2010 Changes in California WCIRB Experience Rating
In November of 2009, Insurance Commissioner Steve Poizner approved several changes in the way California Experience Modifiers are calculated.
As you may be are aware, your Experience Modification is a significant factor in determining your workers' compensation premiums and, as such, is a critical factor in your overall insurance costs.
Some clients have asked us for a brief synopsis of the changes in clear English without resorting to “insurance-speak,” and I'll try to do so.
The reason for this change, the commissioner hopes, is to improve employer understanding of the X-Mod process. As well to encourage improved safety at the workplace as a way to reduce costs. Although the majority of your workers are temporary employees working at someone else's worksite, we certainly hope that this heightened awareness results in fewer injuries for your employees.
Key among the changes is the formula used to split losses into primary and excess, or small and large claims. Previous to January 1, 2010 claims that were $2000 or less went into the X-Mod calculation at full value. Claims in excess of $2001 dollars went into the X-mod formula at a discounted rate. For example a $200,000 or $300,000 claim would go into the X-Mod formula at roughly $8,000 or $9,000 dollars.
The net effect of several small claims could be much larger than the effect of one very large claim. Hence the statement that frequency of claims has a more serious effect on your X-Mod than severity of claims. That statement, while not true in every scenario, was and is generally true.
Beginning January 1, 2010, the split point for primary and excess losses, small claims and large claims, is $7,000. All claims valued at $7,000 and less will go into your X-Mod calculation at full value. All claims above $7,000 in value will go into your X-Mod calculation at $7,000.
WCIRB , the agency that calculates the X-Mods for all employers, has stated that this change along with updates to “credibility values” (part of the X-Mod formula) will result in more accurate X-Mods for employers. The WCIRB also changed its methodology for calculating “expected loss rates” for various industry classifications, which is what an individual employer's loss history is compared to. This change is supposed to increase the accuracy of your X-Mod without impacting the overall average X-Mod. Still, some employers are seeing changes in their X-Mods of plus or minus ten points.
Still to come later this year are changes in the X-Mod form and in the costs included in the X-Mod.
In 2011, employers will be advised what their X-Mod rating would have been if they had been claims free. This change is intended to reinforce the connection between safety and lower workers' compensation premiums.
Questions? Please don't hesitate to contact us. This has been a simplified explanation of a fairly complicated calculation, and I hope that you find it helpful.
The bottom line is that the effect of the changes the WCIRB is making again places emphasis on claim frequency over claim severity. The change in the definition of a “small claim,” now up to the $7,000 range, means that far more claims will go into the X-Mod at their full value.
Does this mean that larger claims no longer matter? Absolutely not. Large claims will also still play a significant role in the computation of your X-Mod.
With these changes in mind, here are a few tips for controlling your X-Mod:
- Focus on claims prevention. This is sometimes difficult because your temporary employees work at your client site. Still, a pre-placement jobsite visit is even more important now, and making sure that your temps are at a safe workplace is critical.
- Use First Aid whenever possible. Work with your carrier to establish a program where First Aid claims are reported as required, but do not have an impact on your claim frequency.
- Implement a Return to Work/ Modified Duty program. Offering modified duty keeps temporary disability costs down, and oftentimes contributes to an employee returning to work more quickly. One possibility is volunteering your injured workers to a charitable organization as modified duty.
- When in doubt, contact us with any questions you may have about your X-Mod or a particular claim. We stand ready to assist you.
Rich Siemer, President
1240 North Lakeview Avenue, #240, Anaheim, California 92807 P 714.779.2000 F 714.779.4129