Insurance Insights: The Cleary Insurance Blog
The Cleary Insurance blog covers insurance, risk management, and financial planning for New England businesses and individuals. Our team of licensed advisors and specialists publishes regular articles on commercial and personal coverage, employee benefits, life and financial planning, and insurance compliance. Browse recent articles below, or use the category filters to find topics relevant to your business or personal situation.
MA Workers Compensation Rates
The Commissioner of Insurance disapproved the Massachusetts Workers Compensation Rating and Inspection Bureau rate increase filing scheduled for September 1st. The obvious good news is that rates are not going up on September 1st. Conversely, the bad news is that this is not necessarily a good thing for everyone!
Workers Compensation rates over the past decade have dropped significantly as various reforms were implemented. However, rates have not kept pace with the increases in medical costs. Insurance carriers have watched margins drastically decline on this line of business and have been closely monitoring what Insurance Commissioner Joseph Murphy was going to do. Now they know.
Why is this potentially a bad thing for employers?
Insurance carriers are going to be conservative when underwriting new business and re-underwriting existing business. They will be looking for the best possible risks. If you are in a less than desirable class of business, have questionable loss experience, marginal safety and return to work programs you will, if offered terms, find them much different (i.e., not in your favor) than your prior plan year policy. If not offered terms, guess what? You will go into the Workers Compensation Assigned Risk Pool. Not a great alternative. (I predict a doubling of the pool population in 2013!)
What to do?
Be proactive. Find out how this is going to affect your next renewal. What is the stance of your existing carrier? Be prepared to tune up your current safety and return to work programs. Aggressively work to reduce reserves and close claims before marketing your program. This is especially critical if you are on a loss sensitive plan.
Workers Compensation Experience Modification Revision
For renewals as of and after January 1, 2013 the methodology for calculating an “interstate” experience modification will be drastically changing. The bottom line is that those with poor experience are going to see drastic increases in their experience modification, while those with excellent history will see decreases. This is very important to all employers who have NCCI issued modification factors, but extremely important to the construction industry where sometimes you can’t get a job if your experience modification is over 1.00.
The change is a way to more accurately reflect in an experience modification the true cost of claims which have grown multiple times over the past few decades while the methodology hasn’t. The modifications will penalize those accounts with poor loss history, abysmal safety programs, and non-existent claim management and back to work programs. Conversely, It will help the modification factors of those who have good experience and actively work their safety, claim management and back to work programs.
What should you do in anticipation of this change in methodology? Well the first thing I would want to know is what will my modification look like under the new methodology? There are tools available, such as “Mod Master” for doing this. If you benefit from the change; great. If you don’t, then what? I would look into finding any errors in your existing claims information that could be corrected, however that is not always easy. Then I would make sure that I have the proper plans and procedures in place to ensure that moving forward I am taking necessary steps to minimize my claims experience.
I wouldn’t underestimate the potential impact of this methodology change on your costs, ability to get work and profit. Those who get out in front of its rollout and see how it will impact them will be the ones in a better position to use it to their advantage or will be ready to explain its adverse consequences.
If you are concerned about this coming change and how it may impact your business please don’t hesitate to contact me.
Sincerely,
Michael J. Regan
617-305-0346
mregan@clearyinsurance.com
Supreme Court Ruling
Today the Supreme Court of the United States upheld the constitutionality of the individual mandate provision of the Patient Protection and Affordable Care Act (PPACA). Accordingly, PPACA’s current health insurance reform provisions will remain in force and we will continue implementing the law, as applicable.
Background
PPACA became law on March 23, 2010. Shortly thereafter, 26 states and the National Federation of Independent Business (NFIB) sued the federal government, claiming that PPACA’s “individual mandate” provision (which requires all individuals to have “minimum essential” health coverage beginning in 2014 or be subject to a penalty) was unconstitutional.
Implications
There will be no impact on implementation of PPACA for employers and plan sponsors, which will need to continue the process of activating the various provisions, including the employer mandate, which will go into effect in 2014.