The NCCI Proposes Significant Changes to Your Experience MOD Factor Calculation

The National Council on Compensation Insurance (NCCI) develops your experience MOD annually and insurance carriers use it as a tool to compare your claims experience to that of your industry. To qualify for a MOD rating, an insured must have had coverage of a minimum premium of $10,000 for one policy period or $5,000 for two consecutive policy periods.



The NCCI annually produces a MOD Worksheet that outlines the calculation and the data that was used to develop your MOD factor. Typically, the MOD worksheet contains three years of claims and payroll data. The most recent policy year is not included in the three years. For example, for a 1/1/2012 MOD, the worksheet would contain the 2010, 2009, and 2008 policy year’s data (not 2011).


In layman’s terms, your MOD is simply the amount of your actual work comp losses divided by your expected losses based on your industry. For the past twenty years, the first $5,000 of a claim has been considered the “primary” portion and any amount above $5,000 has been considered the “excess” portion of the claim. This magic $5,000 line is known as the “split point” of claim. In the formula the NCCI uses to calculate your MOD factor, there is a big difference between the “primary” and “excess” parts of a claim. The formula counts the entire $5,000 “primary” portion of a claim against your MOD but only counts a small portion (typically 5% - 15%) of the “excess” portion of the claim against your MOD. Using a $10,000 lost time claim for a company whose MOD formula only uses 10% of the “excess” portion of the claim, just $5,500 of the $10,000 claim would count against your MOD calculation i.e. the first $5,000 “primary” portion is fully counted but only 10% of the rest of the claim ($5,000 x 10% = $500) is used in the MOD calculation.


The major change that the NCCI is proposing is they will be raising the “split point” of claims from $5,000 to $15,000 over the course of three years. Starting 1/1/2013 the “split point” will be increased from $5,000 to $10,000, and then will be increased to $13,500 in the second year and finally to $15,000 (plus two years of inflation adjustment) in the third year. Looking back at the above example, starting in 2013, that $10,000 lost time claim will have the full $10,000 “primary” portion of the claim fully count against your MOD factor calculation.


How will the “split point” change impact your MOD factor? Your MOD will be largely impacted by the number of claims you have that are over $5,000. If none of your claims exceed $5,000, you will generally see a decrease in your MOD because no additional losses will flow into the MOD formula even with the higher “split point”. Following that same logic, it is safe to predict that for companies that have an above average amount of claims over $5,000 in losses, they can expect to see an increase in their MOD factor.


Keep in mind that even though these proposed changes won’t become effective until 2013, the claims data that the NCCI will be using for your 2013 MOD is from your 2009, 2010, and 2011 policy years. Some may same change is coming in workers’ comp…we say that change is here! At Work Comp Specialists Agency, we are out in front of these changes and are discussing ideas with our clients that will help offset some of the potential negative impacts of the MOD formula change. If you would like to learn about these solutions, please contact us.

The Top 7 Strategies To Keeping Your Work Comp Claim Costs Down

There are 7 strategies to keeping claim costs down which in turn keeps your Experience MOD Factor and the amount you pay in workers’ comp premium as low as possible:

1. Establish a personal relationship with your medical providers
   
   
2. Have a written back to work program with modified/light duty job descriptions for every position within your company
   
   
3. Utilize a post-offer of employment medical questionnaire to ensure your new employee can do the job that you have been hired to do
   
   
4. Have your injured employee bring their paperwork to you after every doctor visit
   
   
5. Use a walk-in or urgent care clinic versus an emergency room whenever possible
   
   
6. Use an agent who reviews your workers’ comp claims frequently
   
   
7. Use an agency who understands how important closing a claim can be for MOD and dividend purposes

Horseplay Injuries in the Workplace: Are They Covered Under Workers' Comp?

While driving on the Florida Turnpike to Miami recently, I was stuck in traffic in a construction zone and witnessed two members of the construction road crew playfully wrestling in the median area. The first thought that came to my mind was how there couldn’t be too many riskier environments for these guys to be horsing around in. The second thought was how the company’s workers’ comp policy would respond if one (or both) of the workers was injured during the “horseplay”.

Some might call workplace horseplay a form of bullying. Others might call it good clean fun that is all a part of a healthy workplace. Either way, workplace horseplay is nothing new.

The general rule used to be that injuries sustained during horseplay were not compensable under workers' compensation laws because horseplay involves conduct outside the scope of employment. Many courts, however, found exceptions to the general rule to allow compensation. For example, the horseplay was momentary and insignificant … or it was common at a particular workplace … or it was condoned or even practiced by management.

