Getting In Shape: Your Unit Statistical Card

Making Oregon Workers' Comp Insurance Work
for Your Company Part I: Know and Love your Unit Stat Card

By Jeffrey DeHaan, CPCU
President
Montgomery & Graham
Property & Casualty

As some of you may know, Unit Statistical Card Data is filed six months ahead of the time your company’s premiums are calculated for the coming year. If you’re not even really sure what Unit Statistical Data is, it’s important to note that mistakes and reserves for claims that have not yet been paid can make a big impact.

What is ‘Unit Statistical Data’?Unit Statistical Data is audited exposure, premium, and loss information for a policy. Each year the National Council on Compensation Insurance (NCCI) collects the following:

• Data from about 2.6 million policies
• More than 4 million unit statistical reports
• Detailed claim information on more than 248,000 claims

The Unit Statistical Data for every policy year needs to be reported based on a valuation 18 months after the inception of the policy. This means that if your policy renews on January 1, the data impacting what you will pay for your insurance is valued as of June 30.



How about in Oregon?
In Oregon, your actual workers compensation insurance premiums are linked to your actual loss experience (claims) through the Experience Rating. The rating increases or decreases your company’s premium for the current policy period based on your actual losses during previous policy periods.

The Experience Rating uses a formula that compares your company’s actual losses with the losses expected for an average company of your size and type. Your future workers compensation insurance rates are then adjusted up or down based on how well you do against the average.

Learn more about the workers compensation experience rating.
The result of the calculation is your company’s experience modification factor, or “experience mod,” as it is called. This figure is then multiplied by the standard rates for your job classifications to determine what premium your company pays.

To provide statistically accurate results, the State of Oregon experience rating plan does the following:

• It uses three years of experience as the basis for modification.
• It does not depend entirely on the company’s own loss experience.
• It gives more weight to small losses than to large losses.
• It caps the maximum surcharge that can be applied.

And while it’s true that the calculation of experience modification factors is automated, errors can occur. These can include:

• Using incorrect classification codes or payroll allocations
• Failing to include all payroll data when calculating expected losses
• Incorrectly reporting loss reserves
• Failing to remove the reserves for closed claims from the rating data
• Failing to revise claim values to reflect subrogation recoveries, second injury fund recoveries, and loss apportionment among different insurers

If you want to learn more about the Montgomery & Graham Property & Casualty Workers’ Compensation Audit Program and how it can help your business please email me at jdehaan@mg-pc.com
If you want to learn more about Montgomery & Graham please click here: www.mg-pc.com

Do You Know Your Lowest Possible Cost for WC Insurance?

Make Oregon Workers Compensation Insurance Work for Your Company, Part II:
Step 1: Determine Your Lowest Possible Cost for Workers Compensation Insurance
Step 2: Make a Plan to Get There

By Robert Bailey, CPCU, CSP
Senior Vice President
Montgomery & Graham Property & Casualty

In Oregon, your workers compensation insurance premiums are linked to your loss experience (claims) through the Experience Rating. The rating is then used to determine your experience modification factor, or experience mod, which determines the insurance rates your company pays. For more on how it works, check out Part I.

Determine the Lowest CostAn experience mod of 1.00 is the average. Unfortunately, too many insurance agents and employers mistake average for good. In reality, a 1.00 mod is like receiving a “C” on your report card. A conscientious company will strive to do better than average by decreasing their losses thereby lowering their workers comp insurance costs.

As part of doing better, it’s valuable to compute your minimum mod, know your current mod and then identify your controllable mod.
The Minimum Mod
The minimum mod is calculated using the appropriate payroll for the risk with zero losses. This gives the lowest mod value theoretically achievable by that risk.

The minimum mod is not the same for all companies. For small companies (as measured by expected losses), it can be as high as 0.90. As the size of the company increases, the minimum mod decreases. For very large companies, the minimum mod can go as low as 0.25.

The Controllable ModThe controllable mod is the difference between the current mod and the minimum mod. For example, say a risk has a current mod of 0.95. If the minimum mod is computed to be 0.50 (the value of the mod if no losses had occurred), then the controllable mod is 0.45 (0.95 - 0.50).

This controllable piece of the mod is a direct result of the losses that occurred during the experience rating period. Thus, this is the piece of the mod that your company can control by lowering losses.




