ATTENTION BUSINESS OWNERS: A Change in the Experience Modification Rate Formula

If you were not aware, split point information has been updated. This week, our agency has the details.

First, what is the split point?

The split point is that point below which claims are applied dollar for dollar when calculating your experience. Above the split point, the claim is only counted at roughly 5-11% of the total claim (when applied in calculating experience.) This prevents large claims from having a severe impact. But since medical costs have risen significantly when the 5k point was established, the board has reassessed and said that the split point needs to better reflect these increase in medical costs. This is the rise in the split point. The effect is to flatten the bell curve. Those on the fringes with either good or bad experience will suffer the most dramatic impact.

Now, onto the updated split point information! There are a few key pieces that you should be aware of, since this change will affect the experience modification rate formula.

• This change WILL NOT begin until 9/1/2013 for risks operating entirely within the state of Massachusetts. Interstate modifications began to be impacted on January 1, 2013.
• The average cost per claim has actually TRIPLED in the last 20 years.
• Overall, the plan is to increase the primary loss split point to:
o 10K in 2013
o 13.5K in 2014
o 15K in 2015
• The 15K COULD be adjusted either up or down, depending on how claims costs trend during that time.
• Based on 2009 information, 78.4% of all intrastate mods will move five points or less either way.

So, what does this all mean?

First and foremost, do not worry! There is plenty of time available to communicate this change and prepare. NCCI is aiming to have approval for the states six months ahead of their applications to mods. Also, NCCI data largely indicates that those with a low mod will see a small reduction while those with a higher mod will see an increase.

If you have ANY questions or concerns about this update or change, do not hesitate to reach out to our agents at Wolpert Insurance. We have an extremely knowledgeable and experienced staff who can answer your questions and concerns about this new change and how it may affect your Massachusetts workers compensation.