The NCCI (National Council on Compensation Insurance), is a group that calculates Experience Modification Factors for companies across the entire United States. Some states have their own rating bureaus due to their size and complexity. For example, New York and New Jersey have the NYCIRB & NJCRIB respectively. For detailed explanation on what your Experience Modification Factor is and how it’s calculated see this site.
Some History
In the 1940s, Experience Modification Factors started being calculated, and they were based upon the dollar figures related to claims at that time. Amazingly, despite the rising costs and inflation, there were very few changes to the calculations between the 1940s and 1998. Then, following the changes in 1998, there were hardly any until 2013. In 2013 the NCCI, and the individual states that calculate their own Experience Modification Factor, adopted an updated “split points” policy that just means a simplification of the difference between the “Primary” and “Excess” parts of a Workers’ Comp claim. The Primary effects your Experience Modification Factor much more harshly than the Excess. By weighing the Primary heavier than the Excess, it protects against one or two larger, outlier claims throwing the calculations off completely (and unfairly).
The way the changes were implemented is that the Primary Split Point was formerly 5,000, and was increased in 2013 to 10,000 and then, over the next two years, would slowly increase to 15,000 which is where the NCCI believes it actually should be these days. (More on that here.)
Finally, on August 12th, 2015, the NYCRIB announced that it had approved the latest increase up to the 15,000 effective October 1st, 2015, as originally outlined. (More on that here.)
What This Means for your Business
What this means is that most companies will see another increase in their Experience Modification Factor following their next recalculation. That takes place on their “Unit Stat Date,” and, if left unchecked, your business could face higher rates, possible penalties, and Labor Department Violations.
What You Can Do About It
First, have you had your Experience Mod verified for inaccuracies? If not, it is imperative that you do so. As with any other calculation, there is a high proponent for errors.
The next step is to have your losses analyzed for personal trends and commonalities. If you want to see where you’re going, you should see where you’ve been. More than likely, you’re destined to repeat history.
Lastly, implement a risk management strategy to manage these claims more closely in order to exert some influence over them. Many companies are often surprised that these primary claims cost their company 30% more than it cost the insurance company. If you knew that, wouldn’t you want to do something about it?
To learn more about your experience mod and take charge against this issue, click here.
