Workers’ Comp Premiums Impacted by Experience Modification Formula Changes
What is changing?
The formula used by the National Council on Compensation Insurance (NCCI) to calculate the Experience Modification Factor is being amended to penalize claim severity more than it currently does. The current formula’s primary loss cap on individual claims is $5,000, meaning that the first $5,000 of each Workers’ Comp claim counts fully toward the Experience Mod Factor, while the balance of the claim is included at a discounted rate. Starting in 2013 the primary loss cap will be increased to $10,000 and will gradually climb to $15,000 in 2015. These increases will continue for each following year based on inflationary factors.
How much will the upcoming changes in experience mod calculation cost you?
If your Experience Mod is currently higher than 1.00 (considered average for your industry), this change will likely raise your Mod, even if your payroll and claims do not change. If you have an Experience Mod under 1.0 it will likely lower your Mod. At Scott we recently did a projection for an employer with a mod of 1.37 which showed that if nothing changes in the organization’s payroll or claims, its Experience Mod will increase to 1.49 in 2013, about a 9% increase. For an employer paying $100,000 in premium now, that translates to an additional premium of almost $9,000 in the first year. By the third year of the transition, the premium could be up to $113,500 per year.