Texas Adopting NCCI Modifier Changes, So Brace Yourselves For Impact
Some people are about to get really pissed off about changes in their WC modifier. Others, not so much. While this will not be entirely the fault of the Texas Department of Insurance's adoption of the NCCI Experience Rating Manual effective 7/1/15, the changes will have something to do with it. Texas Mutual has produced a helpful summary sheet of the NCCI changes to Experience Rating. Hit the link to download it. However, unless you understood the intimate inner workings of modifiers BEFORE the NCCI change, the "summary sheet" will not be very helpful. Let me explain, or rather, to quote Inigo Montoya "There is too much, let me sum up."
When TDI announced its adoption of the NCCI rating rules, the Texas Deparment of Insurance declared that it did not "expect these changes to affect premiums." This is a silly statement when you think about it. Modifiers by their very defintion affect premiums. Any change to the modifier formula is going to effect premiums. The only issue is whether your losses are of a the kind and nature MOST effected by the changes.
Here are some of the key differences that may bring the most changes to your modifier after July 1, 2015.
The actual primary loss limit will go from $5K to $15.5K. We have always said that a bunch of small claims can have a greater impact on a modifier than one large claim. This is because of that primary loss limit of $5K. Losses up to $5K are counted at 100% in the modifier formula. The NCCI rules raise that threshold to $15.5K. Thus, more of these "small" claims will go into your modifier calculation. If you have a lot of losses in the $10K to $20K range, you will see a big difference from the change. In addition, the excess loss limit is more the doubling going from $107K to $230.5K Again, if you have large losses in this range, you will see a big difference from the change.
It is not all bad news. The ELRs (Expected Loss Rates) are increasing. We have seen decreases in these rates in Texas causing a lot of modifier creep, much to the consternation of many contractors with zero losses seeing their modifiers rise for no apparent reason. These contractors may now see a reversal of that modifier creep (assuming their loss history is still excellent).
The bottom line is the classic lawyer answer: "it all depends." The changes ARE going to impact premiums and modifiers. It all depends on how your WC claims and losses fit into the new formula. Either way, BRACE FOR IMPACT!