How and Why the Experience Rating Plan is Changing

If you have an experience modification factor, please take a moment to read this. If you are not sure if you have an experience modification factor, please call us at 877.994.6787, we’ll help you.

The changes are to the California Experience Rating Plan (ERP). This is the mandatory plan that produces experience modifications (ex-mods) for all California employers that have sufficient payroll to qualify. The changes are effective January 1, 2010.

The changes to the ERP are based on recommendations from the Workers’ Compensation Insurance Rating Bureau’s (WCIRB) Experience Rating Task Force to improve the ex-mod’s predictive value and make it easier to understand.

Major changes to the Experience Rating Plan:

**Claims Split

The methodology formula used for splitting actual losses into primary and excess components is changing to a “single split” model, with the first $7,000 of every loss considered primary. This change recognizes that an employer’s claims frequency is more predictive of future losses than the actual size of a given claim.    

**Credibility Values Updated

Credibility values are the weights applied to an employer’s loss experience. The updates recognize that the claims experience of a large employer is more predictive of future losses than the claims experience of a small employer.

Who Is Affected by the Changes?

Most employers will experience an ex-mod change of a few percentage points under the new plan. The precise impact on employers with an experience modification factor will depend on the size of their payroll and the number and size of their losses. According to the WCIRB, an estimated 47 percent of all employers could see a decrease of up to 10 points under the plan.

If you have any questions about this bulletin, any work comp matter or are not sure if you have an experience modification factor, here’s 4 easy ways to reach us:

Free call-877.994.6787

Fax-951.677.6265

Email us- mike@correctcomp.com

Web– www.correctcomp.com  

We wish you all of the success that you deserve! Let us know how your work comp program is changing and how we can help you.

Leave a Reply

Your email address will not be published. Required fields are marked *