Understanding the Importance of Your Workers’ Compensation Unit Stat Filing Date

Author, Greg Garcia, Account Executive, Rancho Mesa Insurance Services, Inc.

Imagine you are a landscaping company owner and your workers’ compensation policy just renewed January 1st. You are probably thinking, now what? Well, the next date that should be on your radar is June 30th, your unit stat date. Each unit stat date varies and with the actual filing taking place approximately 180 days from when the workers’ compensation policy was placed. The unit stat date is when all workers’ compensation claim activity is frozen, along with audited payroll information, and sent to the rating bureau so the experience modification (XMOD) can be calculated.  

As a reminder, your XMOD is determined by comparing your loss experience and historical payroll to others with similar class codes. The XMOD is derived from three years of audited payroll and losses suffered over those years.

If a particular claim is closed after your unit stat date, that claim will impact your next XMOD at the total incurred value before the unit stat date. Therefore, if you have a claim that can either be closed or reserves reduced, it is critical that this is done ahead of the unit stat date. Staying up to date with your claims adjuster and insurance professional ahead of the filing can quite literally save you points on your XMOD, which in turn can help to reduce your worker’s compensation annual premium.

Using one of the metrics on our proprietary KPI Dashboard, our clients are able to track the number of days until their unit stat date. Combining this KPI tool with our dedicated workers’ compensation claim advocate services at prescheduled claims reviews throughout the policy year helps to close the claims or mitigate claim costs in advance of the filing. This strategy can dramatically lower overall insurance costs.

If you have any questions about the unit stat or would like me to put together a custom KPI dashboard for your team, you can contact me at ggarcia@ranchomesa.com.

Cracking the Code: Deciphering the Primary Threshold’s Impact

Author, Greg Garcia, Account Executive, Rancho Mesa Insurance Services, Inc.

Every business owner understands the correlation between their Experience MOD (XMOD) and what they will pay in workers’ compensation premiums.  When the XMOD increases, there is a good chance that the workers’ compensation rates or premiums will rise as well.  This is why it is so crucial to really hone in on company safety procedures to limit work-related injuries as much as possible.  The reality is that even the safest company that does everything the right way is going to run into a workers’ compensation claim from time to time.

So, when the inevitable workers’ compensation claim happens, what are you supposed to do?  What impact will this have on the XMOD?  The first component that business owners need to understand is that there is a cap to how much any single workers’ compensation claim can impact the XMOD.  That cap is called the primary threshold.  The primary threshold varies from company to company and is based off of the company’s payroll.  The more payroll a company has the higher the primary threshold.

For this example, a company has a primary threshold of $15,000 where the maximum number of points that any one claim can impact the XMOD once reaching the threshold is 10 points.  This means that a claim that costs $15,000 and a claim that cost $150,000 will have the same impact (10 points against the XMOD).  However, this does not mean that claims that exceed the primary threshold can be disregarded, because the higher claim cost you have will impact your current and 5-year loss ratio (incurred claim cost/premium paid).  Additionally, if a claim that was reserved higher than the primary threshold and can be closed or decreased lower than the primary threshold, XMOD points can be shaved off of that claim.

Knowing the importance of the primary threshold, we designed our proprietary the KPI dashboard that allows our clients to see their primary threshold number and corresponding maximum impact to the XMOD any one primary threshold claim would have. 

If you have any questions about your XMOD or would like us to create a KPI for your company, please feel free to reach out to me at (619) 438-6905 or ggarcia@ranchomesa.com.

Proposal to Include COVID-19 Claims in EMR Calculation is Denied

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

It appears the COVID-19 pandemic has finally entered an endemic stage and most companies have fully re-opened and/or are offering their employees some type of a hybrid work schedule. With this being the case, the California Workers’ Compensation Insurance Rating Bureau (WCIRB) proposed to amend the rule that excludes COVID-19 claims from the calculation of experience modifications for only claims with incident dates from December 1, 2019 through August 31, 2022. In addition, the WCIRB proposed that effective September 1, 2022, any new COVID-19 claims occurring after this date would be factored into the calculation of an employer’s experience modification rate.

