Missouri Supplemental Information FAQs for Missouri Senate Bill 1

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1 National Council on Compensation Insurance Regulatory Services OCTOBER 18, 2013 ITEM FILING SUPPLEMENTAL INFORMATION FYI-MO Missouri Supplemental Information FAQs for Missouri Senate Bill 1 Missouri Senate Bill 1 was signed into law on July 10, 2013, and is effective January 1, Senate Bill 1 revised Sections and of the Missouri Revised Statutes to include additional benefits for occupational diseases due to toxic exposure. In cases where occupational diseases due to toxic exposure are diagnosed to be mesothelioma and result in permanent total disability or death, Senate Bill 1 adds Section , subdivision (3) of the Missouri Revised Statutes, which provides that employers may elect to accept or reject additional mesothelioma liability benefits. Senate Bill 1 also revised Section of the Missouri Revised Statutes to add information pertaining to individual risk premium modification rating plans that prospectively modify premium based on the individual risk characteristics. Premium modifications may be determined by either a schedule rating plan or risk modeling plan. These individual risk premium modification rating plans are individually filed by the carrier. In addition, Senate Bill 1 revised Section of the Missouri Revised Statutes to state that premium modifications resulting from a risk modeling plan must be reported separately under NCCI s Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan) from premium modifications resulting from a schedule rating plan. 1 Q: What is NCCI doing to address the provisions in Missouri Senate Bill 1? A: NCCI has filed Item 04-MO-2013 Revisions to NCCI Manuals Resulting from the Enactment of Missouri Senate Bill 1 (SB 1), with a proposed effective date of January 1, This item: Revises the Missouri Workers Compensation Premium Algorithm in the Missouri Miscellaneous Rules section of NCCI s Basic Manual for Workers Compensation and Employers Liability Insurance (Basic Manual) to show how a risk modeling plan credit or debit is calculated Establishes new statistical codes for risk modeling plans for use in Missouri (separate and distinct from schedule rating statistical codes) in Part 6-H-2 of NCCI s Statistical Plan as follows: 9147 Risk Modeling Plan Premium Credit 9148 Risk Modeling Plan Premium Debit Establishes the following endorsements in NCCI s Forms Manual of Workers Compensation and Employers Liability Insurance (Forms Manual): Missouri Notification of Additional Mesothelioma Benefits Endorsement (WC ) Missouri Exclusion of Additional Mesothelioma Benefits Endorsement (WC ) MESOTHELIOMA Additional Benefits 2 Q: What are the additional benefits for mesothelioma liability? A: Section (3)(a) of the Missouri Revised Statutes provides that for employers that have elected to accept mesothelioma liability under this subsection, an additional amount of 300% of the state s average weekly wage for 212 weeks shall be paid by the employer or group of employers. This additional benefit is in addition to the indemnity and medical benefits otherwise payable under Chapter Q: How does an employer elect the additional benefits for mesothelioma liability? A: It is NCCI s understanding that the basic benefits for mesothelioma and other toxic occupational diseases, as well as the additional mesothelioma benefits provided under Section , are covered under the standard workers Copyright 2013 National Council on Compensation Insurance, Inc. All Rights Reserved. ncci.com Page 1 of 5

2 compensation insurance policy as the policy conforms to the workers compensation law of a state. So, by purchasing the workers compensation policy, the employer elects to accept these additional mesothelioma liability benefits. 4 Q: What is the impact to the employer if the additional benefits are rejected? A: Section (3)(b) of the Missouri Revised Statutes states that for employers that reject the additional mesothelioma liability benefits under this subsection, the exclusive remedy provisions shall not apply to such liability. 