Effective July 1, 2015, with the inclusion of Texas as a NCCI State, the calculation for the Experience Modifier has changed. This change will have a significant impact on businesses in Texas, as the basis for calculating the Experience Modifier will be affected by these changes.
Key Points:
The split point between a primary and excess loss has increased from $5,000 to $15,500. Claim expenses have increased over the years due to inflation, increased medical costs, and increases in wages and benefits. As such, a higher percentage of claims routinely exceed the previously set loss limit. Previously, claims over $5,000 were weighed less in the overall calculation of the Modifier. This increase in the the split point has resulted in more weight being given to claims accessed at the primary $15,500 level versus the excess.
The cap for a single injury to affect the Modifier calculation has rose from $107,000 to $230,500. An employer with a claim of $320,000 would previously been allocated $107,000 of this claim expense against their Modifier. Under the new cap, the modifier will use $230,500 of the claim in calculating the Modifier.
As of July 1, 2018, NCCI will no longer allow Modifiers to be negotiated downwards. Previously, Texas employers were able to negotiate their modifiers downwards and avail of lower premiums, and remain compliant with contractual limits imposed by their clients.
These changes are going to have a significant impact on the Modifiers. Companies may see their modifiers go from say 0.89 to 1.13 using the same payroll and class codes, depending on the prior loss history and claim severity.
This change will particularly affect companies working in refineries and chemical plants, where their contract stipulates an Experience Modifier less than 1.0 to work in these facilities.
PEOs historically have a low Experience Modifier. By becoming the employer of record, the client is able to use the PEO’s modifier. Additionally, PEOs have exceptional in-house claims management services, and actively work to resolve and close outstanding claims, limiting the severity of the claim.