All posts tagged X-Mod

Getting Buy-in from Managers on Workplace Safety Programs

Inspections at commercial transport dock

One of the keys to instituting a good safety program is to get management and supervisor buy-in.

You need their support and belief in the system if you are to convince your employees to embrace your safety regimen. If your managers don’t believe in the safety plans you have put together, it will show through when they try to sell them to your staff.

If you don’t have buy-in from your managers, the chances are slim to none that your employees will embrace the changes you are proposing. Managers play a crucial role in getting employees on board with safety.

If you are serious about preventing injuries and want to keep your workers’ comp X-Mod low, the role of your management team is crucial.

You will often encounter a few different personality types among your managers and they need to be convinced of the importance of workplace safety in different ways.

  • The excuse-makers: They are the ones that blame external factors that are out of their control for safety lapses, and they may pooh-pooh the harm that a high X-Mod has. They may talk the talk on safety, but they don’t walk the walk.
  • Half-hearted bosses: These managers may actually buy into the safety program, but they are unable to show their commitment in ways that make an impression on the rank and file.
  • Committed: These managers are fully committed and enthusiastically embrace your safety plans and discuss them with staff with exuberance.

 

You’ll need a different approach with each personality type to get them to embrace the concept. Once they do, they can effectively convey the urgency and importance of workplace safety to the rank and file.

Constructor Magazine recently had these recommendations for getting management buy-in:

Select the right leaders – Choose managers who are firm, yet fair with a passion for the safety of the workforce. They should have a track record of success so that they can be an inspiration to their teams. Also, they should not be afraid to get their hands dirty to make a point or demonstrate how something is done.

 

Talk about risk management holistically – Every facet of your operation needs to be addressed if you want a comprehensive global risk management culture to exist.

Executives can influence this by extending discussions of risk management beyond the worksite to help managers see the bigger picture of why safety matters.

Assessing the risk associated with every task, purchase order, estimate or piece of equipment used will reinforce the notion that risk management is a company-wide function and not only in the sphere that the manager is responsible for.

 

Make periodic site visits – Top leadership should make a point to get on the floor and visit various departments to watch the workflow and reinforce the importance of safety to the workers. They should make these visits with the manager who has been put in charge of safety for that department.

At the same time, they should not arrive and start nitpicking and being enforcers of safety policy. Instead, their role should be to start conversations with the workers about safety challenges and asking for advice and ideas to make the operation safer.

They can use these visits to also celebrate successes and challenge the team to do better and always look for issues that could lead to injuries.

Agency Mulls Not Counting Portion of First Aid Claims in X-Mods

first aid stuff

California’s workers’ compensation rating agency is developing new guidelines that would exempt a portion of first aid claims from being included in the calculation of employers’ X-Mods.

Under state regulations, employers are required to report injuries that require first aid and are not severe enough for the employee to seek medical treatment or miss work. But despite the rules, few employers report the claims to their insurance companies.

The Workers’ Compensation Insurance Rating Bureau hopes that creating an exemption in the experience rating plan for first aid claims and injuries would increase reporting.

According to the trade press, the Rating Bureau is working on a plan that would exclude a portion of every claim from the X-Mod formula. The amount for that exemption has not been set and it’s likely that the change, even if approved this year, won’t take effect until at least 2017 or 2018.

But regardless, the move would be a welcome development for California employers, many of which are reluctant to notify their insurers of any injuries that involve only first aid treatment for fear that it will affect their X-Mod or because they are confused by the rules. The reporting of first aid claims is typically not mandatory in most other states.

The industries in which the lack of first aid claim reporting is most prevalent are the construction and restaurant industries, but it occurs in other sectors as well, according to the Rating Bureau.

When employers fail to report first aid claims it causes problems for claims adjusters, hinders workers’ ability to access workers’ comp benefits and has a negative impact on the employers that play by the rules and report all of their claims.

Also, what starts as an injury that only requires first aid treatment can later develop into a full-blown claim if the initial injury worsens.

According to the trade publication Workers’ Comp Executive, the Rating Bureau is looking at imposing a first aid claim exemption of $250, $500 or $1,000. It has been testing the different amounts and the effects on ensuring reliability of employers’ X-Mods.

 

Depending on the amount, it would have a substantial impact on reportable claims:

  • The $250 threshold would eliminate 15% of the claims in the system.
  • The $500 threshold would eliminate 36%.
  • The $1,000 threshold would eliminate 54%.

 

The biggest concern is that eliminating so many claims could reduce the rating system’s ability to accurately predict system costs and set accurate rates.

