Workers’ Compensation:
The New “Split Point” EMR
Formula Change for 2013
Sonja J. Guenther, ALCM, ARM, CIC, CRM
Sr. Vice President, Willis of Colorado
NCCI
•
The National Council on Compensation Insurance
- Administrator for 39 States/400 Carriers
- Collects Statistical Data
- Provides Actuarial Formulation for Advisory Rates
- Produce Experience Modification Factors
- House Industry Classification Expertise
- Administer Rules/Regulations on:
- ownership
- experience rating
- premium audit rules
The “Split Point” Change to the
Experience Mod Factor/Rate (EMR)
Formula
•CURRENTLY:
• The first $5,000 of each loss/injury is the “PRIMARY” portion
of the loss in the experience modification calculation
• That first $5k is weighted the heaviest in this mod factor
formula
• Goes right to the “bottom line” of your EMR
• All dollars over $5k are considered the “EXCESS” portion of
the loss.
• These dollars have weights/ballasts placed against them to
lessen the dollars and “cushion the impact of a large claim
• $5,000 has been the split point for about 20 years
Why is NCCI Changing the Split Point?
•NCCI States:
• Medical Costs have tripled over the past 20 years
• The current experience mod formula is not responsive to
these medical loss costs
• Makes the mod factor (EMR) less reliable/credible
• Employers will increase their attention to safety/claims
management with this change.
How will NCCI Implement this
Change?
January 1, 2013
NCCI will DOUBLE the split point dollars from $5,000
per injury to $10,000 per injury will be considered “primary”
loss dollars (weighted the heaviest in the mod calculation).
January 1, 2014
NCCI will again increase the split point primary
dollars from $10,000 per injury to $13,500.
January 1, 2015
NCCI will make a final adjustment to primary losses
up to as high as $15,000 per injury.
NCCI will index the split point, annually, after that.
How Will This Change Impact My
Mod Factor?
If NCCI tripled the primary loss dollars in every claim,
without making any other actuarial adjustments to
the formula, the average mod factor could have
increased +11 points. (Based on Willis of Colorado limited samplings
projected January-July, 2012 ).
NCCI will adjust the Expected Loss Rate (ELR) and
Developed Ratios (D Ratios) along with weights and
ballasts to offset the impact of the new formula.
These adjustments will vary widely, by state
and industry class results.
How Will This Change Impact My
Mod Factor? (cont.)
Results we are confident of: (source:
NCCI notifications to
policyholders, August, 2012)
EMRs Hovering Close to 1.00
+5-point to -5 point adjustment
Ex: Those mods at 1.03 could see +2 to +5
point increase with formula change alone.
Ex: Those mods at .96 could see a -2 to -5
point decrease with formula change alone.
How Will This Change Impact My
Mod Factor? (cont.)
With the new formula change:
The further from 1.00 your EMR is, the
greater the swing in the formula adjustment
Ex: 1.36 mod could see a +8 point
impact with formula change
Ex: .76 credit mod could see a -8 point
impact with formula change
These are estimate only and the impact will vary by state and industry class.
GOT ANYTHING TO DO WITH
SAFETY?
This is an actuarial formula change
Designed for insurance industry
Created for underwriting/premium
assessment
No change was made for the past 20
years
Discourage the Practice of EMRs
in the Bidding Practice
Common Error Ratio of 30% on the EMR sheets
Common Errors:
- Not the employee of the policyholder
- Not net of deductibles – (net-reporting states)
- Claims reported into the wrong state data
- Dollars never credited for 3rd party recovery
- Data is combined with another employer that is unrelated/ownershp
- Payrolls are estimated
- Payroll data missing completely
- Payrolls reported for audits in dispute
- Payrolls for incorrect class code
Ways to Achieve a Credit EMR
SAFETY, SAFETY, SAFETY
Deductible Plans
NCCI Net Reporting States:
Alabama
Kansas
Colorado
Kentucky
Florida
Maine
Georgia
Missouri
Hawaii
New Mexico
Idaho (claims <$1k only)
Oklahoma
Iowa
South Carolina
Source: NCCI Basic Manual, 2010
Common EMR Trends and Ways to a
Credit Mod
Verify Classifications with Your Agent
Beware of Shifting to a Lower-Rated Class – EMRs Rise
Claims Management (Don’t Pay Them Yourself to Avoid the Mod)
Communication:
Carrier/Agent/Injured Worker
Adjust Reserves (8 mos./3 mos. pre-renl)
Relationship with Designa. Med. Provider
Invoke Statutes:
Pos. Drug Test, Failure to Return to Work
Return to Work:
Temporary
Progressive
Be Committed!
When Acquiring Companies or Selling Divisions of Your Own
- .89 mod now uses $17,759
primary loss dollars
2013=$28,332 in primary loss
dollars
2014= $35,332 in primary loss
dollars
2015= $38,332 in primary loss
dollars
What will these higher loss $ do
to the mod factor?
Without D factor changes:
+11 pts.
Tell a better story than the EMR
Brag on yourself
To Your Agent
To Your Carrier/Underwriter
On Your Website
–Include Recent Safety Awards/State Awards
–Compare Your Incident Rate to Industry
–Show Your Lost-Time Injury Trends? (and DART rates)
> Decreased by What % in the Past Year?
> In the Past 3 Years? 5 Years?
–Attach Carrier/Loss Control Letters About Safety Program
–Involvement in Industry Associations, including leadership positions
Highlight what has happened in the past year!!!
The Rest of the Story
You are more than an EMR
Established procedures
–Return to Work Commitment
–Claims Management Program
–Compliance/Disciplinary Programs in Place and Utilized?
–Team Accountability Programs
Employee selection and training
–Drug/Alcohol Policies Pre/Post/Random
–Pre-placement physicals
–Buddy system for new hires
–What are the topics you are training on?
–Do they match your injury trends?
–Share the frequency of your safety training
–Consider the Behavior Modeling Program (“STOP”)
Questions????
ANSWERS?