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Changes in Reserve Calculations

Effective July 1, 2020, Ohio BWC implemented a new reserve system called ACES.  Based on a large sampling of claims, we’ve found that this system can drastically increase reserves for future claims costs - which will then impact premiums and Group Retro performance. A reserve is a dollar amount placed on every claim, in which the insurer (BWC) “reserves” assumed future costs within the claim. The concept of a reserve is considered standard practice in workers’ compensation insurance, even for self-insured employers.

Once a reserve is set, it will not leave the claim until the claimant has ceased medical treatment for at least six (6) months. The only other way to eliminate a reserve is through the process of a settlement. If a claim has a reserve when Ohio BWC’s September “snapshot” is taken - those reserves will be treated as dollars already spent on the claim, impacting premiums for the coming policy year. Lost time claims will see the largest impact, as medical reserves for 2019 were roughly four (4) times paid compensation and are now 19 times paid compensation.  This does not necessarily mean your company should consider salary continuation to soften the blow, as all claims have reserves. That should be discussed with your TPA on a case-by-case basis and not used as a remedy to avoid a lost-time claim with BWC.

We are expecting these changes to have an impact on Group Retro refunds for the 2020 policy year and beyond and will keep clients educated on their effects so they can make the best program choice each year.

Please email Matt Matusek if you have any questions.  Matt can be reached at mmatusek@spoonerinc.com.

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