The Rating Bureau expects that at the $250 threshold, the change would mostly affect employers who have no other claims and that it would push up their X-Mod by just one percentage point on average.

The committee studying the issue “thought this was a reasonable trade off to get more claims into the system,” David Bellusci, the Rating Bureau’s chief actuary, said during a classification and rating committee meeting in early April, according to the trade publication.

The perception there is that the honest employers reporting all of their claims, including these smaller first aid only claims, are at a disadvantage to employers that are not currently reporting these claims.

Also, the Rating Bureau plans to work Cal/OSHA in regard to changing the definition of first aid. Cal/OSHA regulations do not require that employers report injuries that require first aid to the agency.

 

New System to Reduce Effects of a Single Claim on Small Employers’ Premium

New rules approved by the state insurance commissioner, Dave Jones, will reduce the effects of a single claim on small and mid-sized employers’ workers’ comp premiums, addressing an issue that has long haunted many California companies.

The changes approved for the Experience Rating Plan will introduce a new formula for gauging an employer’s expected and excess losses for claims. It will replace the current “split-point” system that has been blamed for being too volatile and punishing small employers for incurring a single workers’ comp claim.

 

The current split

The current system calculates all losses up to a $7,000 split point and then a portion of the losses over that level, which are deemed “excess losses.” Typically, if the costs of a claim or claims are at or below the primary expected losses, the effect on an employer’s premium is minimal. But if the costs exceed expected costs, there will be a greater impact.

 

The new version

The new system will use a variable split point for determining primary and excess losses that are counted in an employer’s workers’ comp experience. The change will put greater emphasis the number of claims an employer incurs, and de-emphasize the cost of claims on employers’ X-Mods and workers’ comp experience.

The Workers’ Compensation Insurance Rating Bureau, the body that tracks workers’ comp claims costs experience in California, says the new system “enhances the accuracy of the experience rating formula, especially for smaller employers, reduces volatility and provides flexibility for simplifying the experience rating formula in future years.”

 

Why change?

The Rating Bureau had to act because the $7,000 split point has been in place for more than a decade without change. But it has been loath to do so because of the negative effect it would have on smaller employers.

The new system, which will take effect in 2017, includes split points as low as $4,500 – and as high as $75,000 for the largest employers.

The new system also closes a loophole that some small and mid-sized employers are using to avoid the impact of their claims history.

In some cases, employers near the rating threshold can avoid the impact of a large claim by refusing to cooperate with an audit by their workers’ comp carrier. In these cases, the unaudited premium is excluded from the rating calculation, and that can make the employer ineligible for an X-Mod because their premium total is now below the rating threshold.

Under the new rules, an employer that had an X-Mod and is no longer eligible because of the exclusion of unaudited pay, will still receive an X-Mod if it is greater than 100.

This change, too, will take effect for 2017 policies.

 

Cost cutting with clipping path

Why You Lost Your X-Mod and Your Rates Climbed

The threshold for employers to qualify for experience rating (an X-mod) almost doubled in the last four years, meaning that fewer employers are qualifying and those that may have had one once, don’t qualify any longer.

Additionally, many employers since the recession have been reducing their payroll, which also reduces the workers’ compensation premium level below the X-Mod threshold.

These two trends have resulted in many employers that once had low X-Mods (below 100) having seen their rates go up.

We’ve received calls from some of our customers about this issue, so we want to explain what’s going on.

 

How an X-Mod works

When an employer receives an X-Mod, it is a numerical value that explains how your claims experience measures up against others in your industry and the premium you pay. An X-Mod of 100 is the average, meaning that your claims come out to be average for your class code.

If you have a better safety record than your peers and your claims costs are lower than average, you would typically have an X-Mod below 100.

The inverse is also true. If your claims are more costly, then your X-Mod will be more than 100.

 

X-Mod threshold

The X-Mod threshold has been climbing over the last several years at an increasing rate. The new annual premium threshold for being eligible for an experience modifier was raised at the start of this year to $33,300, up 98% from the $16,700 threshold that was set in 2011.

Once an employer no longer qualifies for an X-Mod, their X-Mod is essentially set back to 100, regardless of their claims history. The insurer will still look at the overall cost of your claims, but your X-Mod no longer matters at that point.

In other words, scheduled credits and debits will still apply, depending on your claims costs and claims experience.

For non-X-Mod employers, all companies are grouped according to their business operation or classification code. So if you have a printing shop, your claims costs will be bundled up with all other printing shops in the state for calculation purposes.