5 Q: Section of the Missouri Revised Statutes states that benefits due to the employee as provided for under this chapter except such amount shall only be paid when benefits under subdivisions (2) and (3) of this subsection must be exhausted. What is meant by the term exhausted? A: The statute does not provide a specific definition of the term exhausted. This will depend on the specific facts of the claim and is subject to interpretation under relevant state statutes and case law. Election/Rejection of Additional Benefits 6 Q: When are the additional benefits for mesothelioma liability available? A: The law is effective for any qualifying claims filed on or after January 1, The law change applies to new, renewal, and in-force policies. The law change may also apply to expired policies if the exposure occurred during a policy period that has expired and a qualifying claim related to that exposure is filed on or after January 1, Q: Senate Bill 1 only addresses the employer s ability to elect or reject the additional benefits coverage for mesothelioma. Are carriers required to provide policyholders with additional benefits coverage for mesothelioma? A: The statute is silent. It is NCCI s understanding that benefits for mesothelioma, as well as the additional mesothelioma benefits provided under Section , are covered under the standard workers compensation insurance policy. If a carrier wishes to not provide the coverage, the carrier would have to determine whether the law would allow the filing of an independent endorsement to exclude the coverage. 8 Q: Senate Bill 1 provides that an employer must elect the additional mesothelioma benefits. How does an employer elect coverage? A: The employer elects the additional mesothelioma benefits coverage by purchasing a workers compensation insurance policy. The policy will include the Missouri Notification of Additional Mesothelioma Benefits Endorsement (WC ) that notifies the employer that the workers compensation policy includes the additional benefits unless the employer takes further action to reject the coverage. The notice language may also be provided during the application process in any form chosen by the carrier. 9 Q: How does an employer reject the additional mesothelioma benefits? A: The employer rejects the additional mesothelioma liability benefits coverage by notifying the carrier. The carrier may determine how the employer must notify the carrier and any documentation the carrier will maintain to memorialize the employer s rejection. The carrier will attach the Missouri Exclusion of Additional Mesothelioma Benefits Endorsement (WC ) to the policy. 10 Q: If an employer rejects the additional benefits, when does the exclusion of additional benefits become effective? A: The rejection is effective the date the Missouri Exclusion of Additional Mesothelioma Benefits Endorsement (WC ) is added to the policy. 11 Q: Senate Bill 1 states that in order for an employer to make an election, the employer shall provide the department with notice of such an election in a manner established by the department. How is this obligation satisfied? A: NCCI will provide information to the department (in this case, the Division of Workers Compensation) on all elections made by employers based on data provided by carriers. Carriers provide information to NCCI regarding every policy issued to an employer, including endorsements that are attached to the policy. Carriers do not need to provide anything additional to NCCI. NCCI can provide the Division a list of all employers with policies excluding the additional mesothelioma benefits if the carriers report the policies to NCCI. 12 Q: How often can the employer change its decision to elect or reject additional mesothelioma benefits? Copyright 2013 National Council on Compensation Insurance, Inc. All Rights Reserved. ncci.com Page 2 of 5

3 A: Senate Bill 1 is silent. Missouri law does not limit the number of times an employer can change its decision to elect or reject benefits. Premium Credits and Charges 13 Q: If an employer rejects additional mesothelioma liability benefits, does the employer receive a premium credit? A: NCCI will not be filing a premium credit. Individual carriers will determine whether to file for a premium credit and the manner in which such credit is applied. Carriers will be required to justify any credits to the Missouri Department of Insurance according to Section of the Missouri Revised Statutes. Carriers should refer to the Missouri pages of NCCI s Filing Guide for Rates and Forms for general information regarding Missouri filing requirements. 14 Q: Are carriers allowed to file for a charge associated with the additional mesothelioma liability benefits provided by Section , subdivision (3) of the Missouri Revised Statutes? A: NCCI will not be filing a charge associated with any additional benefits. Individual carriers will determine whether to file for a premium charge and the manner in which such charge is applied. If carriers file for a premium charge, they will be required to justify any charges to the Missouri Department of Insurance according to Section of the Missouri Revised Statutes. 