W. Va. Code R. § 85-18-14

Current through Register Vol. XLI, No. 45, November 8, 2024

Section 85-18-14 - Maintaining Self-Insured Status; Annual Review

14.1. The employer's status as a self-insured employer shall continue on a year-to-year basis so long as the employer continues to maintain the requisite financial standing and continues to satisfy the other requirements imposed by chapter twenty-three of the West Virginia Code and the rules promulgated thereunder, and any order of the Commissioner.

14.2. Annual review. The Commissioner will perform a comprehensive claims, financial, compliance and security review of each self-insured employer on an annual basis. The Commissioner may conduct an audit of all claims records, accounting records, books, records, papers, operations and documents deemed relevant by the Commissioner in the possession or control of the employer.

a. The Commissioner shall notify each self-insured employer of their annual review.

b. Upon notice of the Commissioner, each self-insurer shall file or make available for inspection, by whichever method specified by the Commissioner, all documents and information requested to perform an annual review on the self-insured employer. If any employer fails to make such records and information available for inspection, the Commissioner may recommend to the Industrial Council that the employer's self-insurance status be revoked or, in the Commissioner's discretion, impose penalties on the self-insured employer.

c. The Commissioner shall notify the employer of the results of the annual review or interim reviews if such reviews reflect a deteriorating financial condition.

14.3. Financial review. In the performance of its annual financial and security review, the Commissioner shall determine whether the self-insured employer continues to demonstrate sufficient financial capability to remain self-insured. All the following benchmarks must be met in order to demonstrate a financial position that is not deteriorating.

a. The most recent three years of audited financial statements must be analyzed through the most current Commissioner financial review model.

1. A score of medium to high must be met in the financial strength category.

2. A company cannot post net operating losses more than two years in a row.

3. The current ratio may not decline two years in a row and be at least one to one or may not decline 40% from one financial review to the next.

4. The total liabilities to total assets may not increase two years in a row or increase over 40% from one financial review to the next.

5. The auditor's opinion on the financial statements for the most recent fiscal year must not contain any comments indicating a deteriorating financial condition and/or express a going concern qualification.

b. In addition to meeting all of the preceding benchmarks, one of the following three benchmarks must be met to demonstrate a financial condition that is not deteriorating:

1. Cash flow from operating activities is greater than net income.

2. Total stockholders' equity has not declined two years in a row or over 40% from one financial review to the next.

3. An employer has at least three (3) of the six (6) profitability and solvency ratios fall within the industry median as reported by Dun & Bradstreet or other company specified by the Commissioner. The six ratios are:

A. Profit margin;

B. Rate of return on assets;

C. Return on net worth;

D. Current ratio;

E. Current liabilities to net worth; and

F. Total liabilities to net worth.

c. In addition to the annual review, the Commissioner reserves the right to take action against a self-insured employer based upon any information obtained by the Commissioner between annual reviews which reflects that the self-insured employer's company is in a deteriorating financial condition. The self-insured employer shall be notified of any such reviews or ensuing action.

14.4. The Commissioner reserves the right to review or audit, at any time, a self-insured employer's compliance with the requirements of chapter twenty-three of the West Virginia Code and the rules promulgated thereunder, and to otherwise ensure that, with regard to claims handling practices, the self-insured employer is not operating in an illegal, improper or unjust manner. The Commissioner may assess penalties pursuant to subsection 13.9. of this rule for all instances of non-compliance.

14.5. Security Responsibility. The self-insured employer is responsible for maintaining adequate security for its claims liability for:

a. Catastrophic occurrences, if required by the Commissioner;

b. Claims with dates of injury prior to July 1, 2004; and

c. In instances of a deteriorating financial condition, whether discovered during annual review or during an interim period, claims liability for dates of injury on or after July 1, 2004, as provided by this and other rules of the Commissioner.

14.6. Claims Responsibility. A self-insured employer with respect to all or part of the compensation fund is responsible for:

a. The direct payment of all pecuniary compensation due and owing under chapter twenty-three of the West Virginia Code and the rules promulgated thereunder to employees or employees' dependents;

b. The direct payment of health care provider and medical invoices; and

c. Reimbursing the Commissioner for any payments made by the Commissioner that should have been paid by the self-insured employer.

14.7. The self-insured employer shall pay pecuniary compensation payable by the employer and reimbursements due from the employer within the time periods specified by chapter twenty-three of the West Virginia Code and the rules promulgated thereunder and the orders of all adjudicatory bodies; or, in the absence of any of the above, employer shall pay the compensation and reimbursements in a prompt and timely fashion.

14.8. If the Commissioner determines that the security requires adjustment in light of the self-insured employer's current financial status or liability, the Commissioner shall recommend to the Industrial Council that the security requirements be adjusted. Prior to such action, the Commissioner shall notify the employer of the forthcoming recommendation to the Industrial Council and the reasons for the recommendation. The employer shall be provided thirty (30) days for written response to the Commissioner. The Commissioner shall provide a copy of any such employer response to the Industrial Council if the Commissioner recommends that the employer's security be adjusted.

14.9. The Commissioner shall report to the Industrial Council any acts of non-compliance by a self-insured employer which the Commissioner deems to be a major violation in nature and/or poses a significant threat to the self-insured community and its workforce. The Industrial Council may direct the Commissioner to terminate an employer's self-insurance status if the Council believes that the self-insured employer has shown an inability to carry out the responsibilities of being in self-insured status and that no other lesser penalties or corrective action plans would be effective. The Commissioner shall provide the employer with written notice of the termination.

W. Va. Code R. § 85-18-14