The WCIRB’s rationale for this recommendation was that current circumstances have greatly changed since the rule to exclude COVID-19 claims from the experience rating were initially adopted in 2020. COVID-19 is no longer a temporary short-term phenomenon and the risk of infection will be present in the general population for the foreseeable future. 

With workplace safety standards in place, personal protective equipment and vaccinations available, employers who are diligent in protecting their employees would in turn have a lower experience modification than less safety-conscious employers in the same industry. 

Fortunately, in late June 2022, this change was not approved by Commissioner Lara, but employers should still actively try to prevent the spread of COVID-19 within the workplace by having a written COVID-19 prevention program in place and follow the requirements set by the state and local health department. 

While employers don’t have to worry that COVID-19 cases will affect their experience modification rate, they should still be concerned about the effects on their employees and bottom line. Having employees miss work because of COVID-19 puts extra strain on other employees and can effect productivity, and thus profitability.  

Rancho Mesa has updated its COVID-19 Prevention Program Template designed for California businesses. Request your COVID-19 Prevention Plan template online or contact me at sclayton@ranchomesa.com or (619)937-0167.

Dashboard Spotlight: Your Path to an Experience MOD Below 1.00

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

Rancho Mesa’s Safety KPI Dashboard allows businesses the ability to clearly visualize their path to an Experience MOD (XMOD) below 1.00 through goal setting.

In order to set your business goal, you will need to use three available metrics from your custom dashboard. 

• Lowest Possible XMOD – This is the best case scenario if you had zero claims for the three-year XMOD period.

• Claim Cost Per 1 XMOD Point – This is the amount of incurred claim cost that impacts your XMOD by 1 point.

• Unit Stat Date – This is the moment when your information is sent to the rating bureau for next year’s XMOD to be calculated.

Using these three metrics together, you can effectively set your goal and manage your XMOD accordingly.

The XMOD is calculated using a running three-year window of the most recently completed workers’ compensation policies. Each policy period will contribute a set amount of weight on the XMOD calculation based on payroll and claims.

Take your lowest possible XMOD from the KPI dashboard and subtract that number from .99.

You will be left with the amount of XMOD points your company can absorb while still keeping your XMOD below 1.00.

Divide that number by three and you can evenly distribute the amount of XMOD points you can have each year to keep your XMOD below 1.00.

Take the annual XMOD points and multiple by your Claim Cost Per 1 XMOD Point.** This will give you the maximum claim cost available per policy period.

Example:
Lowest Possible XMOD: 47
Claim Cost Per 1 XMOD Point: $3,100
Unit Stat: September 30th
(.99) – (.47) = .52 (Number of XMOD points available to absorb and keep XMOD below 1.00)
(.52) / (3) = 17.3 (Max XMOD points per year)
(17.3) * (3,100) = $53,630 (Max claim cost available per policy period) **

**Must consider your primary threshold, which is also a number available on the KPI Dashboard.

Knowing these numbers, along with when your unit stat date comes up, allows you to strategically plan.

If all of this seems complicated or you just want to see what your company’s dashboard would look like, request a personalized KPI Dashboard and we can discuss how you can develop a path to an XMOD below 1.00.

Understanding the Impact of MEP Contractors’ Dual Wage & Total Temporary Disability

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

What is a dual wage threshold? According to the Workers’ Compensation Insurance Rating Bureau (WCIRB), in California there are sixteen (16) construction operations that are divided into two separate classifications based on the hourly wage of the employee. There are different advisory pure premium rates for the low wage employee and the high wage employee. For mechanical, electrical and plumbing (MEP) contractors, the class codes used are all included in the recently approved increase which will go into effect September 1, 2022. The table below outlines the changes for the MEP class codes by year.

Classifications	9/1/2021 - Current	9/1/2022 - Proposed
5140/5190	$32	$34
5183/5187	$28	$31
5538/5542	$27	$29

© 2021 Workers' Compensation Insurance Rating Bureau of California. All Rights Reserved.

