Small Workers Comp Claim Can Easily Be A Huge One
Reviewing a loss run for a small Workers Comp Claim justifies the time to perform the task. Please see the last two days of postings. It may be best to read them before this post. This mini-analysis is similar to yesterday’s post.
We often hear when reviewing a loss run that a claim or a group of claims are only small claims. However, due to the structure of how a Workers Comp E-Mod is calculated, there is no such thing as a small claim.
The way that E-Mods are calculated is that the first $15000 is the primary loss. After $15,000, there is a discount factor that reduces the amount that the Workers Comp E-Mod and premiums are affected.
Looking at a claim for say $15,000 – the employer is charged the full amount against their E-Mod. Remember that is the full Primary Loss. How much of an amount above $15,000 equates to the first $15,000? If you look at the last posting, there is a discount of 80%. So, an insured would pay the same for the next $20,000 of Excess Loss as they did for the first $15,000.
Think of it this way – for a $55,000 claim – the first $15,000 is as expensive as the next $65,000.
The bottom line is that there is no such thing as a small claim. Check out claims festering to see how even a medical only can cost a large amount of premiums. In the example above, the Primary Loss portion of the claim is 400% more costly than the Excess Loss after $15,000.
Update – Due to The NCCI;s Increase of the Primary Loss to $15,000, the primary loss numbers in this article had to be changed.
Next Up – How Do the Last Three Posts Relate to a Workers Comp Claims Loss Run?
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