Friday, December 18, 2009

Ontario Labour Critic calls for Competition with WSIB

One might assume legislation that makes a Canadian WCB the exclusive workers’ compensation provider would extend some certainty to that status. Recent developments in other jurisdictions could dispel that assumption.

A few years ago, West Virginia was an exclusive state fund workers’ compensation insurer. Today, it faces competition from private insurers in that state. The New Zealand Accident Compensation Corporation is about to have its exclusivity removed for the workers’ compensation portion of its mandate.

Ontario’s Workplace Insurance and Safety Board (WSIB) has been under financial pressure for some time. It currently has an unfunded liability of about 47%. In other words, WSIB has about half (53%) the money it needs to cover the liabilities—the health care, permanent disability and other benefits injured workers are entitled to.

The way out of this hole is not easy. Clearly, reducing the number and severity of workplace injury and disease cases is part of the solution but unlike BC, which has the main legislated responsibility for occupational safety and health, WSIB is only one player in the prevention role. The Road to Zero strategy requires substantive and continuous reductions in the injury rate in order to have any impact on the unfunded liability.

Other options for WSIB include increasing premiums and cutting benefits. With current premiums among the highest in Canada, there is little appetite for any increase in premiums. In a sense, employers in the WSIB system are already experiencing an intergenerational transfer of costs. The unfunded liability of today is predominantly a result of injuries that occurred in the past. Slashing benefits would clearly hurt those who already are bearing the entire human and much of the financial costs of work-related injury, illness and disease.

What about improving the return on investments? As every investor knows, investments that offer higher returns carry increased risk of large losses. With market volatility and economic uncertainty the way they are today, becoming more aggressive with investment strategies is probably not a great idea.

Recently, the Labour Critic for the Official Opposition in the Ontario legislature introduced a private members Bill to open WSIB to competition. Randy Hillier, who recently sought to lead the Progressive Conservative Party of Ontario, saw his Bill 219 debated in the legislature on November 19, 2009. An explanatory note contained in the Bill states:

The Bill amends the Workplace Safety and Insurance Act, 1997 to allow an employer, at any time, to opt to participate in an insurance plan that is offered by a private-sector insurer, instead of the insurance plan established under the Act, if the alternate plan offers benefits to the employer's workers that are comparable to those offered by the insurance plan as it exists under the Act as of the date that the amendments to the Act come into force. To exercise the option, an employer is required to file a notice with the Workplace Safety and Insurance Board containing the particulars specified in the regulations made under the Act.

As with most private member Bills, this proposed legislation was defeated after some debate. It is clear that the idea of opening the WSIB to competition has resonated with some. While research would suggest that competitive workers’ compensation systems are, on average, higher cost for employers, it is likely that the large unfunded liability in Ontario will keep this issue alive for some time to come.

1 comment:

Lance Nordstrom said...

Another concern with private workers compensation insurance is that the provincial fund becomes the insurer of last resort, which tends to weaken it's position even further. Low risk employers are attractive to private insurers, but those in high-risk industries may find it difficult to insure their employees in the private marketplace.