Florida Insurance Commissioner Kevin McCarty became the 39th state regulator to approve NCCI's plan on July 6. The plan would double the $5,000 "split point" NCCI now applies to injured workers' claims, effective next January, as the first phase of a three-year plan to increase the split point to an estimated $15,000 in 2015.  This means that insurance regulators in 39 states have now approved a plan by NCCI to change the formula it uses to calculate experience modifiers, effective Jan. 1, 2013. The change could increase premiums for almost a quarter of affected employers.

NCCI values claims costs at or below the $5,000 split point as primary losses and applies the full value when calculating experience modifiers, or X-Mods. It currently defines losses above $5,000 as excess losses and discounts their value.

Beginning on Jan 1, the split point will increase to $10,000. Under the plan, the split point would increase to $13,500 in 2014 and would be adjusted for inflation starting at $15,000 in 2015.

NCCI State Relations Executive Lori Lovgren said on Monday regulators have approved the change in 35 states for which NCCI recommends rates or loss costs. Regulators in Indiana, Minnesota, North Carolina and Wisconsin, which have their own rating bureaus, also have agreed to increase the split point.

NCCI said in explanatory materials that it has not adjusted the split point since 1991, while claims costs have tripled during the past two decades.

"Over time, the (rating) plan would continue to become less and less responsive," NCCI said. "There would be employers who deserve bigger credits and employers who deserve bigger debits . . . . And there would be less incentive for employers to control losses."

NCCI said that, across the 39 states, about 22% of employers will see experience modifiers increase by more than 2% beginning next January.

NCCI said it will calculate specific experience ratings for employers once rate filings are approved.

Employers in blue-collar industries who have significant loss experience can expect their experience mods to increase, due to the nature of their business and the frequency and severity of their claims.  For example, if the employer has several claims above $5,000, they can expect a larger amount of losses fall into the primary loss category, whereas before the split point change, they were calculated as excess losses at a discount.

It is also imperative to realize that the majority of the loss data that are being calculated into the first three years of the experience rating split point change (2013, 2014, and 2015) have already occurred. This means that although safety programs will help in reducing experience mods in future years, they will have little to no effect on the upcoming three years, where many employers will experience a major increase in experience mods, and in turn pay higher premiums. The easiest and quickest way that a broker can ensure that at-risk clients will not be caught off guard with drastic premium increases with the new experience rating split point change is through offering their clients workers compensation premium recovery.