By Christopher D. Vanderbeek
The National Counsel on Compensation Insurance (NCCI) and the Missouri Department of Insurance, Financial Institutions and Professional Registration recently approved a change regarding the filing of work-related medical claims in Missouri. The change reportedly reduces the impact of medical-only claims on Missouri businesses? experience ratings by 70%.
The change is effective in Missouri as of July 1, 2011.
To understand the change?s effect on Missouri businesses, one first must understand the ?experience rating? (i.e. ?experience modifier,? ?experience modification rating?). The experience rating is a mathematical formula used by insurance companies to assess premiums. In part, the formula takes into account insurance-paid losses over the past three years.
Small losses (i.e. less than $5,000) have a greater impact on a company?s experience rating than large losses, because small losses are more frequent and more predictable than large losses. Medical-only claims (i.e. claims involving no lost work time) typically constitute small losses. Therefore, medical-only claims have a substantial impact on the experience rating computation.
It is for this reason that Missouri businesses have commonly paid medical-only claims in-house, without reporting the claims to their insurance carriers. Not reporting the claims has allowed businesses to insulate themselves from the impact that reporting the claims would have on the businesses? experience rating and, as a result, on insurance premiums. However, this practice inevitably leads to employers failing to report proper loss data to the state Department of Labor. Accordingly, the change is intended to deter businesses from handling medical-only claims without the involvement of their insurance carriers.
The change comes just as data for the first quarter of 2011 has indicated that workers? compensation insurance premiums increased nationally for the first time since 2005. The data was produced by a survey involving 39 insurance carriers (approximately 20% of the market). It indicated a modest 2% increase. Factors such as decreased investment income, increased medical treatment costs, and an increase in total claims filed (for the first time in 16 years) are said to account for the price hikes.
It is imperative that Missouri businesses understand the effect of this change. It is now financially beneficial for businesses to report all claims, even medical-only claims, to their workers? compensation insurance carriers. Missouri businesses must act accordingly, ensuring optimal financial success in today?s economy.
Posted by Attorney?Christopher D. Vanderbeek.?Vanderbeek is involved in the evaluation and defense of workers? compensation and other insurance claims, protecting the interests of employers and insurers.
08/14/11 11:00 AM
Filed under Business Law, Employment Law, Litigation | Comment (0)
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