montana state fundleg.mt.gov/content/committees/interim/2015-2016/economic...2015/12/01 · msf...
TRANSCRIPT
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Economic Affairs Interim Committee
MontanaStateFundDecember1,2015
Overview
MontanaStateFund(MSF)
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MSF Overview
• Establishedin1915• CreatedinLawasaWorkers’CompensationInsurer‐ Non‐Profit,IndependentPublicCorporation
• ServesastheGuaranteedMarketforMontanaemployers
• Selfsupporting– frompolicyholderpremium–nottaxpayerdollars
• Governedbya7memberBoardofDirectors• AppointedbytheGovernor
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MSF Overview
• Insureapproximately60%oftheInsuredMarket
• $164.5MinAnnualPremium(FY2015)• 10,000NewClaimsReportedeachyear• 8,275OpenClaims
‐ 2,700MedicalOnlyClaims‐ 5,600WageLossClaims
• 25,900InsuredEmployers
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MSF Overview
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MSF Overview
Mission:Montana’sInsuranceCarrierofChoiceandIndustryLeaderinService.
Vision:MSFisCommittedtotheHealthandEconomicProsperityofMontanathroughSuperiorService,Leadership,andCaringIndividualsWorkinginanEnvironmentofTeamwork,CreativityandTrust.
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MSF Overview
• Safety‐ SafetyManagementConsultants‐ MSFSafetyWorkshops‐ Websites:SafeMT&NoJack‐ PromoteSafetyCulturewithMediaCampaigns‐ AssistingCharitableEndeavors(ACE)Grants‐ SafetyFestParticipation‐ WorkSafe Champions‐ Over200Alumni
• StayatWork/ReturntoWork
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MSF Overview –Fraud• SpecialInvestigationUnit(SIU)atMSF• Prosecution&InvestigationbyDepartmentofJustice(DOJ)
• Savingsof$62Msince1993• Januaryof2012‐throughJune2015:
– EmployerMisconductCases• 6convictions
– ClaimBenefitCases• 17convictions
– Restitution‐ Totaling$536,022
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MSF Overview –Fraud
• TheSIUreceivesreferralsprimarilyfrom:‐StateFundstaff
‐FraudHotline‐888‐MTCRIME (888‐682‐7463).
• TheSIUreceivesapproximately240investigationrequestsannually
– MSFhasSavingsonclaimsorfrompolicyholderpremiumsonmattersnotreferredtoDOJ
• $7,374,638inthelast3&1/2years
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What keeps us up at night?
• WorkForce– Aging/Retiringofskilledstaff• Asbestosclaims• HB334– realizingsavings• Economy– TighteningLaborForce,FinancialMarkets• RegulationandLegislation• AvailabilityandCostofMedicalServicesforInjuredEmployees
• Technology– providingtechnicalsolutionstomeetchangingdemands
• Data/CyberSecurity
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MSF Financial Condition
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MSF Financial ConditionNo Rate Increases since 2007
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Policyholder Equity as Compared to Loss Reserves
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MSF Financial Condition
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Impact of Investments(Investment Income and Unrealized Gains on Investments)
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• Extremelylong‐termobligationsassociatedwithworkers’compensationclaims,especiallyasmedicalcontinuestogrow
• MSFwritesonelineofhighlyregulatedinsurance• MSFwritesinasinglestate• MSFprovidesaguaranteedmarket• UncertaintyfromsignificantMontanabenefitchanges–mostrecentlyHB334
• MSFcannotaccessadditionalcapitaltocoveradversefinancialresults
• IfMSFbecomesinsolvent,thereisnoaccesstoGuarantyFund.
Why Equity?
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MSFneedsstrongerthanaveragepolicyholderequitytoaddresstheseissues
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MSF Financial Condition
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MSF Financial Condition$141M in Dividends Since 1999
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SB 279
MontanaStateFundBudgetReview
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MSF Budget FY 2016
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Total Approved Budget $178,331,825 Claim Payments $125,271,222
Operating Expenditures $53,060,603
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FY16StaffingwithPriorYearsFY16StaffingwithPriorYears
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FY14FTE FY15FTE FY16FTEDepartment YearEnd YearEnd Budget
CorporateSupport 33.00 34.00 34.00ExecutiveOffices 6.00 6.00 6.00GeneralCounsel 16.00 16.00 18.00HumanResources 6.00 7.00 7.00InformationTechnology 53.00 53.00 53.00Operations 138.00 146.00 146.00OperationsSupport 49.00 41.00 41.00ABP/ESPMProjects 3.00 1.00 1.00
TotalFTE 304.00 304.00 306.00
ComparativeExpenseRatios
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2011 2012 2013 2014 2015AverageofLargestMTCarriers* 36.6% 37.3% 36.8% 36.71% n/aMontanaStateFund 36.5% 31.2% 34.1% 22.0% 23.2%
Population 201439.8%36.7%33.8%
compensationcarriers.Thehighestexpenseratiointhisgroupingwas41.5%andthelowestwas30.3%
LargestMontanaCarrierscomparedtoMSF
*2014isthemostcurrentyearforwhichdataisavailableandamountsshownreflectsthetotalaverageforMTworkers
2015A.M.Best'sAggregates&Averages(Mostcurrentavailabledatafrom2014)
TotalUSPCIndustryWorkCompComposit
TotalUSPC‐StateFunds
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SB 123 Update
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SB 123 Implementation
• SignificantchangesforMSFatthestartofour2nd centuryofservingMontana
• TransferofregulatoryauthorityofMSFtotheStateAuditor’sOffice(SAO)–SB123– Regulationbegins‐ January1,2016– SAOReviewofRates‐ forrateseffectiveJuly1,2016
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SB 123 Implementation
MSFappreciatessupportforthetransition• StateAuditorsOffice• DepartmentofAdministration• BoardofInvestments• MPERA
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MSF will be treated similarly to private insurers
• SAOSolvencyandFinancialMonitoringofInsurers
‐ MSFwillbepreparedtomakethefollowingreports:
• Quarterly‐ financialreporting&monitoring‐‐May,AugustandNovemberof2016
• Annual‐ financialreport& monitoring‐CY16–fileinMarchof2017
• AnnualRBCReport‐CY16‐ fileinMarchof2017
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Risk Based Capital (RBC)
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Title 33 Private
Insurance Carriers
(As Percent of ACL)
SB 123 Criteria to
Apply to MSF
Company Action Level (CAL) 200% 400%
Regulatory Action Level (RAL) 150% 300%
Authorized Control Level (ACL) 100% 100%
Mandatory Control Level (MCL) 70% 70%
MSF will be treated similarly to private insurers, cont.
