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Determining Eligibility

Whether or not your company is eligible for experience rating is determined by a number of factors. To determine eligibility, payroll developed during the experience period is totaled by classification code. These totals are multiplied by the expected loss rate for each classification that applies as of the effective date of the experience modification. The sum of these calculations must equal or exceed the minimum eligibility threshold. (Prior to January 1, 2016, advisory pure premium rates were used instead of expected loss rates. To learn more about this change, see the wire story, Commissioner Issues Decision on Regulatory Filing).

As of January 1, 2018, the qualifying threshold is $10,300.
(The qualifying threshold was $10,100 in 2017, and $10,300 in 2016).

The eligibility threshold is adjusted annually to ensure the population of experience rated employers remains somewhat stable. The threshold can be found in Section III, Rule 1 of the California Workers' Compensation Experience Rating Plan - 1995 (ERP).  The expected loss rates can be found in Table 1 of the ERP and in the Filings and Plans section of this website.
 

Example 1 - Does NOT Meet Eligibility Threshold

In the table below, Employer 1 does not qualify for experience rating because the eligibility value ($9,323) is below the eligibility threshold of $10,300.

Classification
Code
2014
Payroll
2015
Payroll
2016
Payroll
Payroll
Total
Expected
Loss Rate
(per $100)
Eligibility
Value
8017 138,965 189,900 220,458 549,323 $1.61 $8844
8742 56,426 68,921 78,235 203,582 $0.15 $305
8810 41,569 43,536 48,536 133,641 $0.13 $174
            $9,323

Example 2 - Qualifies for Experience Rating

In the second example below, Employer 2 does qualify for experience rating because the eligibility value ($11,463) is above the eligibility threshold of $10,300.

Classification
Code
2014
Payroll
2015
Payroll

2016
Payroll

Payroll
Total
Expected
Loss Rate
(per $100)
Eligibility
Value
8017 211,777 199,212 260,500 671,489 $1.61 $10,811
8742 92,109 95,551 100,551 288,211 $0.15 432
8810 49,233 55,566 64,555 169,354 $0.13 220
            $11,463

 

Using Pure Premium Rates to Determine Eligibility (Prior to January 1, 2016)

Prior to January 1, 2016, the eligibility value was calculated by multiplying the payroll developed during the experience period for each classification by the advisory pure premium rates instead of expected loss rates. Below is a graph of the eligibility threshold from July 2015 and earlier. 

 

 

Below are examples of how an employer may or may not have met the eligiblity threshold prior to January 1, 2016 when advisory pure premium rates were used in the calculation.
 

Using Pure Premium Rates to Determine Eligibility (Prior to January 1, 2016)

Example 1 - Does NOT Meet Eligiblity Threshold

In the table below, Employer 1, whose premium at the pure premium rate level totaled $25,957, does not meet the eligibility threshold for experience rating even though the employer actually paid more than the July 2015 eligibility threshold ($28,461) for its workers' compensation insurance policy.

Classification
Code
2011 Payroll 2012 Payroll 2013 Payroll Payroll Total Advisory
Pure Premium Rate (per $100)
Advisory
Pure Premium Rate Level Total
Actual Premium Paid to Insurer
8017 138,965 204,965 240,202 584,132 $4.10 23,949  
8742 69,542 78,235 78,235 226,012 $0.60 1,356  
8810 41,569 48,536 48,536 138,641 $0.47 652  
            $25,957 $30,516

Example 2 - Qualifies for Experience Rating

In the second example (see table below), Employer 2 does qualify for experience rating because the amount of premium generated at the pure premium rate level ($30,056) is above the July 2015 eligibility threshold of $28,461.

Classification
Code
2011 Payroll 2012 Payroll 2013 Payroll Payroll Total Advisory
Pure Premium Rate (per $100)
Advisory
Pure Premium Rate Level Total
Actual Premium Paid to Insurer
8017 211,777 199,212 260,500 671,489 $4.10 27,531  
8742 92,109 95,551 100,551 288,211 $0.60 1,729  
8810 49,233 55,566 64,555 169,354 $0.47 796  
            $30,056 $37,450

 

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