NCCI does lots of things.  What they do can affect your Total Cost of Risk.  According to the NCCI website:

“National Council on Compensation Insurance, Inc., based in Boca Raton, FL, manages the nation’s largest database of workers compensation insurance information. NCCI analyzes industry trends, prepares workers compensation insurance rate recommendations, determines the cost of proposed legislation, and provides a variety of services and tools to maintain a healthy workers compensation system.”

What they do affects the workers’ compensation rates for all employers in your class as well as your specific experience modifier(e-mod) that is determined by your company’s claims and the impact of any legislative changes on rates in your state.

What the NCCI is responsible for:

• Gather data

• Analyze workers comp trends

• Provide rate-making decisions

• Propose legislative impact studies

• Is the Workers Comp Advisory committee for 34 states(Oklahoma is one of them!)

• Perform experience modification calculations

• Decide how workers comp premiums are calculated

• Administer assigned risk management plans

• Howe employers operations are assigned into workers compensation class codes

• Involved in the dispute and appeals process

Rates for your business

To determine the rates for your business, NCCI uses class codes based on what your employees’ duties are.  More hazardous duties usually equal higher rates.  

For example, steelworkers have a much higher rate than salespeople.  Each business can have multiple class codes depending on the variety of duties their different employees perform.  A Manufacturer may have a different class code for clerical and sales employees, drivers, and several other class codes for the variety of workers involved on the job, in the manufacturing frontier. In order to determine the e-mod rate for each employees, NCCI looks at the claims for all employees in that class statewide and compare to payroll in the class. They look at the claims for all employees in that class in the entire state and compare to payroll in the class to determine a rate.  They use actuaries for this.

Your Experience Modifier

If your premium is over $5000 for the past few years or over $10,000 in a single year, you are subject to being “experience rated” by NCCI.  Every year you will receive a sheet from NCCI that has a bunch of numbers on it and looks similar to a spreadsheet.  There is a complicated formula involved but basically the more claims you have the higher your modifier is.  The modifier, often called “EMR” or “Mod”, is a multiplier applied to your premium.  So if your modifier is 1.25, you get surcharged 25% and if it’s .75 you get a 25% discount.  All insurance companies will apply your experience modifier to your rates.

Impact of Legislative Changes or Case Law

NCCI will also determine how any legislation that affects workers compensation will ultimately affect the rates.  These changes could result in immediate or future changes in the rates for your state.  Changes that are perceived to change rates (such as a new law extending disability time) will be calculated by an actuary based on detailed information of past claims and a rate increase or decrease will often be applied immediately or in the future.  Court cases that overturn this legislation or other court cases that are appealed above the worker’s comp court can also have an effect on the rates.  In Oklahoma, key legislation was passed that had an immediate rate reduction.  Over the next few months, many of these changes were challenged and defeated in appeals courts and therefore much of the rate decrease was reversed and rates were raised back up to almost where they were before.

You can see the effect NCCI has on your rates.  It is funded by the member insurance companies that are members and through the fees that they charge for their data.  Understanding this helps you better control your Total Cost of Risk. Nevertheless, the interpretation and application of workers comp rules set forth by NCCI are very complicated,