Did you know that we’re less than 6 months away from issuing January 2017 experience modifications based on the new variable split formula?

Are you ready to answer questions from policyholders? If you need education on the 2017 changes, you won’t want to miss our WCIRB Mod Talks webinar series. In each 30-minute webinar, the WCIRB’s Dave Bellusci, Ward Brooks and Rod Libbe share their expertise related to the 2017 Experience Rating Plan changes, and give attendees the opportunity to ask questions and receive a live response. Take a look at some of the frequently asked questions they have received about the 2017 changes:

Why is the experience rating formula changing?

The variable split approach improves the performance of the Plan for all sizes of employers and reduces the Plan’s volatility, particularly for smaller experience rated employers. Rather than adjusting the current fixed $7,000 split point to reflect inflation since it was last updated in 2010, WCIRB research indicated that varying the split point based on the employer size performed better than a one-size-fits-all approach.

Will losses above the split point (“excess losses”) have any weight?

No. Under the 2017 formula, loss amounts above the split point will no longer be used in the experience modification calculation. Excess losses, which represent the severity of claims, can vary widely based on factors that may not be under the control of the employer. The variable split point plan places increased weight on the frequency of claims, which is a better predictor of future claims and may be more controllable by the employer.

How is the “size” of an employer determined for the purpose of the experience rating calculation?

The new formula uses expected losses as a measure of employer size. Expected losses are calculated based on the reported payroll for all policies in the experience period and expected loss rates by classification (per $100 of payroll) approved by the Insurance Commissioner that are applicable to that year’s experience modifications.

How does this change impact small claims?

Small claim amounts below the primary threshold will be used at their full value. Claim amounts in excess of the threshold will not be used.

Will the large loss cap of $175,000 still apply?

The 2017 Plan still includes a $175,000 maximum loss value, but it will largely be irrelevant because only losses up to the primary split points (which are all less than $175,000) are used in the experience modification formula.

Will the experience rating form change?

The experience rating form—commonly referred to as the ratesheet—will not change much. A new field will be added to show the split point value used in the calculation.

When will the 2017 experience rating values be available? How many tables will there be?

The proposed values will be included in the WCIRB’s January 1, 2017 Regulatory Filing to be submitted to the Insurance Commissioner this June. Once approved, electronic versions of the tables will be available for download on WCIRB.com. There will be approximately 90 primary threshold values, and each will have a corresponding table of D-Ratio values by classification code. See below for a sample excerpt from the current table, and an example of what the table may look like in the January 1, 2017 Regulatory Filing (values are not final):

Is there a way I can calculate what an experience modification will be under the new Plan?

Look for the WCIRB’s new experience modification calculator in late June. It will use the 2017 experience rating values proposed to the Insurance Commissioner and allow you to see the potential impact of the new formula. You can view more frequently asked questions and other resources on our webpage dedicated to the 2017 Experience Rating Plan Changes: http://www.wcirb.com/rating2017.

If you have more questions about the 2017 changes, plan to attend the next session of our WCIRB Mod Talks webinar series:

View the complete schedule of our WCIRB Mod Talks series and register for other sessions here: http://www.wcirb.com/content/wcirb-webinars.

More Resources

WCIRB Mod Talks: Session 1 - California’s Variable Split Point Experience Rating Plan
California Workers’ Compensation Experience Rating Plan–1995
Experience Rating Plan Changes in 2017
2016 Experience Rating Changes and Determining Eligibility

Future Editions

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