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Before selecting retro- rating, it's often helpful to do a "what if' calculation of what the city's premiums would have been for each of the past few years if the city had had a retrospective rating plan in place. This can be a useful tool for cities evaluating retro - rating options. A city that's using a retro option should annually review that decision to make sure it still makes sense for the city. A good time for that review is when you receive the annual adjustment bill or refund, about six months after the city's expiration date The adjustment mailing includes the relevant loss and premium data, so you'll have the information you need and plenty of time to . review and make an informed decision for the upcoming renewal. Especially in your first year under a retro, it's a good idea also to look at your current -year losses after nine or ten months to see how you're doing and whether you want to continue with the retro at your renewal. A couple questions to ask when reviewing the retro option: • Are the funds available to cover the city's potential costs? Remember that even a single serious injury could be expensive enough to push the city's cost to the maximum for the year. Keep in mind too that claims from prior years sometimes re -open or increase in cost, which means that the city can owe, addition amounts for prior years as well. To use a retro is to retain risk, and when you retain risk it's critically important that that risk be funded — i.e., have a plan for where the funds would come from to cover the city's potential obligations under the retro. • Does the retro- rating option still make sense for the city? Are you still comfortable trading off certainty in costs for some potential savings? In light of your loss history and your safety program, are you reasonably confident that you'll be able to keep employee injuries down enough to save money in the coming year? For more information about the retrospective rating options, refer to the "Workers' Compensation Retrospective Rating Options" memo. Retro close -out option After five years, the city has the option to close out retro -rated coverage from previous years. If a city closes out the retro, no further adjustments are then made to the city's premiums under the retro -rated formula, regardless of what future changes there may be in the city's paid or incurred losses. The charge for the close -out is a percentage of the city's incurred losses for the coverage year in question. You may call Barb Meyer at 651 -215 -4173 to calculate your city's close -out charges. For more information about the retro close -out option, refer to the "Workers' Compensation Retro Close -Out Option" memo. Deductible options Under a deductible option, the city pays a lower premium in return for agreeing to reimburse LMCIT for paid medical losses up to a set deductible. If the city selects a deductible option, the deductible applies per occurrence to medical costs only. There are six deductible options ranging from a $250 deductible with a 2.5% premium credit to a $10,000 deductible with an 19.5% premium credit. - 5 - - 2 8 -