Workers Compensation

Split Experience Mod Changes

The National Council of Compensation Insurers(NCCI) proposed significant changes to the calculation of the experience modification factor(e-mod) that have recently taken effect in most states.

Experience mods historically have been a metric for Workers Compensation claim loss
frequency; now with the recent changes, mods will now add some additional weight to claim severity as well.  These changes were made to reflect the increased wage, benefit levels, and medical costs due to inflation.

WHAT IS CHANGING?

Currently the NCCI counts the first $5,000 of every claim as primary losses. Any dollar amount over $5,000 on a claim is then called excess and is discounted heavily. These excess dollars do not have as big an impact on the emod as primary losses.

NCCI is moving that split point between primary and excess losses over a three-year period. Instead of $5,000, the primary threshold will change as follows:

  • 2013 $10,000 split point
  • 2014 $13,500 split point
  • 2015 $15,000 split point

Thereafter, the split point will be determined based on an index calculated by NCCI.

WHY IS NCCI CHANGING THE CALCULATION?

  • The split point was developed over 20 years ago and has not been changed since.
  • The average cost of a claim has risen from $2,500 to $8,800 in 20 years.
  • Employers with few or no claims have been subsidizing the costs of employers who have many claims.

HOW WILL THE CHANGES AFFECT MY EMOD?

  • Employers with good emods will see their emods go down even more and could save money on their premiums.
  • Employers with high emods will see their emod increase and their premiums could potentially increase.
  • Employers whose emods are closer to 1.0 will see minor changes to their emod (an average emod is a 1.0).
  • The more payroll an employer has, the more the emod could potentially change so smaller companies will see smaller changes.

SO IS THERE ANY GOOD NEWS?

The good news for employers is that the strategies for controlling your emod have not changed. These strategies include:

  • Getting top management involved in creating a company safety culture.
  • Work closely with your agent to create a good safety program.
  • Implement a claims management program.
  • Discuss your classifications and payrolls with a premium auditor to make sure everything is reported correctly.