Large Deductible Program Question From Newsletter Reader
We appreciate hearing from our employer newsletter readers. The question concerned its large deductible program. Large deductibles seem like an easy way to save on Workers Comp premiums.
Question – What The *** Happened?
Our company switched from a first-dollar voluntary market policy to a $250,000 large deductible program two years ago. We had thought our claims under $250,000 were not going to be reported to the NCCI – the rating bureau. We had hoped this would save us premiums by reducing our Modification Factor. The claims showed up on our Experience Mod Sheets with the full reported values. What the *** happened?
Answer – Common Misconception With Large Deductible Programs
At some point, this should have been explained in detail to you and your company. Sometimes this area stays in the background until NCCI or another rating bureau publishes your Experience Modification Factor. We have often seen where a notice is placed in your lengthy policy that all claim values will be reported to the Rating Bureau.
Sometimes the issue is never discussed with the large deductible insured. We have been writing on this subject and other deductible articles for 20 years. Click here to see a list of all the articles, including one on this very subject and other large deductible articles.
Each state has its own definition of a large deductible, with some states allowing large deductibles as low as $25,000 and some where “large” is in excess of $1 million. No two states are exactly alike with large deductible programs.
A few states have rare exceptions on how insurance carriers report large deductible losses to the rating bureaus.
Bottom Line
Large deductible programs for workers comp can save your company $$$. The main idea remains, as I have written more than often in this website, to read your policy and the critical Endorsements. Rely on yourself to make sure that all parts of switching to a large deductible policy have been covered with your agent/broker.
