The weight of claims costs that go into figuring employers experience mod is scheduled to double next year, the first increase in more than 20 years and the first in a series of annual increases scheduled by the National Council on Compensation Insurance and most state rating bureaus.
The change is expected to push up the e-mods of employers with frequent, less severe lost- time claims. However, the NCCI and other rating bureaus project the change overall nationally to be premium neutral.
Help clients control loss costs
Agents can work with individual clients to lessen the impact of the change on their e-mods. Helping them with early return-to-work and better injury prevention are significant ways to reduce the cost and frequency of claims and produce positive impacts on their e-mods, according to SFM officials.
The change in 2013 is effective:
*Jan. 1 in Iowa
*Jan. 1 in Minnesota, if approved.
*Feb 1 in Nebraska
*July 1 in South Dakota
*Oct. 1 in Wisconsin
In Minnesota and Wisconsin, which are not NCCI states, the change was approved by the Wisconsin Compensation Rating Bureau and is under discussion by the Minnesota Workers’ Compensation Insurers Association, which typically follows the NCCI’s lead on changes like this. Iowa, Nebraska and South Dakota operate under the national rating bureau services of the NCCI.
$5,000 threshold to change
Currently, the e-mod calculation for an employer puts losses into two buckets. The first $5,000 of a claim is the primary amount. Above that is the excess amount. All the primary amount for each lost-time clam is included in the e-mod calculation. Excess amounts are given partial weight depending on the size of the employer.
The rating bureaus’ $5,000 threshold – or “split point,” as it is called - was put in place more than 20 years ago. Since then, the average claim cost has tripled, according to the NCCI.
To update the split point, the NCCI and most non-NCCI states plan phased-in increases. The current $5,000 doubles to $10,000 in 2013, then rises to $13,500 in 2013, and $15,000 in 2015. After that, the split point will adjust annually to a national claims cost index.
According to a Wisconsin WCRB analysis of the effect of raising the split point to $10,000, “insured’s with greater than 1.0 mod tended to receive more of a debit.”
The Wisconsin bureau analysis also shows that the percentage of claims above the current $5,000 split point rose from about 60% of claims in 1998 to nearly 80 percent in 2011, due to the continuing rise in claims costs. For more, Google, “NCCI Understanding the Filed Experience Rating Plan.”
Article used from SFM “The Work Comp Experts”, SFM Agent Agenda July / September 2012