Why does this matter to MEP contractors? The higher wage employee’s workers’ compensation rate is significantly less (on average 46% less) than the lower wage employee. Therefore, if a company has any employees that are currently just barley in the high wage classification, this would drop those employees into the low wage classification and the employer would pay the higher workers’ compensation rate on those individuals. Depending on how many employees an employer has in this situation, it may be advantageous for the employer to calculate if it makes more sense to give those impacted employees a raise to push them back up into the high wage classification or keep them in the new low wage classification. It should be noted and understood that this change will not impact the employer until their next renewal after September 1, 2022. So while most employers will have time to evaluate the impact, it is crucial to begin the evaluation sooner rather than later.

As with any form of wage inflation, an increase in wages, to keep an employee in the higher wage category will increase the claim costs of a total temporary disability claim if they are injured on the job. While increases in wages are necessary, they will also impact the total cost of the claim, which then can increase the company’s experience modification rating (XMOD).

To mitigate this increase and reduce the likelihood of a lost time claim, employers can take several actions:

• Review and update their existing safety programs.

• Revisit their hiring practices.

• Develop a sustainable return-to-work program.

What should employers do next?

• Work with your trusted insurance advisor and run a needs/benefit analysis on increasing employee wages.

• Understand your numbers.

  • What is your primary threshold and why does it matter?

  • What is my claim cost per point of XMOD?

  • How does my frequency of claims compare to the MEP industry?

  • How does my lost time claim average compare to other MEP contractors?

If you would like assistance understanding how these and other data points impact your company, request a proprietary Key Performance Indicator (KPI) dashboard that puts this information at your fingertips.

You still have time to be proactive, do not let these critical changes catch you by surprise!

How Higher Average Pay Can Lead to Work Comp Savings

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Wage thresholds have increased consistently in the past decade. This has pushed owners to give sizable raises every few years to maximize employee compensation, but also reducing insurance cost. The experience modification (XMOD) and payrolls are key factors in developing a company’s net rates for workers’ compensation, but average wage per hour represents a big differentiator for most carriers and can lead to even more savings.

Paying your most competent employees above the wage threshold leads to less fraudulent claims, longer tenured employees, and a happier workplace, not to mention the benefit of a drastic cut in net rates for that class code. The gap that is sometimes felt is when there are employees that have the same job description and are earning 30-40% less. Managing payroll inflation is always critical for businesses but let’s think about what this can do to the employees bringing the average pay down for your company. Consider:

• More fraudulent claims as the employee has less to lose if they are terminated or laid off;

• Resentment toward employees that are doing same job but making more;

• Employees are more likely to move to another company to get raises;

• Likelihood to miss more time when injured, leading toward higher temporary disability pay which typically can lead to a higher XMOD.

Insurance companies and their underwriters look closely at average salary per employee when they receive a submission with the renewal documentation.

The higher the average pay, the more aggressive they can be with potential scheduled credits in most cases. Obviously, the employer must be selective with who receives a raise and how much but also understand what potentially positive impacts there can be when giving raises in order to hit those thresholds.

And, perhaps just as important is partnering with a broker that specializes in your industry and knows how to properly benchmark you with like organizations. This consistently leads to more productive discussions with underwriters that lead to more scheduled credits. The happier your workforce is, the less claims you tend to see and that translates to long-term savings.

If you have any questions about how you compare to your industry or would like to discuss any other insurance related topic, do not hesitate to reach out to 619-937-0164 or email me directly at ccraig@ranchomesa.com.

Wage Inflation’s Impact On Workers’ Compensation

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Following up on a great article by fellow construction team member Kevin Howard, about anticipated wage threshold increases coming in 2022, I wanted to highlight the building problems resulting from substantial hourly wage increases.

I specialize in painting, drywall and plastering contractors and have been asking my clients over the past few months about the health of their business and any new challenges. The most common answer: there is a substantial amount of work to bid on, but a labor shortage limits the possibility of growth.

Paying an employee higher wages creates new issues. Employees tend to inform co-workers when they get a raise. Employees may also try to leverage another company’s higher wage into a raise. The combination of a labor shortage and overpaying employees may result in hyperinflation, leading these employees to believe their value has skyrocketed.

Tying back into Kevin’s article, it is easy to see why these thresholds need to be increased. The wage threshold is meant to separate historically safer employees from newer employees who are less safety conscious. These increases in payroll are pushing less skilled employees into the higher wage category, resulting very likely in higher claim frequency as they are historically less experienced and safety conscious on the jobsite. This is leading to a smaller gap in workers’ compensation rates between the above and below class codes for each industry.

