What Prospective Billing Means for Your Business

The Ohio Bureau of Workers’ Compensation joined much of the rest of the insurance industry when it switched from retrospective to prospective billing in summer 2015.

“The new system was a long-overdue upgrade that brought Ohio in line with the industry standard, and provides employers with more flexibility as they are better able to plan for paying their premiums,” says Melissa Vince, public relations manager for the Ohio BWC.

Prospective billing is part of the BWC’s efforts to modernize its operations, according to the BWC’s website. Advance billing allows for more flexible payment options, up to 12 monthly installments, and employers’ increased ability to forecast and budget for their workers’ comp premium payments.

iStock_000071111607_FullWith the switch to prospective billing, the BWC has better opportunities to provide quotes online or over the phone.

The plan also provides for a 2 percent decrease in base rates for private employers, and 4 percent for public employers. It also increases the BWC’s ability to detect fraud and non-compliance, which can lead to long-term savings for employers.

This billing change impacts all employers, both public and private, that pay into the State Insurance Fund and are not self-insured.

Prior to the new plan the bureau collected premiums in arrears, after extending coverage to employers. Vince noted the BWC, buoyed by its strong financial condition, was able to ease employers’ transition to the new billing system by providing them with a $1.2 billion premium credit.

Prospective billing took effect July 1, 2015 for private employers while public employers joined prospective billing on Jan. 1, 2016. But both are impacted by a transition time, which, for public employers, will occur at the beginning of 2017.

“Although private employers changed to prospective billing last year, the transition process is not fully complete and we’re working to educate employers about the next step, called (payroll) true-up,” Vince explains. “True-up is a new process that requires employers to report their actual payroll for the previous policy year and reconcile any differences in premium paid.

“This is an important step that is necessary for BWC to accurately calculate premium,” she says. “It’s also critically important for employers to maintain their policy and participation in their current rating plan or discount programs.”

Even if their payroll for the year matches the estimate they receive from the BWC, employers must complete the true-up report, Vince adds.

Reports must be submitted online at bwc.ohio.gov or by phone at 1-800-644-6292.

“We’re encouraging employers create an e-account that allows them to manage their policy, pay bills and complete the payroll true-up,” Vince says.

According to a March 3 BWC blog, prospective billing appears to agree with employers. Not only are employers grasping the new process, the blog reports, they’re satisfied to have new payment options that best fit their business needs.

According to the blog, the BWC is now communicating more than ever with customers through email, sending workerscompemail reminders before policy installment due dates when policyholders have not already made payment.

“One of the best ways to measure our success in this (transition) communication is how many employers maintain active coverage, and that number is 95 percent,” the blog states, refuting an initial concern about employers having more opportunities to lapse their coverage.

Overall, the numbers of lapses have decreased since transitioning to prospective billing. With 95 percent of private employers maintaining active coverage, that leaves just 5 percent, or around 13,000 policies, in a lapsed status. To put this in context, under the previous retrospective system between 40,000-45,000 policies typically lapsed every six months. That represents around 17 percent of overall policies.

The BWC has a plan for getting policies reinstated that involves both emails and personal phone calls for a few weeks after the lapse date.

Vince also says that there are also deadlines that relate to the process for switching to the new prospective billing system, and some deadlines for applying for participation in various BWC programs have been adjusted because of the new billing system as well.