Or. Admin. Code § 436-050-0150

Current through Register Vol. 63, No. 12, December 1, 2024

Section 436-050-0150 - Qualifications of a Self-Insured Employer

(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.

Or. Admin. Code § 436-050-0150

WCD 3-1980(Admin), f. & ef. 4-2-80; WCD 4-1982(Admin), f. 2-10-82, ef. 2-15-82; WCD 7-1983(Admin), f. 12-22-83, ef. 12-27-83; WCD 5-1985(Admin), f. 12-10-85, cert. ef. 1-1-86; Renumbered from 436-051-0305; WCD 9-1985(Admin), f. 12-12-85, ef. 1-1-86; WCD 9-1987, f. 12-18-87, ef. 1-1-88; WCD 7-1989, f. 12-22-89, cert. ef. 1-1-90; WCD 25-1990, f. 11-29-90, cert. ef. 12-26-90; WCD 5-2001, f. 6-22-01, cert. ef. 7-1-01; WCD 8-2003(Temp), f. & cert. ef. 7-18-03 thru 1-13-04; WCD 12-2003, f. 12-4-03, cert. ef. 1-1-04; WCD 6-2012, f. 10-4-12, cert. ef. 1-1-13; WCD 5-2016, f. 11-28-16, cert. ef. 1/1/2017; WCD 7-2017, amend filed 12/14/2017, effective 1/1/2018; WCD 7-2022, amend filed 11/07/2022, effective 1/1/2023

Tables referenced are available from the agency.

Statutory/Other Authority: ORS 656.407 & ORS 656.726(4)

Statutes/Other Implemented: ORS 656.407