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