, to gather views on a number of specific public policy issues relating to the WSIB’s financial future.
The Chair of the Funding Review will seek a consensus on the best approach to addressing the UFL and related issues. However, with or without consensus, the Chair of the Funding Review will produce a report on the consultation results and make recommendations to the WSIB in order to guide it towards a more stable financial future.
To establish the scope of the Funding Review, the WSIB has set out its long-term vision for Ontario’s workplace safety and insurance system, defined the mission of the Review and the principles that will guide it, identified a number of specific issues that the Review must examine and procedural guidelines for the conduct of the consultation process.
Funding Review Vision: A fully sustainable system that will eliminate the UFL and protect the long-term integrity of the workplace safety and insurance system in Ontario.
Funding Review Mission: To give WSIB stakeholders an opportunity to review the current pressures on the workplace safety and insurance system and provide input on issues related to the fiscal health of the WSIB.
Guiding Principles
The following principles will guide the work of the Funding Review:
- Improving the funding position of the WSIB is important for building a financially sustainable and affordable workplace safety and insurance system.
- All employers covered by the WSIB must contribute to the full cost of running the system. Workers must co-operate with the WSIB, their health professional and their employer to help them recover and – when medically advisable – return to safe and sustainable work.
- The Funding Review will consult broadly on a range of public policy issues related to the WSIB's financial future.
- The Funding Review will share as much information as possible with the public, stakeholders and experts to ensure full understanding of the issues before it.
- The WSIB will respect the independence of the Chair of the Funding Review in organizing the consultation process and in formulating his recommendations. The Chair of the Funding Review will conduct the review in accordance with these guiding principles and within the scope of issues set out in this document.
Scope
The Funding Review is designed to provide the WSIB with stakeholder input on a range of issues, including:
- Funding: What should the WSIB set as its funding target? What is a reasonable time frame for the WSIB to reach its funding target, having due regard to the impact on employers? What can the WSIB do to manage costs more effectively?
- Premium rates: Is the current WSIB premium rate setting methodology appropriate? Should premium rates increase until the WSIB’s funding target is reached?
- Rate Groups: Is WSIB’s Rate Group structure appropriate, given the principle of collective, no fault liability? What opportunities exist to simplify the Rate Group structure?
- Employer incentives: Is the present design and operation of these programs appropriate? What alternatives exist to promote increased safety in the workplace, fairness in insurance costs to the employer, and incentives to employ injured workers?
- Occupational disease claims: How should occupational disease claims be compensated and funded? Should they be a collective liability or charged back to specific employers? Should the WSIB establish a special fund for occupational disease claims
- Benefits Indexation: What form of indexation would be fair for partially disabled workers?
Governance and Accountability
The Chair of the Funding Review will provide periodic briefings to the President/CEO of the WSIB who will provide status updates and report on the review’s progress to the WSIB Board of Directors on a regular basis.
Consultation Process
The Chair of the Funding Review will lead a year-long consultation to meet with workers, employers and their representatives in locations across Ontario.
An advisory group of four (4) distinguished individuals will support the Chair of the Funding Review, providing guidance and advice during the Review process. The Chair of the Funding Review will be responsible for producing a final report on the Funding Review.
The Funding Review will also be supported by expert resources as needed. The WSIB will support the Review through financial analyses of claims and benefits history and projections, and alternative scenario building. Outside expertise will also be retained to model various alternatives and to research comparisons with other jurisdictions.
Members of the WSIB executive team may be requested to attend some sessions in order to provide context for various issues and answer questions.
Consultation sessions will be organized so as to ensure balanced exposure to the views of worker, employer and other stakeholders.
Detailed notes on stakeholder feedback will be taken at each consultation session.
Written submissions addressing the questions raised in the Funding Review consultation paper can be submitted in hard copy to:
WSIB Funding Review
200 Front Street West, Toronto, Ontario M5V 3J1
Electronic responses to the questions can be submitted using the “Submit your comments” links within this electronic consultation document or via e-mail to [email protected]
Written hard copy and electronic submissions will be accepted until two weeks before the date of the consultation where they are to be submitted, or if not submitted at a consultation, until August 31, 2011.
Consultation Schedule
In order to reach key stakeholders face to face, consultation sessions will be specifically aimed at employer and workers in key locations (to be determined) across the province.
An interactive website www.wsibfundingreview.ca will provide stakeholders who cannot attend a consultation session with the opportunity to submit questions and comments.
The Funding Review will take place in five phases:
Phase One – October to December 2010
- Chair of Review holds introductory meetings with key stakeholders, their professional advisors and other experts.
- Posting of background papers on the WSIB website.
Phase Two – January 2011 to April 2011
- Release of a Green Paper for consultation outlining key issues and providing data and analysis for various options and scenarios for discussion.
- Public consultation sessions across Ontario.
- Chair of Review meets with large employers, small and medium enterprise employers and employer advocacy organizations/associations.
- Chair of Review meets with workers, worker representatives, and labour advocacy organizations/associations.
Phase Three – June 2011 to September 2011
- Chair of Review meets with key stakeholders to share preliminary consultation results.
- Phase Four – September 2011 to November 2011
Chair of Review reviews consultation findings.
- Chair of Review discusses options and recommendations with key stakeholders.
Phase Five- January 2012
- Chair of Review provides report to WSIB
Deliverables
- A report by the Chair of the Funding Review will be provided to the WSIB by the beginning of 2012.
- A report summarizing stakeholder submissions and responses to the consultation questions will be published on the WSIB website as soon as it is available.
- A separate summary of stakeholder comments on benefit indexing, along with recommendations from the Chair of the Funding Review will be provided directly to the government.
- The Funding Review report itself, together with a response to the report from the WSIB, will be published as soon as possible following receipt of the report.