NCCI Changes to 2024 Experience Mod Rating Data

NCCI Changes to 2024 Experience Mod Rating Data

For the first time since 2013, NCCI is making changes to split point and per-accident limitation factors included in experience mod calculations. However, unlike in 2013, the changes will not be uniform across all states and jurisdictions. Mods effective in 2024 will use different split points and per claim accident limitation factors across NCCI states.

As a quick refresher, the term “split point” comes from the imaginary line that divides injuries into small and large. If an injury is big enough to cross this line, it gets “split” into two parts – primary losses and excess losses. This splitting of the injury allows the mod formula to minimize the impact of a larger injury.

Some changes are quite significant, and some states are unchanged.

State	Effective	Previous Split Point	Current Split Point	Difference
Alabama	3/1/24	$18,500	$23,500	$5,000
Alaska	1/1/24	$18,500	$28,000	$9,500
Arkansas	7/1/23	$18,500	$18,500	$0
Florida	1/1/24	$18,500	$18,000	($500)
Georgia	3/1/24	$18,500	$21,500	$3,000
Hawaii	1/1/24	$18,500	$25,500	$7,000
Indiana	1/1/24	$18,500	$17,500	($1,000)
Kentucky	1/1/24	$18,500	$18,500	$0
Louisiana	5/1/24	$18,500	$38,000	$19,500
North Carolina	4/1/24	$18,500	$25,000	$6,500
South Carolina	4/1/23	$18,500	$18,500	$0
Tennessee	3/1/23	$18,500	$18,500	$0
Texas	7/1/23	$18,500	$18,500	$0
Utah	1/1/24	$18,500	$13,300	($5,200)

Note: Effective dates in 2023 have not provided their 2024 rates as of the publishing date. 

Before 2024, all states participating in NCCI experience rating shared the same split point. As mentioned, the split point categorizes claims dollars into primary or excess losses. Essentially, claim dollars below the split point are considered primary losses, and claims dollars that exceed the split point are considered excess losses. This is an important factor because primary losses have a greater impact on the experience mod than excess losses.

Before 2013, all states shared the same split point: $5,000. The first $5,000 of each claim was primary, and any claim dollar over $5,000 was categorized as excess. The change to the split point in 2013 was made to account for medical inflation. Over the years, the split point would be increased to better represent the increasing cost of medical care. In 2023, the split point was $18,500, which was consistent across all states/jurisdictions.

The need to change the split point in 2024 is mainly to account for differences in claim outcomes across different jurisdictions. Specifically, those states where claim costs vary significantly from the national average will be better accounted for. States like Illinois, with higher-than-average claim severity, will see an increase in split point from $18,500 to $28,000. Inversely, states like Indiana, with lower severity, will see a decrease in the split point from $18,500 to $17,500.

Theoretically, this should level the playing field for employers operating in neighboring states. The employer operating in the higher medical cost state will no longer be penalized because a “small” injury in their state is $20,000 and rising above the split line. The employer in the lower-costing state will not receive extra benefits because all injuries in their state are historically smaller and below the split line.

The split point is not the only factor in the experience mod calculation that will change in 2024. The state per-accident claim limitation (SAL) values will be realigned. The SAL is essentially a severity cap placed on an individual claim to limit the claim amount included in the mod calculation. It is intended to limit the impact an extremely large outlier claim has on the experience mod since those outlier claims are not predictive of future loss experience beyond a certain threshold. The SAL had previously been calculated by taking the state average claim cost times 25. It will now be calculated using the 95th percentile of lost time claims for each state. This is expected to result in lower SAL limits in all states, making the experience mod less sensitive to large outlier claims. Correspondingly, the state multiple-claim accident limitation will also change but will continue to be calculated as 2x the per-claim accident limitation.

Same samples of the changes in SAL and Accident Limitation Values

State	Effective	Previous Split Point	Current Split Point	Difference
Alabama	3/1/24	$282,500	$171,000	($111,500)
Alaska	1/1/24	$369,500	$154,000	($215,500)
Arkansas	7/1/23	$242,500
Florida	1/1/24	$283,000	$153,500	($129,500)
Georgia	3/1/24	$335,000	$163,000	($172,000)
Hawaii	1/1/24	$412,000	$176,500	($235,500)
Indiana	1/1/24	$208,500	$146,500	($62,000)
Kentucky	1/1/24	$231,000	$143,500	($87,500)
Louisiana	5/1/24	$524,500	$264,500	($260,000)
North Carolina	4/1/24	$305,500	$179,500	($126,500)
South Carolina	4/1/23	$371,500
Tennessee	3/1/23	$209,000
Texas	7/1/23	$255,000
Utah	1/1/24	$156,000	$114,500	($41,500)

Note: Effective dates in 2023 have not provided their 2024 rates as of the publishing date.

These changes in split point and per claim accident limitations necessitate changes in corresponding factors in the experience mod formula as well. The G value, weighting value (W), and ballast value (B) will also change. The changes to these credibility factors are designed to increase equity across employers.

So, what do these changes mean for employers?  A few things should happen based on the new factors, and employers should start looking at mod projections early.

1. The first year may show some volatility for those employers operating in multiple NCCI states. Understanding that when NCCI updates these factors and publishes updated worksheets, these new factors are applied to all previous years. For example, a worksheet published in 2024 with exposure in Louisiana: ALL previous injuries in the mod calculation will be subject to the new $38,000 split point. If there were a lot of injuries in Louisiana between $18,500 and $38,000, they were previously split into primary and excess losses. Going forward, those same claims will now be 100% primary losses. That difference will have an impact on the modification factor.
2. This formula change could offer employers operating in high split point states more opportunity to compress their modification factor. Using any type of transitional or light duty where the employer shares in the injury cost will provide more benefit as any dollar NOT in the primary will save future premiums at a rate of 2.5 to 1.  Using Louisiana again as an example. Previously, there was only $18,500 of primary losses to impact, but now we can impact up to $38,000. Being patient and working on an injury a little longer could provide excellent long-term benefits.
3. NCCI seems to have created a more compact “mod impact zone” where mod points are earned at the same rate but in a smaller space. Sticking with our sample state of Louisiana: The previous injury cost a maximum of $524,500 and took an extremely large injury to max out the mod formula for a claim. But with the updated maximum of $264,500, the injury will now max out much quicker. In other words, maximum mod impact from an injury happens when an injury reaches accident limitation, and that limitation is now $260,000 lower.

The higher split points and lower SAL are much-needed updates to the NCCI’s experience modification formula. Since workers’ compensation is managed state-by-state, split points and SAL values should reflect the differences in injury costs between each state. A common split point of $18,500 for each state was unfair to the low-cost states and potentially made the high-cost states appear to perform better than average.