Minnesota Statute Excerpt
Excerpt from Minnesota Statutes §79.35. Duties; Responsibilities; Powers
Minnesota Statutes § 79.34 to 79.40 create the WCRA and define its responsibilities and powers. As shown below, §79.35(d) specifically deals with the "pay-as-you-go" system for the unfunded layer (emphasis added).
The reinsurance association shall do the following on behalf of its members: . . .
(d) Calculate and charge to members a total premium sufficient to cover the expected liability which the reinsurance association will incur, together with incurred or estimated to be incurred operating and administrative expenses for the period to which this premium applies and actual claim payments to be made by members during the period to which this premium applies, for claims in excess of the prefunded limit in effect at the time the loss was incurred . . .
What is a Retention Limit?
A retention limit is similar to an insurance deductible dollar amount. Members select a retention limit, with a corresponding premium rate, for each calendar year. The Association reimburses members for all statutory workers' compensation loss payments in excess of the chosen retention limit.
Retention Limit Choices
Currently there are three retention options: a low, a high, and a super retention. The low retention is $500,000 with the high retention at two times the low, or $1,000,000, and the super retention at four times the low, or $2,000,000. The WCRA Board of Directors may change these retention limits over time, subject to approval by the Commissioner of Labor and Industry.
Before 2016, the low retention was indexed to the statewide average weekly wage and rose gradually over time as a result of increasing wages in the state. The high retention was set at two times the low retention while the super retention was set at four times the low retention. Before 1996, there were only two retention levels, with the low retention indexed to the statewide average weekly wage and the high level fixed at $200,000 higher than the low retention.
When to Select the Retention Limit
New WCRA members are notified of their retention level options as part of the licensing process conducted by the Minnesota Department of Commerce. The Department will not approve self-insurer authority until the WCRA receives a completed retention level form.
Every autumn the WCRA informs members of the retention limits available in the upcoming year. If a member wishes to change its retention level for the upcoming coverage year, the WCRA must receive the Retention Level Change form postmarked by December 1. If no form is returned, or it is postmarked after December 1, the retention level currently in effect is retained for the upcoming year. Members are not allowed to change retention levels during the coverage year.
How to Select the Retention Limit
In making your selection, carefully review the financial liability for each limit. When selecting the high or super retention over the low retention, your organization will want to carefully consider the substantial additional liability your organization will have to assume if you experience any serious workers’ compensation claims.
All insurers and self-insurer members that are affiliated or part of a holding company must choose the same retention level
How is Premium Calculated?
The WCRA charges annual premium each year sufficient to cover its expected reinsurance liability and associated expenses for that year. Each member's premium is based on the member's Minnesota workers' compensation exposure (exposure base) and the reinsurance rate for the retention level selected by the member. The WCRA calculates premium by multiplying each member's exposure base by the applicable reinsurance rate.
Every September, the WCRA Board of Directors determines the rates to be used to calculate the reinsurance premium for the next year. The rates correspond to the three retention level options (low, high, and super). Members who select the low retention limit are charged the highest rate due to the WCRA’s increased risk of exposure, with decreasing risk and decreasing rates for the high and super retention levels. In structuring the rates, the Board considers the effect of investment income in reducing the amount of premium revenue required to reimburse members for ultimate loss payments. A 2 percent premium tax is applied to all Self-insurer charges. Rates must be approved by the Commissioner of the Minnesota Department of Labor and Industry. To see current and historical WCRA rates click here.
WCRA Insurer Rates
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- pdf WCRA Retentions and Approved Rates (9 KB) - A table showing the yearly low, high, and super retention limits, and approved rates by retention. Although all WCRA members pay the same rate for similar coverage, self-insured members must pay state premium tax. (Updated 9/14/16)
Each year the WCRA charges annual premiums to its members for workers' compensation reinsurance coverage. The Board of Directors determines the premium rates based upon actuarial anaylses of the liability and associated expenses for the upcoming year. Premiums are calculated on the basis of a member's liability exposure (exposure base) and the reinsurance rate that corresponds to the retention level selected by the member.
August 15 - September 13
Self-insurer members provide experience rating loss data for the experience modification calculation by the WCRA for use in the upcoming coverage year. Data must be received by September 13.
The WCRA Board of Directors approves rates and retentions for the upcoming coverage year.
The Commissioner of the Minnesota Department of Labor and Industry reviews and approves the WCRA rate filing.
WCRA Rate Development Process Overview
Reinsurance renewal information is sent to WCRA members, including the Retention Selection Form with which members can confirm or change the level of reinsurance coverage for the upcoming coverage year.
View or download WCRA Retentions, Prefunded Limits, and Approved Rates
Retention Selection Forms must be postmarked no later than December 1. Forms postmarked later than December 1 will not be considered valid and a company's prior year retention level will apply to the next calendar year.
Reinsurance certificates and agreements mailed to members.
Reinsurance renewal notices mailed to members.
January - April
Self-insurer members provide payroll reports to the WCRA for the previous coverage year in order to allow the revision of their reinsurance premiums from estimated to actual.
February - May
Insurer members provide annual financial call information for the previous calendar year to the WCRA. The WCRA also receives copies of annual financial call information from the MWCIA. This data is used to support the revision of reinsurance premium from estimated to actual.
Self-insurer Hybrid members provide payroll reports to the WCRA for the previous two coverage years. This data is used to support the revision of reinsurance premium from estimated to actual.
The WCRA completes calculations of annual adjustments. Premium notices are sent to members.