NCCI Announces Proposed Changes for Experience Modification Calculations
“What can Employers Expect”?
The National Council of Compensation Insurance (NCCI) has proposed changes to the primary loss cap beginning in 2013, the first such change in 25 years. The anticipated change-if approved-is expected to more than triple the current cap by 2015. This proposal by NCCI is being made because the medical costs on workers compensation claims continue to rise significantly. In fact, workers’ compensation underwriting results in the Carolinas have deteriorated over the last three years. NCCI reports calendar-accident year combined loss ratio for North Carolina employers increased from 102.1 in 2008 to 116 in 2010. Carriers in South Carolina showed an underwriting profit in 2008 with a .97 loss ratio, while 2010 results are showing combined losses of 1.24.
Currently in the Experience Rating Plan, the first $5,000 of a loss is considered primary, and the portion of the loss higher than $5,000 is considered excess. The proposed filing calls for an increase in the split point to an inflation-adjusted $15,000 over a three-year transition period, and will further increase this amount thereafter on an annual basis using a countrywide inflation index.
- In year 1, initially increase the split point to $10,000
- In year 2, increase the split point to $13,500
- In year 3 and annually thereafter, increase the split point to the indexed value of $15,000, where the index would be based on annual changes in the average cost of a claim.
How will this affect individual risks?
Currently, employers with several small losses create a higher experience mod than a company with a single, larger loss even if the total loss dollars are the same. By 2015, when the phase-in is complete, $15,000 would go to the primary cap instead of the current $5,000, and the results will create larger experience modification credits or debits depending upon an employer’s loss experience. An employer, if proactive with safety and return-to-work programs that produce fewer losses will see a larger decrease in the experience modification factor. Conversely, if losses increase or even stay the same, the experience modification factor will increase at a faster rate. This can result in lost job opportunities (when bid contracts require experience mods no greater than 1.0) and in higher premiums from your insurance carrier.
Safety Pays with Return-to-Work Programs
Getting injured employees back to work quickly-and providing positive communication and assistance during the rehabilitation process-has always been an important aspect of successful workers’ compensation programs. Understanding that this is sometimes a difficult thing to do, research consistently shows that injured employees whose companies offer return-to-work programs recover faster, are more satisfied with their care, return to their full-duty jobs sooner, and are released from medical care earlier than if no return-to-work programs are in place.
There is another important benefit for employers who offer medically appropriate modified or alternate work while an injured employee is recovering. If the employee declines this job offer, then the employer is in a much stronger position to prevail if the claim is litigated. Avoiding litigation altogether is the optimum position. However, it is tough to argue that an employee who rejected a reasonable offer to return to work should expect to receive long-term workers’ compensation benefits. Employers who routinely make good faith job offers have more favorable results in court.
If you would like more information or need assistance in developing a successful Return-to-Work program, please contact Brian Reep, CIC, Morrow Insurance Agency, @ breep@morrowinsurance.com or 800-228-3132, ext. 139.