For example, a painter had a separation of 56% from 5474 to 5482 (painters making above or below $28) for their 2021 renewal. For 2022, they are only looking at a 46% difference. From the carrier perspective, more losses are expected in the 5482 (above $28) than the previous year, leading to a rate increase in that class code. I wish I could say that this was industry specific, but from conversations with multiple underwriters, most industries are dealing with these same employment issues and have struggled to find meaningful solutions.

It is possible these dual wage threshold increases will help restore balance by bringing the less skilled employees back into the proper class code, securing the lower rates in the over class code. Employers have shared that these threshold increases are hurting them, but should assist with workers’ comp savings for the truly elite seasoned workers. Carriers have these thresholds to help you differentiate experience from inexperience.

This is a developing issue that we are trying to stay ahead of. The time is now to meet with someone who specializes in your industry and help you formulate a strategy for 2022 to mitigate these impacts and improve your profitably. To schedule a time to talk or meet with me or you can call me directly at 619-438-6900.

Timely Reporting of Workers’ Compensation Claims Lower Overall Costs

Author, Jack Marrs, Associate Account Executive, Rancho Mesa Insurance Services, Inc.

Leading into 2022, it is important for employers to examine their workplace injury reporting practices. Specifically, employers should report all injuries including medical-only workplace injuries to their workers’ compensation insurance company. Best practices dictate all claims should be reported within the first 24 hours in order to improve treatment to the injured worker and reduce the overall cost of the claim to the employer.

A recent conversation with an underwriting manager highlighted the fact that some employers are choosing to pay for occupational clinic visits rather than filing a claim, assuming that small medical-only claims will negatively impact the Experience Modification Factor (X-mod) and ensuing workers’ compensation premiums. However, in actuality claims of $250 or less do not impact the X-mod. Not only are employers legally required to report workplace injuries, but those small claims can easily turn into something bigger, if not reported in a timely manner. Further, the reporting of all incidences can assist a company in identifying trends and root causes thereby allowing for proactive measure to be taken. Rancho Mesa’s proprietary Key Performance Indicator (KPI) dashboard helps track these trends and compare a company’s performance to that of their industry. Request a KPI dashboard for your company.  

Why then does reporting lag result in higher claim costs? An insurance carrier’s ability to investigate a claim, determine compensability, and identify fraud may be hindered as details of the incident fade, witnesses may no longer be available or key evidence may not be preserved. According to Liberty Mutual, a 29-day delay in reporting an injury can lead to a 33% increase in lost time, 52% higher average claim cost, and 152% increase in litigation rates. This makes sense when one considers that a delay in seeking treatment could cause an employee’s condition to worsen, extending recovery time and temporary disability payments.

Lastly, an employer paying a medical bill will pay much more than a workers’ compensation carrier would pay for that same bill as insurance companies negotiate a reduced fee schedule for occupational injuries. Bottom line, failure to report workplace incidents in a timely manner can put any organization and its employees at risk for no benefit. Contact Rancho Mesa to learn more about our Risk Management Center and how our free trainings and webinars can improve your reporting practices.

Experience Mod KPI Provides Trend Analysis, Opportunity Assessment, and Vital Management Tools

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

In January 2021, we launched the Safety Key Performance Indicator (KPI) Dashboard to provide a tool for our customers to use as a bridge between their experience mod and safety performance.

Our primary goals were to:

• Eliminate surprises

• Simplify concepts

• Track performance

• Highlight the positive and negative trends

• Benchmark safety performance against industry competitors

An experience mod above 100 can limit a landscape company’s ability to be awarded jobs or maintain contracts, increase insurance premiums, and have other significant financial implications.

Our dashboard is a tool companies can use to strategically manage the underlying components that directly impact the experience mod and help project future experience mod deviations.  Rancho Mesa can help interpret the results and provide insights to help improve your performance.

Not a Rancho Mesa client but interested in seeing what your dashboard looks like? Complete our new KPI Dashboard quick form, to see how your company measures up.

California’s Landscape Industry Prepares for Ex-Mod Changes

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

For the first time in several years the Expected Loss Rate for class code 0042 has increased from $2.38 to $2.42, a 2% increase.

