Quarterly report pursuant to Section 13 or 15(d)

Workers' Compensation Claims

v3.19.3
Workers' Compensation Claims
9 Months Ended
Sep. 30, 2019
Text Block [Abstract]  
Workers' Compensation Claims

Note 3 – Workers’ Compensation Claims

The following table summarizes the aggregate workers’ compensation reserve activity (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Beginning balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workers' compensation claims liabilities

 

$

430,736

 

 

$

390,814

 

 

$

413,397

 

 

$

363,517

 

Add: claims expense accrual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current period

 

 

37,404

 

 

 

37,784

 

 

 

118,934

 

 

 

116,803

 

Prior periods

 

 

(5,593

)

 

 

(2,327

)

 

 

(10,245

)

 

 

(2,333

)

 

 

 

31,811

 

 

 

35,457

 

 

 

108,689

 

 

 

114,470

 

Less: claim payments related to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current period

 

 

8,609

 

 

 

7,502

 

 

 

14,213

 

 

 

13,783

 

Prior periods

 

 

23,815

 

 

 

19,905

 

 

 

77,619

 

 

 

65,296

 

 

 

 

32,424

 

 

 

27,407

 

 

 

91,832

 

 

 

79,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in claims incurred in excess of retention limits

 

 

(77

)

 

 

(26

)

 

 

(208

)

 

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workers' compensation claims liabilities

 

$

430,046

 

 

$

398,838

 

 

$

430,046

 

 

$

398,838

 

Incurred but not reported (IBNR)

 

$

274,344

 

 

$

246,174

 

 

$

274,344

 

 

$

246,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of IBNR to workers' compensation claims liabilities

 

 

64

%

 

 

62

%

 

 

64

%

 

 

62

%

The Company is a self-insured employer with respect to workers' compensation coverage for all of its employees (including employees co-employed through our client service agreements) working in Colorado, Maryland and Oregon. In the state of Washington, state law allows only the Company's staffing services and internal management employees to be covered under the Company's self-insured workers' compensation program. The Company also operates a wholly owned, fully licensed insurance company, Ecole, which provides workers’ compensation coverage to the Company’s employees working in Arizona and Utah.

For all other clients, the Company obtains policies from Chubb Limited (“Chubb”) through an arrangement known as a fronted program, which provides the Company a licensed, admitted insurance carrier to issue policies on behalf of the Company. Chubb assumes credit risk should the Company be unable to satisfy its indemnification obligations.

Through various insurance arrangements, the Company retains risk of loss up to the first $5.0 million per occurrence, except in Maryland and Colorado, where our retention per occurrence is $1.0 million and $2.0 million, respectively.

The fronted program with Chubb requires that collateral be advanced at the inception of the policy term. To partially satisfy these collateral requirements, the Company provided a surety bond of $15.0 million and a letter of credit of $63.7 million from its principal bank, Wells Fargo Bank, National Association (the “Bank”).

In addition, the Company makes monthly collateral payments into trust accounts (the “Chubb trust accounts”) for the fronted program. The balance in the Chubb trust accounts was $380.6 million and $451.0 million at September 30, 2019 and December 31, 2018, respectively. The Chubb trust accounts’ balances are included as a component of the current and long-term restricted cash and investments on the Company’s condensed consolidated balance sheets.

The states of California, Maryland, Oregon, Washington, Colorado and Delaware required us to maintain collateral totaling $74.8 million and $85.2 million at September 30, 2019 and December 31, 2018, respectively, to cover potential workers’ compensation claims losses related to the Company’s current and former status as a self-insured employer. At September 30, 2019, the Company provided surety bonds and standby letters of credit totaling $74.8 million, including a California requirement of $55.6 million.

The Company provided a total of $430.0 million and $413.4 million at September 30, 2019 and December 31, 2018, respectively, as an estimated future liability for unsettled workers' compensation claims liabilities. Of this amount, $3.0 million and $3.2 million at September 30, 2019 and December 31, 2018, respectively, represent case reserves incurred in excess of the Company’s retention. The accrual for costs incurred in excess of retention limits is offset by a receivable from excess insurance carriers of $3.0 million and $3.2 million at September 30, 2019 and December 31, 2018, respectively, included in other assets on the condensed consolidated balance sheets.