15 Q: How should a premium credit or premium charge for additional mesothelioma liability benefits be reported for Unit Statistical Data to NCCI? A: NCCI is not filing statistical codes for the reporting of any mesothelioma premium credits or charges. Carriers will not report any premium credit or charges related to additional mesothelioma to NCCI. NCCI Filing 16 Q: Is NCCI filing an election form for employers to opt in for the additional benefits? If not, why not? A: No, NCCI is not filing an election form for employers to opt in for the additional benefits. It is NCCI s understanding that the standard benefits for mesothelioma and other toxic occupational diseases, as well as the additional mesothelioma liability benefits provided under Section , are covered under the standard workers compensation insurance policy. The employer has elected to insure its liability for the additional benefits through the purchase of a workers compensation insurance policy. NCCI s Missouri Notification of Additional Mesothelioma Benefits Endorsement (WC ) recognizes that the additional mesothelioma benefits are covered by the policy. Accordingly, an election form to opt in is not necessary. 17 Q: When should the carrier attach the Missouri Notification of Additional Mesothelioma Benefits Endorsement? A: Unless a carrier files its own endorsements, the Missouri Notification of Additional Mesothelioma Benefits Endorsement (WC ) should be attached to every policy in which Missouri is listed in Item 3.A. for the duration of the policy. 18 Q: When should the carrier attach the Missouri Exclusion of Additional Mesothelioma Benefits Endorsement? A: Unless a carrier files its own endorsements, the Missouri Exclusion of Additional Mesothelioma Benefits Endorsement (WC ) should be attached to accommodate the employer s decision to reject the additional benefits provided for mesothelioma liability under Section , subdivision (3) of the Missouri Revised Statutes. 19 Q: NCCI s new endorsements apply on a new and renewal basis. Can carriers also apply these endorsements on an in-force basis? Are carriers required to endorse in-force policies? A: This portion of the law is effective for any qualifying claims filed on or after January 1, 2014; therefore, the law change could affect in-force policies, and possibly even expired policies. Carriers are not required to endorse in-force policies, but do have the option to use WC and WC for in-force policies, as applicable. Carriers choosing to apply NCCI s endorsements to in-force policies as of a date earlier than January 1, 2014, should refer to the Missouri pages of NCCI s Filing Guide for Rates and Forms for general information regarding Missouri filing requirements. 20 Q: Can a carrier file its own endorsements rather than use NCCI s endorsements? Copyright 2013 National Council on Compensation Insurance, Inc. All Rights Reserved. ncci.com Page 3 of 5

4 A: Yes, carriers may file their own endorsements instead of using NCCI s endorsements, subject to the provisions of Section of the Missouri Revised Statutes. 21 Q: If a carrier files its own version of the Missouri Exclusion of Additional Mesothelioma Benefits Endorsement (WC ), how should it be submitted to NCCI for policy reporting? A: Both NCCI s Missouri Exclusion of Additional Mesothelioma Benefits Endorsement (WC ) and the carrier specific form number must be reported on the Endorsement Identification Record (Record Type Code 07). WC would be reported in the Endorsement Number field. The carrier-specific form number, as filed and approved, would be reported in the Carrier Version Identifier field. 22 Q: Do current Missouri loss costs contemplate mesothelioma exposure? A: NCCI loss costs reflect the current exposure to risk for mesothelioma claims. The additional benefits proposed in Senate Bill 1 will be reflected in future loss cost filings as the experience is reported. Mesothelioma exposure varies by carrier. Therefore it is appropriate for each carrier to independently evaluate whether an adjustment to the referenced loss cost level for the additional mesothelioma exposure is warranted for their own book of business. RISK MODELING PLANS Definitions Individual Risk Premium Modification (IRPM) A rating plan or system where workers compensation premiums are adjusted or modified to reflect rating characteristics, not reflected in the base rate(s), which are expected to affect an individual insured s future loss exposure. Senate Bill 1 includes revisions to Section , which now provides that carriers can prospectively modify premiums through one of two methods: either Schedule Rating OR Risk Modeling. Modifications are subject to the limitations contained in Section Schedule Rating The first of two IRPM methods allowed under Section of the Missouri Revised Statutes. Schedule rating is one method of prospectively modifying premiums. Premiums are adjusted or modified through