Beginning 1 January 2013, employers with poor loss histories will pay higher workers compensation premiums. ? At the core of the coming change is the method in which the E-MOD is calculated. ?The biggest group affected will be medium sized businesses, who qualify for an E-MOD rating (note: many small businesses do not meet the criteria necessary to have an E-MOD rating) but don't have the same loss control programs or risk managers on staff that larger corporations may have.
By the same token, policy holders with a good loss history, proven risk management programs, and safety programs that reduce injuries, will benefit more from the new calculation. ?While the changes go into effect on 1 January 2013, it won't affect existing policy holders until their anniversary rating date (often the same date as their renewals).
Increase in the Split Point
For the first time in two decades, NCCI (National Council on Compensation Insurance) is increasing the "split point" calculation from $ 5,000 to $ 10,000 in 2013. ?In 2014, the split point is increased to $ 13,500 and $ 15,000 the following year in 2015. ?A workers compensation claim that is paid up to the "split point" is considered primary, while any losses paid out higher then the split point are considered excess. ?While the average cost of claims have increased 300 percent, the split point has remained the same for more than 20 years, so this change is long overdue in the opinions of many. ?It will effectively shift more claims and weight from severity to frequency.
So what do you need to know as a business owner? ?That loss control efforts should focus on preventing the high frequency-low severity type claims such as sprained joints, pulled muscles, minor cuts and falls, whiplash, and soft tissue injuries. ?These loss control efforts should include (1) a general awareness among all employees, (2) proper use of provided personal protection equipment, (3) proper procedures that are followed, and (4) an effective reporting system and accountability.
If you have frequent work place injuries, you will pay more for workers compensation beginning in 2013. ?If you can avoid those frequent, often minor injuries, then the recalculation of the EMOD ratings and raising of the "split point" could result in potential additional savings starting in 2013. ?Understanding your experience modification rating and monitoring it regularly with aggressive claims management, can be a key factor in reducing workers compensation costs.
Companies that have effective safety programs in place and effective loss control policies understand the relationship between the EMOD rating and insurance premiums, and appropriately view safety performance as a potential profit center. ?In addition to serving as a modifier of workers comp premiums, the EMOD rating is also often used as a prequalification mechanism by project owners and general contractors, when looking for other parties to work with that have good safety records.
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