All best,

Kory

Ann

You are correct that the 2013 projection is using the exact same set of data as your 2012 mod calculation, except that we are:
– splitting all actual itemized losses at $10,000 instead of $5,000, and
– splitting excess losses based on a D-ratio adjusted by 50% from this year, per NCCI documentation

We felt it was important to show the estimated impact on the mod of ONLY this change in the rule, although of course in reality EVERYTHING will change from 2012 to 2013 – payroll, losses, rates AND the rules. However, I can certainly understand your interest in forecasting for everything you can. Although it’s not the most elegant solution, you might consider these steps:

– save or print the 2013 Projection report
– return to Next Steps and use the Formula Calculator to enter summary numbers from the 2013 projection
– then adjust actual and expected losses as desired to reflect your 2012 estimates

Another, better, option would be :

- Go ahead and rollover your 2012 mod file, changing to the 2013 effective date you anticipate
- Enter 2011 payroll and loss estimates in this new file as accurately as you have available at this time
- Calculate the mod. Note that the calculation itself will NOT use the new split point until 2013 rates are actually available, so the only exhibit that will be very accurate will be the 2013 Mod Projection report.

Once 2013 rates are released for the states included in your mod, then the mod calculation and full set of ModMaster exhibits should be accurate.

I hope that makes sense, and is helpful. If not, let me know and I’ll be glad to give you a call!

Thanks very much for checking in – I’m always glad to hear how folks are doing with the product, and how we can make anything about the ModMaster experience better.

Kind regards,

Kory

I have been using the new Mod Projection with every and what I find is the projection reflects there being no change in the primary and excess losses, except for the higher split point, and does not take into consideration the inpact of the curent policy year losses and estimated payrolls as is the case in the MM 4.0 “Forecast a Future Mod.” I believe the Mod Projection in 5.o should provide users with the flexibility to “work forward” and input the actaul priomary and actual excess losses. This will provide what I feel is a “better” estimate of the split point change on the future mod.

Michael

Approval by NCCI states seems to be proceeding very well – as of the most recent circular I’ve received (dated 10/6), 24 states have approved the change with effective dates ranging from 1/1/2013 through 11/1/2013: AL, AZ, AR, DC, HI, ID, IN, KS, KY, LA, ME, MD, MS, NE, NH, NM, OK, OR, SC, SD, TN, UT, VT, and WV. (Typically the change becomes effective on the same date those states would normally have a rating update, although I haven’t had a chance to check all of these for that fact).

Those would be NCCI states, of course. As for the independents, a quick check of most of their websites isn’t showing anything new with regards to this issue…but, I will revisit this soon and post any updates I see. I would expect at least some of the indepdendents to take NCCI’s lead on this, and Iknow I noticed one bureau (NYCIRB, I believe) mentioning that they were studying the issue.

All best,

Kory

I do not seem to have access to the NCCI circulars. Is there an update on the NCCI combinable states that will not be participating in this change, specifically the 7 independent bureau states (IN, MA, MN, NC, NY, TX, WI). In the very least are any of these not mentioned in the schedule. Have any states rejected this change, or plan to?

Thanks,
Michael Hoff

We also know there are reasons other than just safety consciousness for a mod to be higher than average, in the same fashion that the best hospitals may have higher-than-average mortality rates due to the difficult nature of the cases they draw.

As such, corporate use of a 1.00 mod for cut-off of subcontractors eligibility can misuse the mod rating. However, the actuarial purists out there need to accept this reality. Their mod formula update may be well-reasoned fact in their world, but the change can have adverse implications for real businesses employing real workers.

Kory

I guess I could have underlined “simply” (but am not sure this page supports html in replies) or said “simply and solely” but we ARE going to have some unfortunate clients whose mods jump for NO other reason than this technical change.

For these clients, it will be like getting a speeding ticket for going 30 mph when the speed limit sign was reduced from 30 to 25 after you’d already passed by. It is always disconcerting for a client when pending rule changes affect situations that were OK up to that point. It is tough to find an acceptable explanation for those affected by the change.

