WorkSafe admits it's taken a risk with employer premiums

WorkSafe New Brunswick is acknowledging it’s gambling with the pool of money it uses to cover benefit claims for injured workers even as the CEO warns that a market crash could hit the fund at any time.

Crown corporation announced this week it will change the way it calculates premiums charged to businesses

Dorine Pirie, the chair of WorkSafe New Brunswick's board, appeared at a legislative committee hearing Wednesday. (Jacques Poitras/CBC News )

WorkSafe New Brunswick is acknowledging it's gambling with the pool of money it uses to cover benefit claims for injured workers — even as the CEO warns that a market crash could hit the fund at any time.

The Crown corporation announced earlier this week it will change the formula it uses to calculate premiums that employers must pay to fund benefit claims.

WorkSafe's policy has been to collect 110 per cent of the money required to cover the forecast cost of all claims, or more than it needs.

But facing complaints from employers that premiums are rising too fast, WorkSafe's board announced this week it will require only 100 per cent of claim costs in the fund.

That increases the chance the fund will be overdrawn if there's a spike in claims or a downturn in the markets where the money is invested.

"Now there's risk, and we know that," board chair Dorine Pirie told reporters during a break in legislative committee hearings Wednesday.

"It's kind of a calculated risk."

The change allowed WorkSafe to avoid an even larger premium increase on Jan. 1, 2018.

It's kind of a calculated risk.- Dorine   Pirie , chair of WorkSafeNB board

Employers have called for a fix for soaring rates, but Joel Richardson of Canadian Manufacturers and Exporters said his members are "very, very concerned" about WorkSafe's decision.

"There is a significant risk associated with that," he said. "Arbitrary financial decisions by the board of WorkSafe on a year-by-year basis is not really prudent financial management.

"The CEO of WorkSafe can say on the one hand they're long-term thinkers. On the other hand they're saying they're planning rates on a one-year basis, without thinking about the future and the potential impact this could have on the province, on employers, and on employee benefits. It's an extremely risky move from our perspective."

Market warning

WorkSafeNB CEO Tim Petersen says he expects the fund from which workers' claims are paid will be a victim of a financial crash at any time. (CBC)

In fact, WorkSafe CEO Tim Petersen told the legislature's Crown corporations committee Wednesday that he expects the fund, which is invested in the markets, to be the victim of a financial crash at any time.

"We're in year eight of a bull market and a market correction is coming soon," he said. "We need to be aware of that."

If markets tanked and the fund was short of money, WorkSafe would be required by law to add surcharges to its premiums, a step Richardson said would further punish employers.

WorkSafe announced this week it will raise premiums from $1.48 per $100 of payroll to $1.70 on Jan. 1. Without the policy change, the increase would have been to $1.93.

Last year, WorkSafe rates jumped from $1.11 to $1.48, setting off a wave of complaints from employers. In May, Donald Arseneault, the labour minister at the time, called on the Crown corporation to find a way to avoid a similar increase for 2018.

"I do not want to see that happen again," he said.

No political pressure, chair says

Pirie said the decision was the result of "serious and intense" discussions with employers, not from political pressure.

"Yes, there was direction given to us, but it was only an ask that we keep the rate increase to a minimum," she said. We were mainly listening to our employers.

"I don't feel, did not feel, and I have not felt throughout this process political pressure to do anything."

The shift in policy is only for one year, but Pirie said it was not timed to push the problem past the September 2018 election.

She said it's because a government-appointed task force is in the midst of studying a longer-term solution.

"We're so much in favour of that," she said. "We're waiting to see what they have to say."

Pressure on premiums

Petersen spent part of Wednesday's legislative committee hearing telling MLAs why premiums were going up.

He said decisions by the Workers' Compensation Appeal Tribunal were forcing changes to WorkSafe policies that were leading to greater coverage.

Vice-president Shelley Dauphinee said one tribunal decision affecting workers with pre-existing conditions means that "in many cases we are not able to end a claim for any reason other than full recovery."

That means a worker injured at work who recovers from the injury but still has the previous illness is still covered by WorkSafe for "a lot longer."

Richardson said he has heard of situations where workers with diabetes or arthritis are still being paid by WorkSafe long after they've recovered from their workplace injury.

"Is WorkSafe paying health care benefits to people away from Medicare?" Richardson said. "Are Medicare costs being diverted from the provincial government onto WorkSafe?"

Petersen acknowledged Wednesday that WorkSafe has not asked the courts to overturn any of the appeal tribunal decisions.

He said WorkSafe would probably go to court if the tribunal forces the Crown corporation to retroactively pay claims dating back years, something he said would cost hundreds of millions of dollars.

Rehab centre won't be privatized

Pirie also responded Wednesday to a CBC News report that an internal government review was recommending that services at WorkSafe's Worker Rehabilitation Centre in Grand Bay-Westfield be outsourced to the private sector.

The review said only a small number of workers were using the centre but at a high cost, a financial burden that is absorbed by premiums.

It also said the number of workers treated at the centre who return to work has declined.

Pirie said it was too soon to say if WorkSafe would agree to the recommendation.

"You can't just jump on that and say that's the answer," she said. "The board has to review that. … We'll consider it, absolutely."

But Gilles LePage, the new labour minister, released a statement Wednesday saying the government "does not support privatizing" the centre as a way to reduce costs.