Californias WCIRB X-Mod Formula Heavily Penalizes Small Unsafe Companies
This month Californias WCIRB produced a new small employer X-Mod formula.
Yesterday, I attended the WCIRB Conference in Burbank, CA. The WCIRB makes one work in their workshops. They always put on great workshops.
One of the things I noticed that jumped off the page was the rating formula to calculate the X-Mods had changed considerably. The other main rating bureau in the US – NCCI – changed their formula over three years to reflect a higher split point value. The NCCI basically altered the formula to move more of the rating value from severity-based to recurrence-based.
I had wondered how and if the WCIRB would also change their rating formula to move more towards recurrence -based penalties from severity-based X-Mod Calculations.
Severity-based basically means a discounting factor is included that will not penalize employers that have one severe injury with very high payouts and reserves (Total Incurred). The WCIRB removed any discounting of the Primary Loss. The primary loss level is $7,000. The excess loss is any part of the loss over the $7,000 threshold.
The discounting table (favoring small payroll employers) would discount the primary loss part of a claim. Smaller payroll employers could not easily absorb the effect of one or two major claims. The WCIRB was basically leveling the playing field between small and large employers.
As with the NCCI’s change in split-points, the WCIRB is making sure that safe employers are not subsidizing unsafe employers. By eliminating the primary loss discounting table, all employers will be penalized more for repetitive injuries. Unsafe smaller employers will feel the effects in their next X-Mod calculation.
The Californias WCIRB’s new formula will cause small unsafe employers to pay more for Workers Compensation insurance. I will cover the formula change next time.
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