California Insurance Commissioner Approves 2017 Changes
California Xmods also known as Experience Modification Factors calculations are changing drastically in 2017. A very important term for California employers in the next few years is the term variable split point.
Split points are the amount at which the Total Incurred for a claim has much more of an effect on an employer’s X-Mod.
Variable split points are not the same as the split point changes enacted by NCCI over the previous years. NCCI now has its split point set at $15,000 from $5,000 just a few years ago. Search the term split points in the search box for more articles on the changes by NCCI.
How variable split points work is the total expected losses for the Experience Period have much more of an effect than just the prior California split point of $7,000. In other words, the size of the employer will determine the split point.
According to the WCRIB:
- Approximately 90 Primary Threshold split points
- Values range from $4,500 to $75,000
- Ranges based on the employer’s total expected losses in the experience period
- Final values will be updated and proposed to Insurance Commissioner in the 2016 WCIRB Regulatory Filing
The interesting fact is the effect on California Xmods may not be known until the Insurance Commissioner approves the final levels.
The most important fact is the 2017 and forward X-Mod system is going to punish employers that have repetitive accidents. The concept of a variable X-Mod will also lessen the effect of one huge claim on a small
employer.
The claim amounts up to the split point are used fully in the x-mod calculation. This is the same as NCCI’s split points with one major exception.
Claim amounts above split point are not used in x-mod calculation. One of the main differences between the NCCI and WCIRB split points is that NCCI still uses the Excess loss in its calculations. NCCI excess losses are in a roundabout way – discounted. California will be basically creating the split point as more of a ceiling.
You can find the PowerPoint(r) slides here on the changes to the X-Mods.
Unsafe smaller employers have already seen a major change to the way their X-Mods are calculated by the WCIRB. I attended a 2013 WCIRB conference which introduced a new X-Mod formula that removed a credit for small employers.
The goal here is plain and simple- safety.
Related: Combined Ratio Difference Debate – Calendar vs. Accident Year
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