Section R20-5-1101. Definitions

In addition to the definitions provided in A.R.S. § 23-901, the fol- lowing definitions apply to this Article:

“Act” means the Arizona Workers’ Compensation Act, A.R.S.

§ 23-901 et seq.

“Affiliate” or “affiliate relationship” means a person or entity that has the power to control, directly or indirectly, through one or more intermediaries, another person or entity. “Anniversary date” means the date beginning one year from the initial effective date of the Authorization to Self-insure. “Applicant” means an individual employer filing an initial application for authority to self-insure under A.R.S. § 23-961. “Authorized signature” means the signature of an officer of the self-insurer.

“Cash-flow ratio” means a numerical relationship that reflects an ability to meet current financial obligations out of cash flow and is calculated by dividing funds provided by operations of a business by current liabilities.

“Chief counsel” means the chief counsel for the Industrial Commission of Arizona.

“Claim” means a worker’s compensation claim.

“Claims Division,” means the Claims Division of the Indus- trial Commission of Arizona.

“Classification code” means a number assigned by  an approved rating organization that classifies employees by type of job performed.

“Control” means the possession, direct or indirect, of power to direct or cause the direction of, the management and policies of a person or entity, whether through the ownership of voting securities, by contract, or otherwise.

“Current ratio” means a numerical relationship that reflects an ability to pay current obligations and is calculated by dividing current assets by current liabilities.

“Debt-status ratio” means a numerical relationship that reflects the proportion of funds supplied internally relative to the funds contributed by creditors and is calculated by dividing  net worth by total liabilities.

“Division” means the Accounting Division of the Industrial Commission of Arizona.

“Ex-medical plan” means a method of determining the pre- mium upon which taxes are calculated that provides for rate revisions based upon the self-insurer operating a medical facil- ity with a program for providing medical, surgical, or hospital services to a majority of the self-insurer’s employees and that complies with the requirements of A.R.S. § 23-1070. Neither losses nor incurred loss reserves are used in this plan.

“Excess insurance carrier” means an insurance carrier autho- rized to issue policies of excess insurance coverage to a self- insured employer.

“Experience modification rate” means a ratio comparing actual losses to expected losses based on a formula determined by an approved rating organization and which includes three years of loss information.

“Fixed premium plan” means a method of determining the pre- mium upon which taxes are calculated in which neither losses nor incurred loss reserves are used for calculation. The only discount is for premium size.

“Fully-funded risk management fund” means a fund that main- tains a positive equity balance that is sufficient to cover all of the fund’s actuarial losses.

“Guaranteed cost plan” means a method of determining the premium upon which taxes are calculated that provides for a direct relationship, on a annual basis, of the premium for tax purposes and the experience modification rate developed to reflect the loss payment and incurred loss experience of the self-insured employer.

“Individual employer” means an employer under the Act that is applying for authority to self-insure, or is approved to self- insure, that is not an entity described in A.R.S. § 23-961.01; § 11-952.01; or § 41-621.01.

“Parent company” means one that owns sufficient stock in a subsidiary company to have voting control of the subsidiary company, as “control” is defined in this Article.

“Profitability ratio” means a numerical relationship that rep- resents the return on assets and the efficiency of assets and is calculated by dividing profit before taxes by total assets, mul- tiplied by 100 expressed as a percentage.

“Public entity” means an individual employer that is a state, county, municipality, school district, or any other entity with taxing authority.

“Quick ratio” means a numerical relationship that represents the degree to which liabilities are covered by the most liquid current assets and is calculated by dividing cash and equiva- lents, plus receivables, by current liabilities.

“Rating organization,” means an entity that meets the require- ments of A.R.S § 20-363, and is approved by the Arizona Department of Insurance to establish rates, codes, and formu- las used to calculate worker compensation premiums. “Resolution of Authorization” means a document issued by the Commission that grants authority to self-insure for pur- poses of workers’ compensation.

“Retrospective rating plan” means a method of determining the premium upon which taxes are calculated that provides for the relationship between the premium for tax purposes, the experience modification rate developed to reflect the loss pay- ment   and   incurred    loss   experience   of   the    self-insured employer, and the actual incurred losses for the tax year. “Securities” or “security” means a guaranty bond, a bond of the  United  States  or  its  agencies,   United  States’  Treasury Notes, a letter of credit, or Local Government Investment Pool (LGIP) funds, or appropriate documents renewing or continu- ing any of these.

“Self-insurer” or “self-insured” means an individual employer that the Commission authorizes to self-insure for workers’ compensation insurance under A.R.S. § 23-961.

“Working capital ratio” means a numerical relationship that measures the sufficiency of working capital to support sales and is calculated by dividing working capital by sales. Work- ing capital is calculated by subtracting current liabilities from current assets.

Historical Note

New Section made by final rulemaking at 11 A.A.R.

1008, effective April 4, 2005 (Supp. 05-1).