There have been two major changes that may impact your workers compensation policy effective January 1, 2013.
First, the Minnesota Department of Commerce is changing the formula used for calculating workers' compensation premiums. Beginning on Jan. 1, 2013, the maximum annual remuneration amount for the listed individuals will increase from $93,194 to $190,258. Minimum annual remuneration will increase from $23,296 to $31,772. This change takes effect Jan. 1, 2013, and impacts executive officers, partners, sole proprietors, and members/owners of limited liability companies. This is the first of three phases designed to align the MWCIA and Minnesota ratings with those of the NCCI and other states. These changes apply to all Minnesota workers' compensation premiums, and will take effect on renewals occurring after Jan. 1, 2013.
Second, the primary/excess split point is being adjusted which may impact your experience modification factor. In the experience rating process, each loss is divided into a primary and excess portion. Currently, the first $5,000 of every loss is allocated as a primary loss, with everything over and above considered an excess loss. For example, a $2,000 loss has no excess value. On the other hand, a loss of $20,000 would have $5,000 in primary losses as well as $15,000 in excess losses. Primary losses are used as an indicator of frequency, and are counted in full as part of the mod calculation. Conversely, excess losses receive partial weight in the mod calculation. This means that primary losses affect the mod more than excess losses do. Because the primary/excess split point has not changed for approximately 20 years, and the average cost per case has tripled, the split point will increase to $15,000 over the next three years. The split point will change to $10,000 effective 1/1/2013, $13,500 effective 1/1/2014, and $15,000 effective 1/1/2015. Whether your mod increases or decreases will depend on whether you have an above or below average number of losses under the split point. If most of your losses are under $5,000, you are likely to see a decrease in your mod. If many of your losses exceed $5,000, you should prepare for an increase in your mod.
These two changes are sure to affect almost everyone with a workers compensation policy, so staying on top of what's changing and why, will surely help you and your company in the long run.