Bottom line, although very minimal, this should help bring the experience mod down.

This information will impact any landscape company who has a policy effective date of September 1, 2021 and beyond.

Based on a couple of projection comparisons, we have seen an impact of 1 to 4 points come off the experience mod for landscape companies.

Landscape companies working with Rancho Mesa with policy effective dates after 9/1/2021 will see updated information on their KPI Dashboard, at the next review.

For landscape companies not working with Rancho Mesa, you can request a custom KPI Dashboard today by reaching out to Drew Garcia.

New Hires Pose Hidden Exposure

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Hiring is never an easy task, especially during a pandemic. Dealing with COVID-19 has made finding the right employees much more difficult for many business owners in the construction industry. Now is the perfect time to evaluate your hiring practices to ensure you don’t make a costly hiring mistakes that can affect your Experience Modification Rate (XMOD) and workers’ compensation premium long after the pandemic has passed.

It was not that long ago that our economy was thriving and we had an unemployment rate under 4% in California. Though, due to the shutdown, we have seen that number shoot up as high as 16.4% in April 2020 and settle back down to 11% by September 2020, according to the Bureau of Labor Statistics (BLS). So, while many industries saw massive lay-offs, the construction industry has continued to thrive, at least for the time being. That means many employers are now actively looking for both skilled and non-skilled labor in order to complete existing projects and plan for future contracts that have been awarded. That’s great news for the 11% of the population who are unemployed, but employers should still be cautious about hiring just anyone without utilizing best practices to minimize risk.

In September 2020, Rancho Mesa partnered with Culture Works to offer the “Remote Recruiting & Company Culture Webinar” where they went into detail on the best practices for remote recruiting. Watch an archived version of the webinar to learn practical steps for recruiting employees in today’s economic climate.

Finding the right employee for the job may not be as easy as it used to be. Some skilled workers may not feel comfortable working on a job site, even while safety precautions are being observed. And, others may have been offered higher wages and more benefits at other companies who are also in need of workers. So, employers are really at a disadvantage. They may weigh the benefits and risks of hiring people who are less experienced or those who don’t take job site safety very seriously.

Now is the time to implement best practices when hiring to insulate your company from potential problems. This could mean implementing drug testing, pre-hire physicals, reach out to previous employers for recommendations, and updating your employee handbook to making sure these employees are aware of exactly what the job description is that they are being hired to do and the company’s expectations.

Experience on the job and a history of safety training are indicators that a new hire is a good risk. However, we know that employees over 45 have a 23% higher chance of having a sprain, strain or tear than employees under the age of 45. They also have a 27% higher chance of having a slip, trip or fall according to BLS. This does not mean that you shouldn’t hire workers over 45. It just means that to minimize risk, provide employees with appropriate training. Implement stretch and mobility programs for your workforce to do daily to reduce the exposure.

Rancho Mesa offers clients the Field Mobility & Stretch and ABLE Lifting training that is designed to reduce strains and cumulative trauma claims. Getting your employees prepared for the work day before they pick up their tools is vital in staying ahead of claims and boosts employee morale. The best way to handle workers’ compensation claims is to prevent them from happening.

Knowing your exposure is vital in staying ahead of industry trends. If you have further questions do not hesitate to contact me at (619) 438-6900 or ccraig@ranchomesa.com.

COVID-19 Workers Comp Surcharge Coming to California

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Adding frustration to the growing concerns for businesses dealing with COVID-19, the Workers’ Compensation Insurance Rating Bureau (WCIRB) has recommended California employers pay a COVID-19 surcharge on their 2021 workers’ compensation policies. 

If approved, this new COVID-19 surcharge will vary by industry and have a minimum of $0.01 and hit a maximum of $0.24 per $100.00 of payroll. The industries with less of a COVID-19 exposure can expect a lower surcharge. While industries with a higher exposure can expect a greater increase. The additional surcharge my not seem like a lot, but multiplied by a company’s payroll, it can be significant to a company’s bottom line. Additionally, this surcharge will apply to all California employers, regardless if they had any COVID-19 illnesses.

