By Jeff Biesen CPCU
The National Commission on Compensation Insurance submitted changes which were adopted by the Indiana Compensation Rating Bureau (ICRB) as well as the other 38 states that subscribe to the NCCI. The changes are the first since the calculation was introduced 20 years ago and will have a material impact on the premium paid for Workers Compensation Insurance.
Item E-1402 allows the adjustment of the primary and excess loss split points. For the past 2 decades the max cap for primary losses has been $5000 and anything above $5,000 was considered excess. In 2013 the primary max cap was increased to $10,000. In 2014 it will increase to $13,500 and yet again to $15,000 in 2015. It is expected that 75% of employers will see a +/- 5% change in the mod. But for some the change could be dramatic.
The increase is said to be necessary as the cost of claims have tripled since the formula was adopted. Chief Actuary Dennis Mealy notes the changes will improve the accuracy of the plan. “Experience rating” he states, “improves equity in pricing amongst individual business and encourages loss prevention.” The truth is, those with solid Risk Management programs, will see their EMR reduce more quickly and pay less for Work Comp. Those with poor experience and without loss prevention measures in place will see the EMR increase quicker and pay more for Work Comp. It is important to invest time and resources in Loss Prevention and Procedures. While the calculation change affects YEAR SPLIT POINT Currently $5,000 2013 $10,000 2014 $13,500 2015 $15,000 Subsequent Based on inflation Split Point Transition Program Big Changes Affect EMR Calculation New changes have the ability to raise (or lower) the EMR more quickly than in the past, making EMR management more important than ever. www.buildingindiana.com | SEPTEMBER/OCTOBER 2013 33 most states, here in Indiana we have distinct advantages over those in neighboring states. Employers in Indiana have the ability to control the Work Comp claim process.
Take control of the process; tighten reporting procedures and direct care for injuries. In Indiana the employer has the right to direct care; the employee must go to the designated medical facility. Before losses occur develop a relationship with an Occupational Medical facility. There are some very good clinics in the area. They know how to get the employee back to work quickly and help avoid wasted hours sitting in an Emergency Room.
Indiana allows for a 70% reduction in the reportable amount of a med only claim. So if you can get an employee back to work without loss time (No TTD or PPD) the total amount of the loss can be reduced by 70%, helping to keep the mod down.
Invest your time in Safety to help avoid injuries in the first place. Most Insurance Carriers and Agents have access to safety resources. Promoting a safe work environment everyday cannot be over emphasized. Also, keep in mind that errors in the calculation can occur. Have your EMR audited annually well in advance of the anniversary date. Manage the process before a loss occurs so you have the procedures in place to help keep your EMR in check. Many contractors would not be able to work for a number of owners and GC’s in our area if their mod is higher than 1.0. Employers with proven safety and loss prevention programs that reduce injuries will benefit from the NCCI recent calculation changes.
Jeffrey R Biesen
Valparaiso, Chicago, NWI