National Council on Compensation Insurance Changes Comp Formula

by Gwen Moritz  on Monday, Sep. 2, 2013 12:00 am  

James Daniel

In the end, the change in the split point should be revenue neutral to insurance carriers, meaning every increased premium at one company will be offset by a decrease for another company that has had fewer or less expensive injuries.

“It’s not that big a change,” said Lori Lovgren, the NCCI’s division executive for state relations.

Owens’ example of an employer whose experience mod increased nearly 20 percent is extreme, according NCCI data. Typically, about 5.1 percent of companies see their mods go up by more than 15 percent due to the number and severity of claims they made. Increasing the split point from $5,000 to $10,000 was expected to result in mod increases of more than 15 percent in only 1.2 percent of employers nationwide. And while virtually no employers were expected to get mod reductions of more than 15 percent, significant decreases of more than 5 percent were expected in 11.5 percent of cases.

Data specifically drawn from 964 Arkansas employers suggested that big increases in experience modifications due to the change in the split point were more likely here, but still only 2.1 percent were expected to see mod increases of more than 15 percent.

Arkansas employers are also more likely to see sizable decreases in their experience mods; the Arkansas-specific sample showed that 15.6 percent would have decreases of between 5 and 15 percent. (See table below.) 

Experience Modification Changes Due to Split Point Change

Typical Annual Changes*Expected After Split Point Change*Observed in Arkansas**
Decrease >15% 4.5% 0% 0%
Decrease 5%-15% 8.5% 11.5% 15.6%
Plus or minus 5% 74.7% 75.4% 69.4%
Increase 5%-15% 7.2% 11.9% 12.9%
Increase >15% 5.1% 1.2% 2.1%
  100% 100% 100%

*In all NCCI states **Based on a sample of 964 experience modifications in Arkansas
Source: National Council on Compensation Insurance Note: The percentage change in experience modification is not the same as the change in actual premium paid by a specific  employer.

New Workers’ Comp Commission CEO

James Daniel will be elevated to CEO of the Arkansas Workers’ Compensation Commission on Tuesday, succeeding Alan McClain, who had been CEO since 2005.

McClain, who was director of the AWCC’s self-insurance division from 2000 until becoming CEO, was named last month as a new regional director for the Workers’ Compensation Research Institute in Cambridge, Mass., a nonprofit organization that researches workers’ compensation issues.

Daniel is currently assistant CEO of the AWCC, where he has worked since 1987. He was chairman of the commission until December 1996. Before joining the Workers’ Comp Commission, Daniel served on the Arkansas Public Service Commission and the Arkansas State Police Commission.

Senior Editor Mark Friedman contributed to this report.



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