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.

Businessman Waiting For Californias WCIRB Businesswoman Carrying Case

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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.

Hand Pointing California's WCIRB Calculating Icon

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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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Who Is The WCIRB ?

What do they regulate and who is the WCIRB ? I received this question on the WCIRB last night from a California employer that had grown large enough to receive an X-Mod. Congratulations on your company’s growth in a tough economy. Sometimes, it is best to get back to the basics when analyzing Workers Compensation.

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The WCIRB is the acronym for the Workers Compensation Insurance Rating Bureau of California. The organization is very similar to NCCI. They are the data gatherer for info that feeds into each California employer’s Experience Modification Factor (XMod).

Some companies are too small to be rated in California. The minimum pure premium for an X-Mod is presently $25,225. The pure premium figure is not the premiums your company has paid.

The bureau holds conferences/workshops usually four or more times a year. I have found them to be very educational. The staff has always treated me very professionally and would help me as much as possible in any given situation.

One very important fact is the WCIRB only sets advisory rates. They are not directly responsible for how much you are charged in Workers Comp premiums. Your insurance carrier will usually deviate from their recommended rates by filing a Loss Cost Multiplier.

This is from the WCIRB’s About Us web page.

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The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) is a California unincorporated, private, nonprofit association comprised of all companies licensed to transact workers’ compensation insurance in California, and has over 400 member companies. No state money is used to fund its operations. The operations of the WCIRB are funded primarily by membership fees and assessments.

To accurately measure the cost of providing workers’ compensation benefits, the rating agency performs a number of functions, including collection of premium and loss data on every workers’ compensation insurance policy, examination of policy documents, inspections of insured businesses, and test audits of insurer payroll audits and claims classification.

The WCIRB employs approximately 200 people and maintains two offices. The home office is located in San Francisco, and a small Southern California field office is located in Cerritos.

Californias WCIRB New X-Mod Formula Penalizes Unsafe Employers

Californias WCIRB X-Mod Formula Heavily Penalizes Small Unsafe Companies

Who Is The WCIRB And What Do They Regulate?

Who Is The WCIRB ?