The National Council on Compensation Insurance (NCCI) is making changes to their modification (mod) rating system for workers’ compensation coverage. Two specific changes in 2024:
- A shift to state-specific primary/excess split point(s) rather than nationwide primary/excess split point
- A change in the calculation method for state accident limitations
Changes are being made to more accurately represent each state’s average claim costs and other state specific variables. The split-point thresholds are an extremely important factor in determining a client’s workers’ compensation experience rating.
A split-point threshold is made up of two components:
Primary losses are given a much greater weight than excess losses in the calculation of a client’s experience modification rating (EMR). Using a $100,000 claim in Illinois as an example:
According to NCCI, the transition to state-specific split-points enhances the accuracy of each experience mod and does a much better job at reflecting each individual state’s average injury costs. These proposed split points range widely, from $9,500 in Oregon to $38,000 in Louisiana. Most states are also seeing a drop in state accident limitations. The overall impact of larger, catastrophic claims or “shock losses” will be significantly reduced. Illinois is seeing a decrease in their state claim accident limit from $458,500 to $206,000 for 2024.
What will be the impact?
NCCI has emphasized that the impact of these changes will affect clients differently across states. It’s also been suggested that over 80% of all risks will see a shift of +/-5 points. To be clear, this is regarding all risks across all 36 NCCI states.
In Illinois, we have seen more of a negative impact on clients’ workers’ compensation experience ratings who experience a high frequency of claims — especially those with average claim costs in the tens of thousands. On the other side of the spectrum, if you are a company with a lower frequency of ‘shock losses’ on your mod, the change in state claim accident limits could benefit you in many cases regarding your EMR.
If you have any concerns regarding your worker’s compensation experience mod rating for 2024, please reach out to your broker or MMA business partner for further insight and analysis of future impacts and possible strategies to consider.