Whether injuries resulting from horseplay at work are compensable under workers' compensation laws depends on a number of factors. Many courts apply the so-called Larson test, named after the well-known treatise, Larson’s Workers’ Compensation Law. The Larson test involves an examination of four factors, any one of which might swing the outcome of a case:

(1) the extent and seriousness of the deviation;
(2) the completeness of the deviation, i.e., whether it was commingled with the performance of a duty or involved an abandonment of duty;
(3) the extent to which the practice of horseplay had become an accepted
part of the employment; and
(4) the extent to which the nature of the employment may be expected to include some horseplay.

An employee of a Panera Bread bakery in Colorado was injured when, attempting to kick at the air in the direction of a fellow employee, his leg slipped out from under him and he fell to the floor. Even though horseplay was not an accepted part of his employment, his injuries were found to be compensable because his actions did not amount to an extensive or serious deviation from his employment duties.

Even horseplay involving more extensive and serious deviations from normal work duties can be found compensable when other factors in the Larson test come into play. For example, horseplay may have become a pattern that was accepted in the workplace.

Nevertheless, some horseplay may be so far removed from any normally expected behavior that it cannot be deemed to have arisen in the course of employment.

In one case, jumping 70 feet from a conveyor belt into a cotton pile was an extreme form of horseplay that was found to be beyond the scope of employment. A recent Delaware case provides another example of an extreme form of horseplay that could fall outside the scope of employment—even at a workplace where horseplay was common and accepted. The claimant worked for a construction firm where horseplay and practical jokes were common. Three coworkers trapped him in a bathroom and wrapped him in duct tape from his ankles to his shoulders. He suffered back and knee injuries. The court ruled that some horseplay “may be so unreasonable and so unexpected that it is not within the co-employees’ course and scope of employment.” Also keep in mind that since work comp is state law, the only precidence that would come into play in Florida would be from Florida courts.

While a workplace policy against horseplay seems like a reasonable precaution, it provides no guarantee against workers' compensation liability for minor and momentary acts of horseplay.

By Kian Ostovar with Work Comp Specialists Agency with information provided from "Horseplay in The Workplace" by Charles Tesner Esq.

Why A Drug Free Workplace Policy Is Worth It's Weight In Gold

During a meeting with a client of mine this past week, we reviewed their 5% drug free workplace (DFWP) credit on their upcoming 2010 policy. The person I was meeting with expressed some frustration with the fact that the credit amount of $1,000 barely covered their annual cost for implementing their DFWP program. Keep in mind that this company has an aggressive zero tolerance policy that goes above the state of Florida minimum standards of having a certified program and conducting pre-hire and post accident testing. They also do three random tests a month and require a supervisor to accompany the employee to the testing site each time. So in addition to the cost of the tests, the company also bears the cost of lost time and production for two employees, three times a month.

I encouraged my client to look at all of the other benefits of their DFWP program. In addition to providing their work comp carrier the ability to deny a claim if an injured worker tests postive for an illegal drug that contributed to the accident, here are some other reasons to become (or continue to be) a Certified Drug Free Workplace.

>> Employer expenses related to substance abuse are increasing and may exceed $250 Billion per year, based on the following expenses:

1. Workers' Compensation: Substance abusers register 50% of all claims and 5X more claims than average.

2. Health Benefits: Abusers utilize 8X greater health benefits and spend >300% more on healthcare than peers. [US Department of Labor]

3. Absenteeism: Substance abusers account for 35% of all work absences and are 6X more truant than colleagues. [US Department of Labor]

4. General: Substance addicted employees are responsible for much higher rates of workplace turnover, theft, accidents, deaths and violence. [Special Congressional Report on Alcohol and Health; US Department of Labor] The Substance Abuse and Mental Health Services Association reports that more than 75% of substance addicted persons work. The rate of substance addicted workers in the average workplace is about 13%.

If you do not have a Certified Drug Free Workplace Program in place, what is holding you back? If you have one, when was the last time it was reviewed by an expert to ensure it is up to date and in compliance? If you would like assistance implementing a program or having yours reviewed at our cost, feel free to contact me at kostovar@workcompspecialists.com

by Kian Ostovar of Work Comp Specialists Agency

"The Offer"

I'm reading a great book, The Referral Engine by John Jantsch, and wanted to share this story from it along with a few questions to ponder.

Zappos, the mega-successful online shoe retailer has a unique way to ensure that their employees are the type that will help them continue to grow. They call it "The Offer". When they hire a new employee, they go through four weeks of paid training and are immersed in the company's strategy, culture, and obsession with customer service. After one week on the job, Zappos makes "The Offer" in which they tell each employee that if they quit that day, they will be paid for the week of work plus $1,000 to quit. What Zappos discovered was that if any employee took them up on the offer, they were never going to be the kind of customer focused, high energy employee so important to their brand. It turns out that less than 10% of the new employees take the money and quit. One could figure that the cost of keeping uncommitted folks far exceeds the offer cost in letting them go.

How many of your employees would cash in on "The Offer"? Are they the ones that you want to continue to build your company around? What steps have you taken to ensure your employees are committed to your company's (and their) success?