Make a PlanThe minimum mod and controllable mod are important for two reasons:

For large risks — These values highlight the savings that are possible by controlling losses. A large risk with a mod of 0.95 may still be able to achieve significant savings through loss control and loss prevention. The 0.95 mod may be considered "good," but if the minimum mod is 0.50, there is significant room for improvement.
For small risks — These values can be used for setting realistic expectations. For example, a small risk that sets a goal of having a 0.80 mod will not be able to achieve it under any circumstances if the minimum mod is 0.85.

Understanding the minimum and controllable mods will help explain your total mod-based premium, enabling you to better identify the potential for workers' comp premium savings.

More information:
Check out Part I in the series: Manage Your Annual Unit Statistical Card. (Jeff DeHaan's post on our Worker's Compensation Blog).

If you want to learn more about the Montgomery & Graham Property & Casualty Workers’ Compensation Audit Program and how it can help your business please email me at rbailey@mg-pc.com

If you want to learn more about Montgomery & Graham please click here: http://www.mg-pc.com/

Oregon Workers' Comp Free Resources

Make Oregon Workers Compensation Insurance Work for Your Company Part III, Consider using the Free Resources Available from the State of Oregon

By Jeff Cecchini, ACSR, Sales Professional
Montgomery & Graham
Property & Casualty


Receive FREE (supported by our taxes) Resources The State of Oregon has free money to support your company’s efforts to keep workers’ comp insurance premiums low. (In truth, as you’ll learn below the free money isn’t really free; it comes from a tax funded by worker and employer contributions to the Workers’ Benefit Fund (WBF).)

How can your company access these free resources?
Here are some state programs that enable you to do the right thing, save workers’ compensation insurance premium dollars, and receive FREE MONEY:

Employer-at-Injury Program
The Employer-at-Injury Program encourages the early return to work of injured workers. It does this by helping defray your early return-to-work costs and reducing claim costs. Here’s how:

Wage subsidy reimburses you 50 percent of the early return-to-work gross wages for a maximum of 66 work days within 24 consecutive months.

Worksite modification reimburses you up to $2500 for rental, purchase, or modification of equipment that allows your worker to perform early return-to-work job duties, within the injury-related restrictions.

Early return-to-work purchases reimburses you for a range of things, including the following:

• Up to $1000 for tuition, books, and fees for classes or a course to update skills and/or meet the requirements of the light-duty job
• Up to $2500 for tools and equipment required for the light-duty job
• Up to $400 for clothing required for the light-duty job

Reemployment Assistance Program
The Reemployment Assistance Program offers incentives to hire or rehire injured workers. You can get a premium exemption and funds for wage subsidies, worksite modifications, certain purchases, and claim cost reimbursement for eligible employers and workers.

The program also reimburses insurers and self-insured employers for certain related administrative costs.
Assistance necessary for a worker to find, accept, or retain employment in Oregon:

• Tuition, books, and fees for instruction to update existing skills or to meet the requirements of a job ($1,000 max.)
• Temporary lodging, meals, and mileage to attend instruction when overnight travel is required ($500 maximum)
• Tools and equipment mandatory for employment ($2,500 max.)
• Clothing required for the job ($400 max.)
• Moving expenses for a job in Oregon if the new worksite is more than 50 miles from the worker's primary residence
• Initiation fees, or back dues and one month's current dues, required by a labor union
• Occupational certification, licenses, and related testing costs ($500 max.)
• Worksite creation costs incurred as part of creating a new job for a preferred worker ($5,000 max.). (Note that all the items here belong to the employer.)
• Miscellaneous purchases that don't fit in any other categories but are necessary for the preferred worker to find, accept, or retain employment in Oregon ($2,500 max. per claim opening)
  
  
  
  

Where does all this ‘free money’ come from?The money comes from a payroll assessment calculated on the basis of hours worked by all paid workers, owners, and officers that are:

• Covered by workers´ compensation insurance in Oregon
• Subject to Oregon’s Workers´ Compensation Laws

You report and pay the WBF assessment directly to the State with your other state payroll taxes. Fund assessment rate for employers and employees is 2.8 cents per hour for calendar year 2009.

Additional workers comp insurance tipsCheck out the previous installments in the series:

• Part 1: Manage Your Annual Unit Statistical Card http://mgpcworkerscomp.blogspot.com/2009/07/getting-in-shape-your-unit-statistical.html
• Part II: Determine Your Lowest Possible Cost for Workers Compensation Insurance and How to Get There http://mgpcworkerscomp.blogspot.com/2009/07/do-you-know-your-lowest-possible-cost.html

If you want to learn more about Montgomery & Graham, please click here: http://www.mg-pc.com/