Workers Compensation Alert

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There is an important change taking place with how workers compensation experience mod (E-Mod) factor will be calculated in the future.  The E-Mod factor is based on losses have over a three-year period (the last three years, not including the most recent policy year) as compared to what “expected losses” would be for this same period. A credit mod, less than 1.00, means that employer’s losses are better than average; a debit mod, over 1.00, indicates that losses are worse than expected.

E-Mods are most responsive to “primary losses,” defined as losses up to $5,000 per claim. Although the average cost of a claim has tripled in the last 20 years, the $5,000 definition has remained constant, making the current E-Mod calculation less responsive to incurred claims. As a result of this change, more “primary losses” will be going into the calculation.

In 2013, to address this problem, the National Council on Compensation Insurance (NCCI) will increase the primary / excess loss splits in the following stages.

  • 2013: $10,000
  • 2014: $13,500
  • 2015: $15,000 plus a two year inflation factor

Beginning in 2016, after the initial three-year adjustments, the primary loss splits used to calculate E-Mods are planned to be indexed further.

There will be no overall premium level change for the workers compensation industry. However, insureds with credit mods will generally see their mods go down with the new formula, and insureds with debit mods could experience higher mod factors. As a reminder, Key Risk is the endorsed workers compensation carrier of the VHCA and can provide more information about this change at 866.323.8955, ext. 5012 or 5013.