The estimated losses of the group are added together and an average cost is obtained, which is then applied to the entire class. The rates determined are averages reflecting the normal conditions found in each classification.

An employer is assigned to a classification to ensure that the rates reflect the costs of all employers with similar characteristics. Although each classification contains “similar” risks, each individual risk in a class is different to some extent (the X-Mod is designed to reflect these individual differences in loss potential).

So if you had an X-Mod higher than 100, you may see a slight downtick in the amount of workers’ comp premium you pay, but for those employers whose last X-Mod was below 100, the opposite could happen.

 

The takeaway
The best course of action if you no longer qualify for an X-Mod is to continue focusing on workplace safety and keeping your employees from getting injured on the job and filing claims.

And if you do have claims, you should work with us and the insurance company to manage those claims so that you can get the worker back on the job as soon as is feasible and safe for them.

 

If you have questions about your workers’ comp policy, contact Wright & Kimbrough.

xmod puzzle conceptual

 

Bureau Considers Better X-Mod Calculation Regimen

Last year the Workers’ Compensation Insurance Rating Bureau of California instituted new rules that limited to 25 percentage points the amount an X-Mod can change due to a single claim.

Now it’s considering additional regulations to further improve the way X-Mods are calculated. The goal is to ensure that X-Mods better reflect the true claims history and costs of employers, and to eliminate the X-Mod spike for smaller employers who experience just one claim.

The issue of one claim sending an X-Mod spiraling has been a thorn in the side of many smaller employers. Sometimes the insurer may increase reserves for a claim because it expects costs to mount quickly. When those reserves are placed on a claim, it will be reflected in your loss reports when it comes to calculating your X-Mod.

Currently, the Rating Bureau uses a single split point for dividing primary and excess losses. The new system it’s mulling would use 90 or more different thresholds based on the size of any given employer.

The goal of this possible change is to make California’s current X-Mod system a better predictor of an employer’s likelihood to suffer a compensable workplace injury.

As currently drafted, the multiple split point formula would essentially use just an employer’s actual primary losses, plus their expected excess losses divided by their expected losses, to determine their X-Mod.

Primary losses are the costs that the insurer would expect to pay for a given workplace injury, and excess losses are those that go above and beyond those initial primary losses. Excess losses are driven by the severity of the injury and the worker’s ability to recover from the injury and return to work.

This process is in its early stages and the proposed effective date is not until 2017, according to press reports.

Currently, the experience rating plan uses a single split point set at $7,000 for all employers, which critics say unfairly affects smaller risks and is not as responsive for larger employers.

Any claims incurred up to the split point value are included in an employer’s X-Mod calculation at full value, while the rating formula only considers a portion of the claims dollars over that amount.

The Rating Bureau has resisted raising the split point (last year it entertained a recommendation that it be raised to $9,000) because of the negative impact it would have on smaller employers, and has been exploring alternatives to the single split point system.

abacus

Closed Claims and Adjustments to Your X-Mod

So, you have a workers’ comp claim that’s been growing in terms of costs for the last two years, and finally it has closed.

You’ve been fretting about its impact on your experience modification factor (X-Mod), so now that it’s closed, what happens?

Under the Closed Claims rule of the Workers’ Compensation Insurance Rating Bureau, an experience modification may be subject to revision whenever claims that were used in calculating the experience mod are reported as closed, meaning that no more payouts will be made on the claim.

The WCIRB uses the amount your insurance company has reserved for a particular claim, not the actual payouts to date. In many cases you will find that, on an open claim, the insurance company may have paid out $5,000 to date, but may have $15,000 in total reserved, meaning they estimate the payouts might reach that point some day.

Check with us to make sure your insurance company is closing claims in the system. Once the claim is closed out, then the experience mod will use the sometimes lower actual rather than the reserved number.

If the aggregate value of all closed claims used in calculating your X-Mod is valued collectively at an amount that is less than 60% of the aggregate of the highest value at which each closed claim was previously used in a rating, then the experience rating may be revised downward using the most current reported values.

The good news is that X-Mods will not be revised pursuant to the Closed Claims rule if it results in an increase to the experience modification.

When a claim is first reported by an insurer as closed on a unit statistical report, the WCIRB automatically reviews the policyholder’s current and two immediately preceding X-mods to determine if they should be revised pursuant to the Closed Claims rule. As necessary, revised experience modifications are automatically published and the insurer is notified.

Finally, remember that X-Mods are calculated looking back over a three-year period, and the last year is not included. So, for a renewal date of Jan 1, 2014, your experience mod probably includes claims from Jan. 1, 2010 to Dec. 31, 2012.

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