New x-mod formulas have been approved and employers should be focusing on limiting the number vs. cost of claims.
Changes are afoot in how experience modifications are going to be calculated. An experience modification or “X-Mod” is a percentage calculated by the Workers’ Compensation Insurance Rating Bureau (“WCIRB”) based on an employer’s payroll, number of workers’ compensation claims, and the costs of those claims.
An employer with no claims may have a low X-Mod…in the 70 percent range. An employer with several costly claims may see their X-Mod climb above 200 percent, thus becoming uninsurable.
The WCIRB’s X-Mod formula uses a fixed number to split workers’ compensation claim amounts into two. For example, in a $25,000 claim, the first $7,000 will count 100% against the employer, but the additional $18,000 will count against the employer at less than 100%. This helps to moderate the impact of a large claim. The WCIRB is now poised to take this further beginning in January 2017. Their plan is to replace the $7,000 “split point” with a variable split plan ranging from $4,500 for the smallest employers to $75,000 for the largest.
“Employers would therefore do well to adopt safety procedures and practices to limit the number of claims as it appears inevitable that X-Mod calculations will continue to move toward focusing more on the number of claims rather than their costs.”
The WCIRB has also indicated that this plan works best when the amount over the “split point” has “zero excess credibility,” i.e., that amount should not count against the employer. This could create a dramatic change in how claims affect X-Mods. The WCIRB ran the numbers and found that, for an employer with a $25,000 variable split point, the impact of a $30,000 claim on the employer’s X-Mod will be the same as the impact of a $150,000 claim.
Employers would therefore do well to adopt safety procedures and practices to limit the number of claims as it appears inevitable that X-Mod calculations will continue to move toward focusing more on the number of claims rather than their costs. This, however, could be a step in the right direction since the costs of claims is all too often reflective of the insurance carrier’s claims handling, and not on the actual validity or severity of the claim.
With this potential new X-Mod formula, defending against the claim during its early stages becomes all the more important. RPNA continues to remain at the forefront of fighting for employers who are suffering or have suffered through their carrier’s mishandling of claims. We will therefore be pleased to answer any questions you may have about this subject.
If you have any questions, please contact us at (818) 992-9999 or via email.