Lower Our Mod
This question was emailed in from a blog reader from Virginia. The rest of the employer’s question pointed out that the file was six years old. The answer to the question is it depends on the timing of the recovery.Virginia, as in most states does not allow a Mod (Experience Modification Factor) revision from more than four policy years into the past. As the Workers Comp file was more than four years old, the subrogation money will be credited to the file. However, a Mod from six years ago cannot be promulgated again.The funds are known as “in the money” for the Workers Comp carrier. Strangely enough, the money is in a way pure profit for the carrier.
Self insureds are another matter. The money should be immediately returned to the employer as the Third Party Administrator (TPA) had paid the claim from an account, not an insurance policy. The funds that were recovered due to subrogation cannot be applied to the Mod after four policy years maximum. This is due to the way that Mods are calculated by NCCI or the State Rating Bureau.
In almost all cases, the Mods are promulgated from policies four, three, and two years prior to the current policy year. The Workers Comp claims from the policy that expired in the previous year will not be charged to the Mod until the following year.
Over the past few years, there have been a number of lawsuits pursuing the Mod recalculations even though they were from files that were older than four years. The lawsuits are/were alleging the carriers were too slow in recovering and applying the funds which caused higher Mods.
This situation is exactly why the employers should be very vigilant in tracking subrogation or any type of file refund such as an overpaid medical bill. It is not recommended that your company leave it to the carrier to recover and apply the recoveries or refunds to the Mod.