carrier underwriter-observed rating characteristics and are based on a scheduled range of debits and credits. The debits and credits applied are determined by the carrier underwriter through the carrier s analysis of the insured s operations. Premium modifications under schedule rating plans are limited to up to +/-25%, plus up to an additional 10% credit is allowed for a reduction of the carrier s expenses. Risk Modeling The second of two IRPM methods allowed under Section of the Missouri Revised Statutes. Risk modeling is an alternative method of prospectively modifying premiums. In a risk modeling rating plan, computer software or systems are designed to analyze and assess individual risk characteristics and apply premium modifications systematically to insureds premiums. Premium modifications under risk modeling rating plans are limited to up to +/- 50%. Statistical Codes 23 Q: What statistical codes should be used to report credits/debits related to risk modeling plans? A: Senate Bill 1 revised Section of the Missouri Revised Statutes to provide that premium modifications resulting from a risk modeling plan must be reported separately under NCCI s Statistical Plan from premium modifications resulting from a schedule rating plan. Statistical Code 9147 Risk Modeling Plan Premium Credit, and Statistical Code 9148 Risk Modeling Plan Premium Debit, were created for Missouri in NCCI s Statistical Plan to report the credits and debits resulting from a risk modeling plan. Filings 24 Q: Can a single carrier offer both a schedule rating plan and a risk modeling plan? A: According to Section (6)(3) of the Missouri Revised Statutes, a carrier cannot offer both a schedule rating plan and a risk modeling plan. The statute provides: Premium modifications under this subsection may be determined by an underwriter assessing the individual risk characteristics and applying premium credits and debits as specified under a schedule rating plan. Alternatively, an insurer may utilize software or a computer risk modeling system designed to identify and assess individual risk characteristics and which systematically and uniformly applies premium modifications to similarly-situated employers. 25 Q: If one member of a carrier group has chosen to offer either a schedule rating plan or a risk modeling plan, are all other members of the carrier group required to offer the same? Copyright 2013 National Council on Compensation Insurance, Inc. All Rights Reserved. ncci.com Page 4 of 5

5 A: No. 26 Q: What if a carrier has a schedule rating plan on file and wants to file a risk modeling plan? A: It is NCCI s understanding that the carrier cannot offer both plans at the same time. If the carrier has a schedule rating plan on file and wants to file a risk modeling plan, the carrier s risk modeling plan filing must indicate that the schedule rating plan is either withdrawn or replaced. 27 Q: Are the schedule rating and risk modeling plans optional? A: Yes. Schedule rating plans and risk modeling plans are not required by statute. 28 Q: Does this change in the law require a refiling of a previously approved rating plan? A: It is NCCI s understanding that if there are no changes and if the previously approved plan conforms to current law, a refiling is not required. This document is informational and is not intended to provide an interpretation of state law or regulation. This document is furnished as is with all defects and includes information available at the time of publication only. NCCI makes no representations or warranties relating to this document of any kind and expressly disclaims any and all express, statutory, or implied warranties, including the implied warranty of merchantability, fitness for a particular purpose, completeness, or currentness. Additionally, you assume all responsibility for the use of, and for any and all results derived or obtained through, the document. No employee or agent of NCCI, or its affiliates, is authorized to make any warranties of any kind regarding this document. Any and all results, conclusions, analyses, or decisions developed or derived from, on account of, or through your use of the document are yours, and NCCI does not endorse, approve, or otherwise acquiesce in your actions, results, analyses, or decisions, nor shall NCCI have any liability thereto. PERSON TO CONTACT If you have any questions, please contact: Technical Contact: Roy Wood Linda Bello State Relations Executive Regulatory Services Manager NCCI NCCI Gravois Road, Suite Caughman Farm Lane, Suite 303 St. Louis, MO Lexington, SC Phone: Phone: roy_wood@ncci.com linda_bello@ncci.com Copyright 2013 National Council on Compensation Insurance, Inc. All Rights Reserved. ncci.com Page 5 of 5