PRESENTED BY
IOWA MUNICIPALITIES WORKERS’
COMPENSATION ASSOCIATION
We Serve:
370 cities
75 counties
80 political subdivisions
525 Members
Financially Stable
• More than $18 million in premium/
$53 million in fund balance
• Five year loss ratio of 49%
• Safety National Reinsured (A Rated)
Board
• Nine-member Board of Trustees
• Five city representatives
• Four county representatives
• Elected of appointed officials from member
entities
National Council on Compensation Insurance
(NCCI)
• Publishes underwriting, data and reference manuals for all
participating states
• The rate-setting organization for Iowa and 37 other
states
• Distinguishes between various types of work and creates a
class code for each
• Collects loss data from employers and sets the rate for each
class code
• Adjusts rates by class code each year based on historical loss
experience
NCCI Data
• Used to calculate premium by all workers’ compensation
insurance providers in Iowa
• Data components in premium calculation:
• Payroll (by class code) x Rate (per $100 payroll)
x Experience Modification Factor (EMF)
x Discounts/Surcharges = Net Premium
+ Expense Constant = Total Premium
• Data components you control to some degree:
• Payroll
• EMF (determined by your loss experience)
NCCI Experience Rating
• A formula that compares your payroll and claims by class code
and then compares your entity’s experience (the result of the
previous comparison) to your expected experience based on
that of all other employers in the state.
• The resulting modifier adjusts your standard premium higher
or lower according to your loss experience.
• The modifier for the next coverage year is based on your loss
experience of the last 3 completed years.
3 Years for Experience Rating
Used to calculate the current EMF
Current
EMF
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
New
EMF
Used to calculate the EMF for next fiscal year
NCCI Experience Rating Formula
 The formula in simple terms:
Actual Losses
Expected Losses
 The final formula in simple terms:
Modified Actual Losses
Modified Expected Losses
NCCI Experience Rating Formula
Actual Formula:
Primary Actual Losses + Ballast Value + (Actual Excess Losses X Weighting Value) +
(1-Weighting Value) X Expected Excess Losses
___________________________________________________________________________________________________
Primary Expected Losses + Ballast Value + (Expected Excess Losses X Weighting
Value) + (1-Weighting Value) X Expected Excess Losses
The Experience Modification Factor
(EMF)
• A multiplier that is applied to the pure premium
• A multiplier of 1.00 represents an average risk
• A multiplier greater than 1.00 – called a debit mod
• A multiplier less than 1.00 – called a credit mod
Standard Premium
Experience Modification
Factor
Modified Premium
$50,000
X
1.15
=
$57,500
$50,000
X
0.85
=
$42,500
So What’s Changing?
• Primary Loss components of the formula:
• Medical-only claims – previously included at full value,
now reduced by 70%
• Indemnity claims – the portion of each included as primary
loss being increased
• 2013 from $5,000 to $10,000
• 2014 from $10,000 to $13,500
• 2015 from $13,500 to $15,000
What have these changes meant?
• Weight shifts from frequency to severity
• Impact of claim frequency lessens
• Impact of claim severity increases
• So what about deductibles?
• Minor medical no longer effective
• Large deductible?
Budgeting for Workers’ Compensation
Premium
• Determine your city’s estimated payroll, taking
into consideration:
• Cost-of-living and/or merit pay increases
• Staffing changes
• Changes in operations
• Apply new NCCI rates (ask your agent)
• Review Experience modification worksheets and
last 4 completed years of claims data valued as
of 12/31 (ask your agent).
Budgeting for Workers’ Compensation
Premium
• Discount Rating Plan –
• Longevity Credits
• Loss Experience Credits
• Large Premium Credits
• Good Experience Bonus
• New Mod Factors are now available!
• Payroll worksheets coming in March
Preventing Injuries/Accidents
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Make safety a priority – get everyone’s buy-in
Form a Safety Committee
Create an incident review team
Develop written safety programs and train employees
Incorporate a disciplinary policy for unsafe behavior
Communicate frequently with employees about safety
Perform pre-employment, post-job-offer physicals and
background checks
• Contract with outside firms to do work employees not
qualified, trained or equipped to perform
Containing Claim Costs
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Report claims to your carrier immediately!
Implement a designated physician program
Have written, detailed job descriptions
Implement a return-to-work program
Have incident review team complete their
investigation and report to Safety Committee
• Stay in contact with the claims examiner
• Stay in contact with the treating physician
• Stay in contact with the injured employee
Contact us
imwcainfo@iowaleague.org