Understanding Your Workers Compensation Experience Mod Factor and Its Relationship to Safety Colorado Contractors Assn.

Transcription

1 Understanding Your Workers Compensation Experience Mod Factor and Its Relationship to Safety Colorado Contractors Assn. April, 2014 Sonja J. Guenther, ALCM, ARM, CIC, CRM Sr. Vice President, Willis of Colorado

2 Situations That Can Create Debit EMRs Lax Safety Program/Training Injury Experience Hiring an Injury Poor Management of Claims Reduction of Payrolls No Relationship w/medical Provider or Adjuster Failure to Offer Light-Duty Large Claims/Freq. Losses Mod Factor Formula Change Split Point Changes

3 Ways to Influence the EMR SAFETY, SAFETY, SAFETY Deductible Plans and Net Reporting States Alabama Kentucky Colorado Maine Florida Missouri Georgia New Mexico Hawaii Oklahoma Idaho Oregon Iowa Kansas House Bill 1025 Eff. 7/1/13 changed max. Colorado deductibles Source: NCCI Basic Manual, 2012

4 Protecting the Mod Factor Good Hiring Techniques Pre-Hire Testing; Phys. Agility, Integrity Testing Safety Training PLUS: Accident Investigations Communicate your findings Be sure agent/underwriter is informed of this training Train from injury trends Contact Agent/Adjuster for Updates Regularly Mitigate reserves/close claims Review at VERY minimum: 8 mos. pre-renl. (before stats sent to NCCI) 3 mos. pre-renl. (U/W pre-renewal review)

5 Surprising Events That Can Impact the Mod Factor Beware of Shifting to a Lower-Rated Class EMRs Rise Conversations When Acquiring Companies or Selling off Divisions The data of the companies are blended Merge the mods, in advance, for the outcome Changing the Annual Renewal Date of the Policy > 60 Days skews reporting dates of policies Can increase the EMR Wrap Up Projects Phantom claims when you ve finished the project

6 Using Mod Factors as a Reflection of Safety EMR s (mods) Used in Construction/Energy Industries Bidding Process As a Gauge of Safety Could be disqualified for mod >1.00, >.90, or >.80 Larger employers = smaller mod factors Smaller, loss-free employers cannot reach low mod factors Some employers DO NOT HAVE a mod factor Discourage this Practice >30% error ratio in experience mods

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8 Situations That Influence EMRs That Have No Relationship to Safety : State Rate Changes/Expected Loss Rate (ELR) Factors Actuarial Formula Changes Introduced by NCCI 27 NCCI States Have the Experience Rating Adjustment Plan NCCI will TRIPLE (or more) primary losses with new split point formula Out of Balance adjustments to mod factors by State administrators Employee is Injured by Third Party Maximum Caps on Claim Dollars, Per State Impact of Deductibles on Mod Factors Errors Included in Mod Factors

9 The NCCI Worksheet 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 for the wrong employer - Payrolls are estimated - Payroll data missing completely - Payrolls reported for audits in dispute - Payrolls for incorrect class code - Data blended for non-combinable companies Economy and Lowered Payrolls Have Made Mods Increase

10 Achieving a Credit EMR Claims Management Don t Pay Yourself to Avoid the Mod State Fines/Penalties Make sure your state allows this Communication: Carrier/Agent/Injured Worker Relationship with Desig. Med. Provider Invoke Statutes: Drug Testing Violation of Safety Rule Failure to Return to Work (Rule 6) Light Duty: Temporary Progressive Be Committed!

11 Offering Light/Modified Duty Keeps Employee Productive/Making a Contribution Avoids Muscle Atrophy Continues Social Interaction/Avoid Depression You Pay Them Once Income Is Taxable Wage Benefits (TTD) Will Impact Premiums/EMR For 3 Full Years TTD is Not Taxable Could Lower Injured Worker s Permanency Rating (PPD)/Award Lower $ Into Your Mod Factor

12 How Are Experience Mod Factors (EMR s) Changing? Each injury/claim in an EMR is made up of the primary portion and the excess portion The Primary Portion: WAS the first $5k of each claim Weighted the heaviest in the EMR calculation Goes right to the bottom line of an experience mod and impacts it to the greatest degree

13 How Are Experience Mod Factors (EMRs) Changing? (continued) The Excess Portion of Each Loss: WAS the $ amount of each claim >$5k. Every $ over $5k HAD weights/ballasts placed against them to cushion the impact of these larger losses on the mod factor. The $5,000 figure WAS the split point prior to 2013

14 Why is NCCI Changing the Split Point? Work Comp costs have tripled in the past 20 years (NCCI has not adjusted the split point in more than 20 years) Experience mod factors are no longer responsive to loss frequency This adjustment will make mod factors more reliable and credible The change will give employers more incentive to operate more safely/reduce injuries.

15 How Will the Split Point be Changing? January 1, 2013, the split point DOUBLED to $10,000 The first $10k of each injury will be considered primary losses The first $10k of each loss will be weighted heavier in the mod calculation January 1, 2014 the split point/primary losses moved to $13,500. January 1, 2015 the split point/primary losses are projected by NCCI to >TRIPLE to $15,500 The split point will be adjusted by indexing after 2015 Colorado House Bill 1025, eff. 7/1/13 will allow employers to carry a deductible that matches NCCI s split point.

16 House Bill Aggravated Inequity Bill Six States Have Agg. Inequity Regulations in Workers Comp. You have an open claim when your claims info. is reported to NCCI to complete your experience mod The carrier reserves that claim, for example at $65,000 and reports it to NCCI at this level During the year, the carrier closes the claim at a LOWER amount But the EMPLOYER continues to PAY PREMIUMS based on the higher $65k estimated/reserved amount Until the claim $ is re-reported to NCCI NEXT year HB Received STRONG opposition from insurance carriers Died in Committee, March, 2014 Workers Comp. Coalition was main supporter

17 How Is Your Company Perceived? Take the Focus Away from a Number (EMR) and Onto Your Safety Program and Actual Injury Results Include Recent Safety Awards/State Awards-Complete the Packets You Get from Associations Compare Incident Rate to Industry Show Lost-Time Injury Trends? Decreasing? Attach Carrier/Agent Pre-Qual. Letters About Your Mod/Safety Program Involvement in Industry Associations Include Leadership Positions Held We Have Been Injury Free for Days Fill in the blank!