• RateReviewbySAO–– FirstfilinginMarch2016–forRateseffectiveJuly1,2016
– PreparedtrialratefilingforSAOinput
• SAOMarketConductandFinancialExaminations– MSFisreviewingandenhancingdocumentationandtraining
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MSF will be treated similarly to private insurers, cont.
• FormApprovalbySAO‐ FormsareinprocessofbeingsubmittedtoSAOforreviewandapproval
• ProducerLicensing‐ InhousestaffnowlicensedCasualtyProducers ‐ requiredJanuary1,2016
‐ WillreportallProducerAppointments
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MSF will be treated similarly to private insurers, cont.
• ApplicationforCertificateofAuthority‐ FiledinformationalApplicationonSeptember1,2015
‐ CertificateofAuthoritytobeissuedbySAO,effectiveJanuary1,2016
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MSF will be treated similarly to private insurers, cont.
• MSFisconvertingtoacalendaryearin2016:‐Financialreporting‐Financialstatements‐Investmentaccounting
• PolicyholderComplaintReporting,33‐18‐1001,MCA
‐EffectiveJanuary1,2016‐Guidelinedeveloped‐TrainingMSFemployees
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MSF will be treated similarly to private insurers, cont.
• CompliancewithNCCIrequirements‐MSFspecialclassificationsforAgriculture(0006),StateAgencies&CitiesandCounties
‐AdoptedbyCRCommitteeandinNCCIClassCodeinventoryfor7‐1‐16Rates
‐ExperienceModificationThreshold‐ of$5,000‐NCCIfiledandSAOapprovedforallinsurers‐Fornewandrenewalseffective7‐1‐16
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MSF will be treated similarly to private insurers, cont.
• CompliancewithNCCIrequirements‐ TransitionPlan–twoexceptionrequeststoSAO‐PerCapitaClassCodeforDomesticWorkers‐AnniversaryRatingDate(tobeeliminated5‐1‐17)
• MSFwilltrainemployeesoncompliancewithNCCIBasicManualrequirements
– ChangestocomputersystemforNCCIcomplianceinprocess
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SB 123 Implementation
• Budget&AnnualBusinessPlanningwillconverttoacalendaryearbasisonJanuary1,2016
‐ December11,2015BoardMeeting
‐ MSFComplianceOfficerhired
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SB 123 Implementation
– LegislativeAuditDivision’sauditofMSFwillcontinueonanannualbasis(CalendarYear)
– MSFwillreporttoEconomicAffairsInterimCommitteeeachinterim‐ toincludeBudgetUpdateperSB279andSB123Implementation
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SB 123 Implementation
• Thenext100YearsLookPositive– Financially– Operationally
• SB123ImprovedthepositionofMSF‐ AsaSAORegulatedWorkers’CompensationInsurer‐ InourroleastheGuaranteedMarketforMontana
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OLD FUND
Old Fund• Claims that occurred before July 1, 1990
• Legislature separated liability and designated separate funding sources
• 733 claims open as of June 30, 2015 • 713 as of November 30, 2015
• Average age of injured employee – 65.38
• In FY15 127 claims closed, 32 reopened
• For FY 2015 - 7 new claims in Old Fund (asbestos)
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Trend of Remaining OF Claims
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Towers Watson
FY Active Claims Loss Reserves (millions)
2005 1,120 $89.8
2006 1,002 82.9
2007 967 81.4
2008 951 71.7
2009 926 65.3
2010 898 58.8
2011 881 53.2
2012 827 48.5
2013 782 44
2014 794 38.8
2015 733 35.8
Old Fund
Accident Years: 1956 – 1975 ‐ Active Claims: 28
Accident Years: 1976 – 1982 ‐ Active Claims: 142
Accident Year Active Claims 1983 491984 551985 571986 711987 961988 921989 651990 78
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Old Fund• June 30, 2015 – Old Fund estimated unpaid losses and claims adjustment expenses are $41.6 million
– Old Fund cash flow estimates –ending approximately 2051 (see handout)
• Table above is for Loss only and does not include administrative costs or DLI assessment
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Towers Watson FRA AMI *
Loss Reserves (in millions) 35.8 59.5 101.5
* FRA assumption using 6/30/2014 AMI estimate and applying FY 15 payments
Questions?
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