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                            Division of Insurance

                                             3 CCR 702-5

                                 LIFE, ACCIDENT AND HEALTH
Amended Regulation 5-3-5


Section 1       Authority
Section 2       Scope and Purpose
Section 3       Rule
Section 4       Applicability
Section 5       Severability
Section 6       Enforcement
Section 7       Effective Date
Section 8       History

Section 1       Authority

This regulation is promulgated and adopted by the Commissioner of Insurance under the authority of §§
8-44-111 and 10-1-109, C.R.S.

Section 2       Scope and Purpose

Pursuant to § 8-44-111(3), C.R.S., Colorado is a net reporting state for workers’ compensation insurance.
This means that an employer’s deductible up to the maximum of $5,000 is subtracted from the amount
of the loss per claim for the purpose of calculating the employer’s experience modification factor. Many
employers have not received the intended benefit of the $5,000 exclusion. Due to reporting
requirements, insurers reported the full loss to the statistical agent because they had not actually
received the deductible reimbursement from the employer. Frequently, insurers fail to correct their unit
statistical reports to show the paid deductible amount, thereby depriving the employer of the benefit of
the deduction. This rule eliminates the requirement of actual receipt of the deductible by insurers prior
to reporting such deductible to the statistical agent for the purpose of calculating the experience
modification factor.

Section 3       Applicability

This regulation shall apply to all insurers authorized to issue workers’ compensation insurance policies in
Colorado including the Colorado Compensation Insurance Authority also known as Pinnacol Assurance
who issue policies with a deductible.

Section 4       Rule
Workers’ Compensation insurers writing deductible insurance policies in Colorado are required to
deduct the full amount of the policy deductible from any claim reported, up to a maximum of $5,000 per
claim. This shall be applicable for large and small deductible programs, without regard to the actual
receipt of the deductible when initially reporting a loss to any statistical agent for the calculation of the
employers experience modification factor. Elimination of the actual receipt requirement will ensure that
more employers receive accurate experience modification factors.

However, insurers shall also report the total or full amount of the loss (without regard to the $5,000
exclusion above). This is to ensure that the full amount of the loss is reported properly for purposes
other than calculating the experience modification factor.

Section 5        Severability

If any provision of this regulation or the application of it to any person or circumstance is for any reason
held to be invalid, the remainder of this regulation shall not be affected.

Section 6        Enforcement

Noncompliance with this regulation may result in the imposition of any of the sanctions made available
in the Colorado statutes pertaining to the business of insurance, or other laws, which include the
imposition of civil penalties, issuance of cease and desist orders, and/or suspensions or revocation of
license, subject to the requirements of due process.

Section 7        Effective Date

This regulation is effective July 1, 2012.

Section 8        History

New Regulation 5-3-5, effective July 1, 2002.
Amended Regulation 5-3-5, effective July 1, 2012.

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