Total Tax Payer Subsidies of all Retro Programs
This section shows that Retro programs have diverted more than $2 Billion tax payer dollars from the State insurance pool for non-insurance reasons during the past 20 years.
While BIAW is the largest Retro Insurance Agency, there are a total of 43 Retro Insurance Agencies plus 254 individual Retro “firms.” The following chart shows that in 2006, Retro Program Insurance Claims for all Retro Insurance Agencies exceeded Premiums by $2.6 Million dollars. Thus, there should have been no refunds at all in 2006. But as the chart show, refunds (or overpayments) in 2006 exceeded $130 million dollars.
Retro Refunds for ALL Retro Insurance agencies in 2006
|
Agency Reporting Quarter |
Retro Program Premiums ($M) |
Retro Developed Claims ($M) |
Premiums Paid In - Claims Paid Out |
Retro “Refunds” Total (in $ millions) |
Total Cost to State Taxpayers ($M) |
|
January |
120.8 |
128.5 |
-7.8 |
14.7 |
22.5 |
|
April |
4.0 |
4.2 |
-0.2 |
0.8 |
1.0 |
|
July |
566.8 |
557.4 |
9.4 |
112.1 (BIAW=39M) |
102.7 |
|
October |
35.5 |
39.5 |
-4.0 |
1.2 |
5.2 |
|
2006 Total |
727.1 |
729.6 |
-2.6 |
128.8 |
$130 Million |
Source: WA ST B&I Retrospective Rating Program, Refund/Assessment Summaries, July 1st http://www.lni.wa.gov/ClaimsIns/Insurance/Reduce/Qualify/FinInfo/default.asp
Retro Insurance Programs such as the BIAW report during one of four quarters each year. BIAW is a July Reporter.
Looking more closely at the chart above, if BIAW got $39 million in 2006, for a tax payer loss of $38 million and the total tax payer loss to all Retro groups for 2006 was $130 million, then the BIAW share of the total is 38/130 = 29%. Thus, for the entire 7 years from 2002 to 2008, if BIAW cost to tax payers was $256 million, then the total cost of all Retro Programs was $1 billion dollars. The following table and chart is a best guess estimate of the tax payer cost in overpayments to all Retro programs during the past 10 years using the 29% ratio rule. The total comes to $1 billion dollars. Assuming that at least 10% of all Retro funds has been improperly diverted into political campaigns, converts to over $100 million tax payer dollars being diverted for an average of $10 million dollars per year during the past 10 years.
|
Year |
BIAW Cost to Tax Payers ($M) |
Times 100/29 |
All Retro Programs Est. Cost to Taxpayers |
Actual Cost to Tax Payers (in $ millions) |
|
2008 |
44.0 |
100/29 |
112 M |
NA |
|
2007 |
55.0 |
100/29 |
190 M |
NA |
|
2006 |
38.0 |
100/29 |
131 M |
131 (0) |
|
2005 |
35.5 |
100/29 |
122 M |
120 (-2) |
|
2004 |
31.8 |
100/29 |
110 M |
123 (+13) |
|
2003 |
28.0 |
100/29 |
97 M |
101 (+4) |
|
2002 |
22.4 |
100/29 |
77 M |
75 (-2) |
|
2001 |
18.2 |
100/29 |
63 M |
NA |
|
2000 |
17.1 |
100/29 |
59 M |
NA |
|
1999 |
18.5 |
100/29 |
64 M |
NA |
|
10 year Total |
$308.5M |
100/29 |
$1.03 Billion |
|
Retro Refund Summary 2006 Ten Largest Retro Agencies
As the following chart shows, in 2006, BIAW claims were only one million dollars less than premiums. Thus, the maximum BIAW refund should have been one million dollars in 2006.
But the windfall overpayments were not merely limited to the BIAW. There are currently 43 Retro Insurance Agencies plus 254 individual firms. All of the following insurance agencies received huge windfall overpayments due to errors in the State Retro program. The refunds should have been limited to Premiums minus Developed Claims. Instead, refunds exceeded claims by over $130 million dollars just in 2006.
The following ten insurance agencies accounted for $100 million of the $130 million in overpayments in 2006. The BIAW accounted for $39 million in refunds or about 29% of the entire problem.