Thanks for your comments and good question. What I mean by being careful is that, especially for these clients, you may want to:

1. Make every effort possible to project the mod as accurately as you can. This would involve the steps I mention in the webinar at the end of the article for actually calculating how much of the losses are going to shift from excess to primary and what that impact would be on the mod. (Admittedly, this is only an estimate since there are a lot of moving parts, but in my mind it’s still worth the effort to have an idea of the impact. Does it help the client’s situation? No. Does it at least help them be more informed ahead of time? Yes.)
2. On a quarterly basis, and especially in the quarter before the evaluation date of the losses for experience rating purposes (6 months prior to the mod effective date), help the client work with the adjuster to get claims closed and or reserves adjusted downward, when appropriate. Reducing reserves absolutely could help the client’s situation!
3. Consider a payroll/premium audit to make sure that office employees, subcontractors, etc. are not being mis-classified, if you haven’t done that with this client.

Those are some ideas that immediately come to my mind. I certainly welcome others’ thoughts on this good question.

Kory

“While that doesn’t sound like bad news, you want to be extremely careful about clients in contracting, roofing, and other professions who may have to have a mod of a certain value (like 1.0) to bid on a job.”

How are we supposed to “be careful about [these] clients”?

Unfortunately, since the mod is based on past claims and payrolls, there is nothing that the client, his broker or insurance carrier can do if the modifier suddenly goes over 1.00 simply due to this change.

Sure, we can lecture the client to redouble their safety efforts and hope their mod comes down in some future year, but that will not help their present predicament.

The only thing I can suggest is the NCCI or others promote the idea that corporate risk managers give some forebearance to contractors who find themselves suddenly disqualified due to a technical change that was beyond the client’s control.

Any other thoughts?

The dates are included in NCCI’s CIF-2011-14 circular, but you can also check to see when a state is normally updated by viewing the System Administration/Rating Data screen in ModMaster. This screen shows the most recent effective date for each state. With only a few exceptions, that same month in 2013 will be when the state is expected to pick up the change in split point. The only exceptions I see are Iowa and Missouri, which NCCI indicates will be updated 1/1/2013. ModMaster shows other months because both those states had special updates this year.

Note that independent bureaus such as MA, NY, etc. may or may not pick up this change.

Kory

I’m glad you asked!

Kory

Thanks for your comments, and you’re right, there are certainly a lot of complex issues underneath this change, and how the workers comp system functions. As for the mathematical, rule-based portion of the system that I was most focused on in this article, the reason for the change was not addressed in much detail at the NCCI AIS conference, other than to state that NCCI has recently completed a multi-year review of the experience rating plan. More details have come out in the presentation that’s posted on the Casualty Actuarial Society website, and which I refer to in my newest article on this subject, just posted today: http://workcompedgeblog.com/2011/08/02/how-will-mods-change-ncci-rule-recommendations/

Thank you for reading and commenting!

Kory

- Kory

You are not the only ModMaster user who has said, in one way or another, that they’d like more fields associated with each Large Loss record. We are definitely looking at that for a future enhancement.

I really like the idea of the Open vs. Closed claims report. And it’s good to know that you think height/weight/BMI would be good to have, but may not yet be practical to obtain. We will definitely be thinking about these things some more!

Many thanks,

Kory

Regarding your concerns with the mod analysis I am always in favor of having more data available to find correlations. Usually I have trouble finding good information quickly on an account’s claims as Loss Runs tend to be vague in their descriptions or just list the first reported information which may be incorrect. Loss Runs also vary widely by carrier, some offering no information at all. At this point calculating a BMI for each claimant would be a great addition to your program, but where would the height/weight data come from?

Also, since I work on construction accounts where almost always more than one policy is in effect at all times, I usually populate the optional fields with the policy number and actual dates of loss instead of the injury and cause. Often these fields are more important to identify what projects or entities need to be looked at.

It has been my experience that the mod review has been a good first step in opening a conversation with the insured for the claim and safety/loss control reps. They would have a better understanding of what happened in the identified claims. What might help them is a list of the open claims with all of the optional field data, perhaps listing the closed claims as well separately below as wc claims can reopen easily.

How to join this free group is explained on the WorkCompEdge blog at http://workcompedgeblog.com/2010/11/30/work-comp-analysis-group-for-workers-compensation-professionals/

http://www.riskmanagementmonitor.com/obesity-costs-canada-and-the-united-states-300-billion-per-year/

Is the risk of becoming a RRE under MSPA worht the few points saved on your Emod? Every employer will have to answer that question for him/herself, but will certainly require some guidance for a knowledgable agent..

Hope Kjeseth
COMPTROL a division of Kraus-Anderson Construction