Another year and another set of changes in the ever-changing world of workers’ compensation. The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) has recently released new regulatory guidelines to be aware of. The changes you can expect are summarized in the below blog. Enjoy!
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Experience Rating System
Experience rating is a tool used to measure loss experience of employers against that of their peer competitors. The developed rate is expressed as a factor; example .90 provides a 10% credit while a 1.10 provides a 10% debit and is applied against the workers’ compensation manual insurance premium. As a result, the Experience Modification Rating, or EMR, provides an incentive to employers to improve workplace safety.
Currently, the first $7,000 in losses for each claim is considered primary and counts fully in an employer’s EMR. Any losses above $7,000 are considered excess and have less weight in the experience rating formula. The changes effective 1/1/17 amend this threshold to a variable split value determined by the employers’ payroll size and class codes, with threshold values ranging from $4,500 to $75,000. This variable split places greater weight on frequency of claims as the entire claim value under this threshold will impact the EMR. The WCIRB states the experience modifications for California employers as a whole will remain unchanged (i.e. will continue to average 1.00). However, those employers with higher frequency of losses can expect to be adversely affected. The impact to individual contractors EMR will vary and we encourage you to work with your broker to assess the effect on your 2017 experience rate.
First Aid Claims
Currently, the California Labor Code 5401 (a) does not obligate the employer to report first aid claims. In 6409 (a) Only a “Physician” as defined in Labor Code 3209(a) has an obligation to report to the employer and insurer. The WCIRB requires all claims be reported so as to comply with Labor Code 6409 (a). This lack of clarity has allowed employers to use the guidelines for OSHA reporting and exclude First Aid Only claims from reports to insurers. The amendments clarify that all claims for which any medical care is provided, including those involving first aid, must be reported to insurers and the WCIRB. However, no changes were made to the Labor Code and no additional enforcement mechanisms have been proposed, so the ultimate impact this amendment will have on the reporting of First Aid claims remains unclear.
The criteria to exclude officers and members of the board of directors of private companies, limited liability companies, general partnerships and corporations has been amended by Assembly Bill 2883. Now the following can elect to be excluded:
- Officers or members of a Board of Directors only if he/she owns 15% or greater of the common stock of the Corporation; or
- A General Partner of a Partnership or a Managing Member of a Limited Liability Company
Any party electing to be excluded must execute a written waiver of his/her rights under the statute stating under penalty of perjury that the person is a qualifying Officer, Director, General Partner or Managing Member.
This change applies to all policies in force as of January 1st 2017, not just those programs bound on or after 1/1/2017. Please consult with your broker to confirm your company is in compliance with these new requirements.
Payroll Minimum and Maximum Changes
The current payroll amounts for Executive Officers, Partners, Individual Employers and Members of an LLC have been amended effective 1/1/17. See below:
- Officer Minimum: $48,100
- Officer Maximum: $122,200
This is important for employers who provide coverage for executives as you prepare your 2017 payroll estimates. There have been no changes to the wage thresholds for any of the dual wage classifications.
Many thanks to Kevin Reimers for his work on this piece.