The California Department of Insurance (CDI) approved a new method for calculating experience modifications (“X-Mod”) beginning January 1, 2019. The new formula excludes the first $250 of every claim from the calculation. This change is designed to encourage employers to report all claims, including the cost of small or “first aid” type claims, those that require only medical treatment.
In addition, the Experience Rating Formula effective in 2019 was simplified. The new simplified formula places a clear and direct emphasis on reducing the occurrence and cost of workplace injuries as reflected in the actual primary losses*.
The WCIRB cites the following changes to the formula and resulting benefits:
Excluding the first $250 of each loss from formula:
- Addresses potential underreporting of “first aid” claims.
- Has a modest impact on most employers’ X-Mods.
- No overall pure premium impact.
- No significant impact on average X-Mods.
- Impact on individual employer X-Mod will depend on individual employer’s claim and exposure history.
- Impacts generally modest – more than 85% of X-Mods will be impacted by 2 points or fewer.
- Loss-free employers will generally see a small increase.
- Changes experience rating form.
The WCIRB has created this guide to reflect the changes. You may also contact your State Fund Underwriter with questions or for additional support.
*Actual Primary Losses equal the cost of losses incurred with each loss, limited to the policyholder’s Primary Threshold.
An employer’s Primary Threshold is based on the total Expected Losses for the experience period, based on businesses of similar size and industry.