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Workers Comp Small Deductible Correction – Woops (My Mistake)

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Workers Comp Small Deductible Programs Reduce Costs More In Certain  States

Most Workers Comp small deductible programs result in premium savings.  However, in certain states, the savings can be much larger.

I decided to write a few corrections this week.  In 2009 – yes, that far back in time, I wrote that small deductible programs may not be worth the effort.   That is now a debatable point.   My concerns can be found in the 2009 article.

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The difference between a small and large deductible program kicks in at $100,000 in most states.   Any workers comp policy that has deductible of less than $100,000 is a small deductible program.

While attending the very informative NCCI Workers Comp Data Conference last week,  I was reminded that not all states are the same when it comes to having a small deductible program.   Regardless of the state, your company should check to see if your carrier offers such a program.

Almost all insurance carriers do offer some type of workers comp small deductible.

Two types of small deductible programs exist presently – Net and Gross.

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If your company operates in Net Deductible States, the premium savings may be more fruitful.   Those states are:

  • Alabama
  • Colorado
  • Florida
  • Georgia
  • Hawaii
  • Iowa
  • Kansas

Gross deductible states do not subtract the deductibles when calculating the Experience Modification Factor (E-Mod or X-Mod).  Net deductible states do subtract the deductibles.

I have to be very careful in making such a blanket statement on workers comp small deductible programs as each one of the states listed above have very different rules.   For instance, some states say only the medical part of the claim can have a deductible while others allow both the indemnity and medical payouts to have deductibles.

For reference, the gross deductible states (not subtracted from E-Mod calculation) are:

  • Arizona
  • Arkansas
  • Connecticut
  • Florida
  • Illinois
  • Indiana

Notice that Florida appears in both lists.  Florida is both a Net and Gross Deductible state.   Yes, that was not a typo.

To complicate matters even more, certain states allow deductibles only on the voluntary markets while others allow small deductibles on voluntary market policies and residual market (usually assigned risk)  policies.

Earlier in this article, I pointed out that small deductible policies are those with less than a $100,000 deductible.   However, each state has an upper limit on the small deductibles – usually $5,000 or $10,000.

The main point is to inquire whether your current carrier or competing carriers at renewal offer small deductibles.  They can be a great Risk Management tool to reduce your premiums.   All your company has to do is ask – do you have a small deductible program available?

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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