Current through Register Vol. 63, No. 3, March 1, 2024
(1)
General qualifications. To qualify as a self-insured employer, the
employer must:
(a) Establish proof that the
employer has an adequate staff qualified to process claims;
(b) Establish proof of the financial ability
to make certain the prompt payment of all compensation and other payments due
under ORS chapter 656;
(c) Obtain
excess insurance coverage in the amounts approved by the director;
and
(d) Be registered and
authorized to do business in this state under ORS chapters 58, 60, 62, 63, 65,
67, 70, and 648, as applicable, or be a municipal or public corporation as
defined in ORS 297.405.
(2)
Claims processing staff. The
employer must establish proof of an adequate staff qualified to process claims
by:
(a) Employing and retaining at each claims
processing location, at least one claims examiner that is certified under OAR
436-055-0070 to process claims in this state, and is actually involved in the
claims processing function; or
(b)
Contracting the services of one or more service companies that employ at each
claims processing location in this state, at least one claims examiner that is
certified under OAR 436-055-0070 to process claims in this state, and that is
actually involved in processing the self-insured employer's claims.
(3)
Proof of financial
ability. Unless exempt under OAR 436-050-0185, the employer must
establish proof of financial ability by:
(a)
Providing a security deposit that the director determines is acceptable under
OAR 436-050-0165, and in an amount as determined under OAR 436-050-0180;
and
(b) Demonstrate acceptable
financial strength by maintaining a rating equal to "strong" or "moderate" as
determined under sections (4) and (5) of this rule.
(4)
Financial strength analysis.
The financial reports submitted by the employer under OAR 436-050-0175(1) must
contain information sufficient to calculate the financial ratios described in
this section. The points awarded for each ratio will be used to determine the
employer's financial strength under section (5) of this rule.
(a) For the purposes of calculating the
financial ratios under this section:
(A) The
face value of a self-insured employer's irrevocable standby letter of credit
(ISLOC) used to satisfy the director's requirement for a security deposit may
not be included in the self-insured employer's reported assets;
(B)
Current assets include all
assets that may be reasonably expected to be converted into cash, or could
become the equivalent of cash, within one year in the normal course of
business;
(i) Current assets include, but are
not limited to cash, accounts receivable, inventory, and prepaid expenses, and
investments, marketable securities, and bonds that mature within one year or
may be converted to cash without penalties or fees; and
(ii) Current assets must not include fixed
assets, accumulated depreciation, intangible assets, or investments, marketable
securities, or bonds with maturity dates of one year or longer;
(C)
Current
liabilities are debts and obligations expected to be due within the next
year;
(i) Examples of current liabilities
include accounts payable, notes payable, accrued taxes, and wages and salaries
owed to workers;
(ii) Current
liabilities must not include debts or claims on assets that will be due a year
or more in the future or longer-term liabilities;
(D)
Long-term liabilities must
include all debts and obligations expected to be due one year or more in the
future. Long-term liabilities include any mortgages, loans, bonds, and claims
reserve funds not due within one year;
(E)
Net assets are total assets
less total liabilities. Financial statements and reports may otherwise refer to
net assets as net position, adjusted net worth, surplus, owner's equity, or
shareholders' equity; and
(F)
Net income is the net revenue from sales, interest, or services
rendered minus costs, operating expenses, and taxes. Financial statements and
reports may otherwise refer to this component as comprehensive income, net
earnings, or net profit;
(b) Except for employers described under
subsection (c), the director will score the financial strength of an employer
based on the following ratios:
(A) The
current ratio is calculated by dividing current assets by current
liabilities. A maximum of six points are possible for the current ratio, to be
awarded as follows:
Ratio ----------------- Points
At least 2 ---------- = 6 points
At least 1.75 ------ = 5 points
At least 1.6 ------- = 4 points
At least 1.4 ------- = 3 points
At least 1.25 ------ = 2 points
At least 1 ---------- = 1 points
Less than 1 -------- = 0 points
(B) The
debt-to-equity ratio is
calculated by dividing long-term liabilities by net assets. A maximum of six
points are possible for the debt-to-equity ratio, to be awarded as follows:
Ratio ---------------- Points
25% or less ------- = 6 points
50% or less ------- = 5 points
