The 2017 enhancement to the experience rating formula is probably the biggest change to California’s experience rating system since 2010. To get everyone prepared for this change we have been presenting a series of webinars called WCIRB Mod Talks.
“Experience Rating Eligibility and the Impact of Unaudited Payroll” was the topic of the April 7 webinar session. The WCIRB’s Dave Bellusci and Rod Libbe discussed what happens to the policyholder’s experience modification when a final audit cannot be conducted. Here are some of the questions from that session:
We will attempt to publish an experience modification excluding the unaudited payroll, but using all of the reported losses. The Experience Rating Plan does not allow the use of estimated or unaudited payroll in the experience modification calculation. When an insurer reports estimated payroll to the WCIRB due to the failure of an employer to cooperate with the audit, we send a letter to the policyholder to inform them of the potential impact and encourage them to cooperate with the audit. If we do not receive the audited payroll within 60 days, we will attempt to publish an experience modification excluding the unaudited payroll, but using all of the reported losses.
For 2017, the Insurance Commissioner approved a change that will allow debit experience modifications that exclude unaudited payroll to be issued even if they do not meet the eligibility threshold, provided the policyholder was experience rated in the immediately preceding year.
It is a financial incentive for the policyholder to cooperate with the audit. The WCIRB’s ability to produce accurate experience modifications, expected loss rates and advisory pure premium rates is dependent upon accurate audited payroll reporting. The change adopted by the Insurance Commissioner effective January 1, 2017 will help towards that aim.
On the experience rating worksheet, there is an “E” designation next to the experience modification to indicate that the rating excludes unaudited payroll. The policyholder also receives a notification from the WCIRB that their experience modification excludes estimated payroll but includes any losses.
Yes. When the insurer submits a unit statistical report (USR) correction with the audited payroll to the WCIRB, the current and two immediately preceding experience modifications are subject to revision in accordance with the Experience Modification Corrections–Effective Dates rule in the Experience Rating Plan.
If you missed the first two sessions of WCIRB Mod Talks, you can watch the video recordings:
There are four more sessions in the series scheduled throughout the year. Don’t miss out! Register today and bring all your questions about the 2017 changes to experience rating:
Session 3 – The Regulatory Filing Process
Dave Bellusci and Ward Brooks explain the process for proposing Experience Rating Plan enhancements to the Insurance Commissioner, and what to expect in the WCIRB’s January 1, 2017 Regulatory Filing.
To view the complete schedule and register for the next four sessions in the series, go to our WCIRB Webinars page. More resources and FAQs about the 2017 Experience Rating Plan changes can be found at www.wcirb.com/rating2017.