What to Expect from Upcoming MOD Calculation Changes
December 5, 2022
The way experience modifications are calculated is changing in 2023. Learn why this is happening and how it will impact your workers comp insurance premiums.
The way experience modifications are calculated is changing in 2023. Learn why this is happening and how it will impact your workers comp insurance premiums.
The way experience modifications are calculated is going to change later this year. Here’s some info to help you understand and prepare for the effects.
Let’s start by getting back to the basics. An experience modification rating, or MOD, is used to price workers’ compensation insurance premiums. It’s a way of using your past claims experience to evaluate your future risk. A MOD rating under 1 will help you get better premiums. A rating over 1 will likely increase your premiums and may even cost you bidding opportunities in the construction industry.
The National Council on Compensation Insurance (NCCI) is the organization the industry uses to calculate mods. They’re changing two of the factors they use for the calculation, and the changes will take effect starting Nov. 1, 2023.
The split point helps balance out the effects of large claims with the effects of more frequent claims, because claims frequency is thought to be a better predictor of future claims. The full weight of claims under the split point affects the MOD. But claims over the split point are reduced by a factor. This ensures one huge claim doesn’t affect your MOD as much.
Today, the national split rate is $18,500. Say a company has a $20,000 claim. When NCCI analyzes it, they will apply $18,500 as a primary loss. They’ll discount the other $1,500, based on the rate for the company’s state.
With the change coming on November 1, the split rate will be determined by the state’s experience rather than the national rate. States with high claim severity (think California) will have higher split points, while states with lower claim severity will have lower split points.
NCCI is doing just the opposite with the maximum claim amount that can be applied to your MOD. Right now, the states determine this amount. In Missouri, for example, it’s $361,000, in Kansas, it’s $245,000, and in Texas, it’s $246,000. These states tend to be overly conservative, however, and we expect the new national max to be lower, thereby benefiting business in the state.
Overall, the NCCI says the changes should be neutral and more equitable for all, but it’s hard to tell right now. We do know that if you operate in multiple states, these changes will make it tougher for you to interpret your MOD.
You may not be able to make any changes to prepare for or mitigate the effects of these changes. But you CAN affect your MOD with solid safety programs, communication and compliance.
The Miller Group is here to help you:
