Changes to the California Experience Rating Plan may make a difference in the premiums paid in 2010 and beyond for all California employers who are experience rated. Insurance Commissioner Steve Poizner recently approved revisions to the formula for calculating experience modifications (ex-mods). As California’s workers’ compensation expert, State Fund wants to help everyone learn more about what to expect.
The changes, applicable for ex-mods with rating dates on or after January 1, 2010, will not impact the ratings of all employers in the same way. The degree of change for an individual employer due to the revised formula will largely be determined by the number and size of losses and the employer’s payroll. Most employers will experience a change of a few percentage points under the new methodology. However, greater changes are possible, with larger employers the least affected
At the request of Commissioner Poizner, the Workers’ Compensation Insurance Rating Bureau (WCIRB) formed a task force to examine the ex-mod formula in 2007. The group set out to enhance the ex-mod’s predictive value and make it easier to understand, so that employers would more strongly perceive their ex-mod rating as an incentive to manage a safe workplace.
For 2010, the methodology used for splitting actual losses into Primary and Excess components has been changed to the “single split” model used in many other jurisdictions. The first $7,000 of every loss will be considered primary. According to the WCIRB, this change will improve the predictive accuracy of the Experience Rating Plan by approximately 12 percent and is intended to better reflect two statistical tendencies:
Each employer’s situation is unique, however, and it is impossible to predict the exact outcome without doing the math. If you have any questions about the changes to the Experience Rating Plan, please contact State Fund.
