On Point With the NCCI Workers Compensation Rating Changes
The first stage of the National Council on Compensation Insurance (NCCI) planned three year transition period to change the experience rating primary-excess split point was instituted in many states on January 1, 2013. Within the experience rating process, each loss is divided into a primary and excess portion. Previously, the first $5,000 of every loss was considered a primary loss and everything greater was allocated as an excess loss. Primary losses are considered to be indicators of frequency and the full amount is figured into the mod calculation. Therefore, primary losses affect the mod more than excess losses. The transition that NCCI has proposed raises the split point from $5,000 to $15,000 over three years as follows:
- Year 1 The split point will initially be increased to $10,000 and will become effective with each states approved rate/loss cost filing on or after January 1, 2013.
- Year 2 A states next effective year filing will increase the split point further to $13,500.
- Year 3 A states third effective filing year will increase the split point further to $15,000 plus two years of inflation adjustment (rounded to the nearest $500).
Front Row or the Nose Bleeds
The thought process is that as the split point increases, loss dollars in the experience rating formula shift from the excess layer to the primary layer. Because primary losses receive more weight than excess losses do, the plan becomes more responsive. In other words, the spread of the modification factors will increase with each increase in the split point. Therefore, insureds with factors less than 1.00 should expect to see an even lower experience mod. Similarly, insureds with mod factors greater than 1.00 should expect to see their mod increase.
How to Get a Standing Ovation
Every company or facility should strive to get their experience mod factor below 1.00. Risk management and safety programs are key to controlling the cost of workers compensation coverage. An organization can greatly reduce costs by preventing accidents and claims before they happen. A loss control program should directly address common losses that are driving up your experience mod factor. Your risk management strategy should include procedures for hiring practices, limited lift strategies, timely claim reporting, comprehensive accident investigation and a robust return to work program. Additionally, reviewing your experience mod worksheets for accuracy and comprehensive claim reviews are crucial to the overall health of your experience medication rating.
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