70% or less ------- = 4 points
80% or less ------- = 3 points
90% or less ------- = 2 points
100% or less ------ = 1 points
More than 100% --- = 0 points
(C) The
return-on-net assets
ratio is calculated by dividing net income by net assets. A maximum of
six points are possible for the return-on-net-assets ratio, to be awarded as
follows:
Ratio ----------------- Points
At least 10% ----- = 6 points
At least 8% ------- = 5 points
At least 6% ------- = 4 points
At least 4% ------- = 3 points
At least 3% ------- = 2 points
At least 2% ------- = 1 points
Less than 2% ----- = 0 points
(c) The director will score the financial
strength of an employer that is a municipal corporation as defined in ORS
297.405 that submits a
Comprehensive Annual Financial Report, based on the following ratios:
(A) The
current ratio is
calculated by dividing current assets by current liabilities. A maximum of six
points are possible for the current ratio, to be awarded as follows:
Ratio ----------------- Points
At least 2 --------- = 6 points
At least 1.75 ----- = 5 points
At least 1.6 -------- = 4 points
At least 1.4 -------- = 3 points
At least 1.25 ------ = 2 points
At least 1 ---------- = 1 points
Less than 1 -------- = 0 points
(B) The
debt service ratio is
calculated by dividing total debt service by total revenue. A maximum of six
points are possible for the debt service ratio, to be awarded as follows:
Ratio ----------------- Points
10% or less ------- = 6 points
12% or less ------- = 5 points
14% or less ------- = 4 points
16% or less ------- = 3 points
18% or less ------- = 2 points
20% or less ------- = 1 points
More than 20% --- = 0 points
(C) The
return-on-net assets
ratio is calculated by dividing net income by net assets. A maximum of
six points are possible for the return-on-net-assets ratio, to be awarded as
follows:
Ratio ----------------- Points
At least 5% ------- = 6 points
At least 4% ------- = 5 points
At least 3% ------- = 4 points
At least 2% ------- = 3 points
At least 1.5% ----- = 2 points
At least 1% ------- = 1 points
Less than 1% ----- = 0 points
(5)
Rating of financial
strength. The employer's financial strength will be rated based on the
sum of the points awarded for the three ratios under section (4) of this rule.
(a) A sum of 13 to 18 points is equal to a
strongrating:
(A) The director
will approve initial or continued certification if the employer meets all of
the requirements of this rule; and
(B) The employer's security deposit amount
will be determined based on OAR 436-050-0180(1) or (3);
(b) A sum of 7 to 12 points is equal to a
moderate rating:
(A) The
director will approve initial or continued certification if the employer meets
all the requirements of this rule; and
(B) The employer's security deposit amount
will be determined based on OAR 436-050-0180 (1) and (2), or (3);
and
(c) A sum of 0 to 6
points is equal to a
weak rating:
(A) The director may not approve the
application for initial self-insured employer certification; and
(B) For an existing certified self-insured
employer, the director may take one or more actions, including but not limited
to:
(i) Providing the employer notice of the
director's intent to revoke its self-insurance certification under OAR
436-050-0200 and this rule;
(ii)
Increasing the security deposit calculated under OAR 436-050-0180 by an amount
based on factors including, but not limited to, the considerations identified
in OAR 436-050-0180(4);
(iii)
Allowing the amount of the security deposit to be determined based on a
certified actuarial study under OAR 436-050-0180(3); or
(iv) Requiring the employer to submit a
financial correction plan that demonstrates the employer's ability to improve
its rating, in a reasonable time period, without hampering the employer's
ability to pay compensation and other amounts due under ORS chapter
656.
(6)
Financial strength based on
municipal bond ratings. Notwithstanding section (5) of this rule, a
public self-insured employer that provides verifiable evidence of a municipal
bond rating of Aa3, AA-, or higher will be considered to have a strong
financial strength rating.
(7)
Failure to maintain qualifications. Failure of a certified
self-insured employer to maintain the qualifications required in this rule may
result in revocation of the employer's self-insured certification. If the
director intends to revoke the employer's self-insured employer's
certification:
(a) The director will give the
employer 30 days written notice;
(b) The revocation will be effective 30 days
from the date the employer receives the director's revocation notice;
and
(c) If the employer complies
with the qualification requirements within the 30-day period, the revocation
will be canceled and the certification will remain in effect.
Tables referenced are available from the
agency.
Statutory/Other Authority: ORS
656.407 & ORS
656.726(4)
Statutes/Other Implemented: ORS
656.407
