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February Chapter Meeting Presentation

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									The 2011and 2013 Experience Rating Changes




                 Gammill, MBA
         Randall Gammill MBA, SPHR
             Connell Insurance Inc.
               Branson, Missouri
THE EXPERIENCE RATING PLAN

Applies to every employer with more than $3,500 in annual premium
-



-Calculated by the National Council on Compensation Insurance
(NCCI) using tables and formulas approved by the Missouri
Department of Insurance

Used in approximately 40 states
-
                                g
     Basic Elements of the Rating
High hazard industry does not mean high experience rating:
  Roofing contractors are compared only to other roofing contractors
  Firefighters are compared only to other firefighters
  Fast food restaurants are compared only to other fast food restaurants

There are 600 industry class codes to compare with
Average experience rating in every industry is always 1.00
Classification code determines the Expected Loss Rate (ELR)
ELR - utilized as percentage of payroll to determine expected losses
(Payroll/100) X (ELR) = Expected Losses each year
3-year total Expected Losses determine various weighting values
                             g
   More Elements of the Rating

Code 6 – Medical only

Codes 5 or 9 – Lost time

Actual and Primary Losses – Changes in 2013
  Primary limit will Increase from $5,000 to $15,000
  Overall change will mean a wider range of ratings

          g                            g
Stabilizing Values and Loss Limits change with
employer size as determined by total 3-year
expected losses.
Calculating the Experience Modifier

Three-year time period

Lag Year

Cost of Various Claims Under 7/1/11 Formula

Verification of Claim Amounts and Reserves
                          y
  Review Loss Runs and Payroll before evaluation date
  Only medical and indemnity costs are included
  Legal and other expenses are excluded
   ese ves are c uded e same paid
  Reserves a e included the sa e as pa d
      Experience Rating Adjustment (ERA)
                            1,
             Effective July 1 2011

•   Effective July 1, 2011 Missouri adopted a new experience rating
    formula This formula has been used in most states since 1998.
    formula.                                                 1998
•   New formula discounts medical only claims by 70%.
•                                     p                ( )
    New formula also reduces the Expected Loss Rate (ELR) and
    Discount Ratio (D-ratio) to encourage early return-to-work
    programs.
•   A l retroactively to previous 3 years of claims.
    Applies             l                       f l
•   Provides much stronger incentive for light-duty work.
       Experience Modifier Calculation



Expected Losses – impact of payroll and class code
changes
Injury Codes - Actual Losses and Primary losses
Impact of $1,000 and $10,000 claims before and
after ERA.
Emphasis on designated medical care and return-
to-work program.
                 pp
          What happens if…….
the class code changes?

payroll changes?

you never have a claim?

you pay med only claims under $1,000?

    don t
you don’t track your open reserves?
       Se    d    s e g Med-Only U de $1,000
       Self Administering Med O y Under $ ,000

Y must still submit the First Report of I j
You    t till b it th Fi t R                  t the     i      third
                                   t f Injury to th carrier or thi d
party administrator. True or False

                                                               self-
You may be liable for the additional costs of the claim if the self
administered case spirals out of control. True or False

                                                        self-
Under the new ERA formula you are no longer allowed to self
administer medical-only claims under $1,000. True or False

                                                    self administering
Under the new ERA formula you will still benefit by self-administering
medical only claims under $1,000. True or False
         Need More Information?
www.insurance.mo.gov
  Rates, Complaints, and Carrier Information
www.ncci.com
  Purchase the ABC’s of Revised Experience Rating
  Purchase The 1998 Adjustment to the Experience Rating Plan
  (800-622-4123) General to Complex Questions
         py y                 p
  Free copy of your current experience modification worksheet

Randall Gammill –(800-356-8140)
  rgammill@connellinsurance.com
  Experience modifier review and projection
  Class code and payroll evaluations
  Review of claims and reserves
  Audio recording of this presentation may be found in the “Media Library”
  link             ll
  l k at www.connellinsurance.com

								
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