NCCI Split Point Debate – Employers End Up Taking The Hit
The Split Point Debate points to employers taking the hit. I had an interesting question earlier this week on the upcoming NCCI Split Point changes. Over the last few weeks, I have received quite a few emails on how the split points will affect an employer’s E-Mod. I am sure that you have heard of the upcoming changes. If not, please follow the link in the first sentence and this link on the 2013 E-Mod calculations.
The main concern now is how an employer will be affected in the upcoming year with the split point doubling from $5,000 to $10,000. The split point is now $5,000 as the primary loss and any amounts after the split point is the Excess Loss. There is a built-in discount factor that kicks in when a claim reaches $5,000. The discount factor is a saving grace for an employer with a few large claims.
NCCI and the rating bureaus have built the Workers Compensation E-Mod system around penalizing employers that have many small claims. Statistics have shown again and again that a certain percentage of small claims will eventually turn out to be large claims. I have seen this in loss runs over the years. I agree with that assumption.
Which employers will see the most increase in their Mods after 1/1/13 – the employers that have a large group of claims between $5,000 and $10,000. There will be no discount factor on these claims. It is true now that six claims with a $5,000 incurred loss will affect the E-Mod as much as one $100,000 claim.
The new changes will change that statement to six claims with a $10,000 loss will affect the E-Mod as much as two $100,000 claims. I am making a blanket statement as each state has its own discounting factors, so this may not fit in all states. However, the concept is true and correct.
If you are not one of my weekly newsletter readers or read the blogs as they are published, I encourage you to go down the right side of the screen and use the search box and search for NCCI changes. I have written numerous posts on this subject.
The NCCI has said that only 18% of the employers will be affected negatively. I am not sure if I agree or disagree with that figure. I think we may have to wait a few years to see the full effect.
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