The Workers’ Compensation Insurance Rating Bureau (WCIRB) approved the surcharge after growing concerns that the number of COVID-19-related workers’ compensation claims will continue to increase. It’s been estimated this year that 11% of all workers’ compensation claims in California have been COVID-19 related. The surcharge will help the insurance carriers mitigate the growing cost of the claims that could not have been anticipated when rates were calculated for 2020 policies. Even though COVID-19 claims will not be included in California’s companies’ Experience Modification Rates (i.e., XMOD, EMR), carriers will look to a number of variables in order to adequately price for an individual company’s premium. Those will include:

1. Overall claims experience

2. COVID-19 claims experience

3. The COVID-19 protocols and practices that are in place

Rancho Mesa, California union employer groups, as well as several carriers including the State Compensation Insurance Fund (State Fund), oppose the surcharge idea. Our feeling, as well as many of the others, is that most carriers are now underwriting specifically for COVID-19 by evaluating the businesses’ COVID-19 claim history and safe guards. Thus, there is no need for an additional surcharge.

In the next few weeks, we will release a follow up article that will highlight the best practices employers can implement now to minimize the COVID-19 impact to their organization and 2021 workers’ compensation renewal pricing.

For questions about workers’ compensation and the COVID-19 surcharge, contact me at (619) 937-0167 or sclayton@ranchomesa.com.

California’s Workers’ Compensation Landscape May Reach a Valley in Coming Year

Author, Drew Garcia, Vice President of the Landscape Group, Rancho Mesa Insurance Services, Inc.

The workers’ compensation market for landscape companies in California has remained in a downward trend since 2015. As a result, landscape business owners have realized lower rates and subsequently aggressive premiums.

The following are some key insights to help landscape businesses prepare for their 2021 workers’ compensation insurance renewal.

For Experience MOD (XMOD) purposes, it’s important to know the Expected Loss Rate (ELR) for the landscape class code (0042) has decreased 8% over last year, $2.38 per $100.  With a lower ELR comes an adverse effect for landscape companies’ individual XMOD, as a result of lower expected losses.  Lower ELRs also drive down the primary threshold, amplifying each claim’s impact on the XMOD.  Have your 2021 XMOD projected early to identify any possible implications. 

Pure premium rates are developed by the Workers' Compensation Insurance Rating Bureau of California (WCIRB) and approved by the insurance commissioner to reflect the expected losses and loss adjustment expenses for each class code.  Insurance carriers can then use these rates to come up with their own base rates to establish premiums.  Pure premium for the landscape industry is down 8% over last year, from $5.61 to $5.14.    The WCIRB also added a $.06 surcharge for COVID-19 claim impacts for the landscape industry.  The Landscape Industry was labeled under tier 3 of 5, were the $.06 surcharge will be applied.  Other tiers such as 4, 5, and 6 saw $.012, $.18, and $.20 surcharges as it was deemed those industries have a larger exposure share to COVID claims.  In the end, with the surcharge, Pure Premium is slightly down and theoretically should lower carrier base rates.

Watch a 10-minute webinar where Drew Garcia explains the California Workers' Compensation marketplace for the landscape industry.

Areas like Los Angeles Country, Riverside County, and San Bernardino Country have had higher claims activity and claim outcomes than other parts of the state. Carriers use territory factors to more accurately align their premium for your business, depending on your location. Territory factors can either credit or debit your policy based on the location of your business or surrounding areas where you operate. For example, if you are a landscape company in Riverside County but doing business in San Diego Country, make sure you are breaking out these operations so your underwriter can accurately evaluate the correct percentage of operations in Riverside vs. San Diego.

The average base rate filed by insurance carriers for class code 0042 is $10.63, which is down 7% over last year.  Carriers determine base rates based on industry appetite, historical loss experience, pure premium rates, and overhead.  Not all carriers have an appetite for landscape business and the lowest base rate does not mean the lowest net rate.  Insurance carriers have the ability to apply “schedule rating” which is a list of criteria they file for with the California Department of Insurance to allow underwriters the ability to deviate off the price.

In 2019, the top three carriers writing workers’ compensation insurance in California by premium volume was State Fund (10.56%), Berkshire Hathaway Homestate Companies (7.12%), and Insurance Company of the West (6.94%).  Rounding out the top ten were Hartford, Travelers, AmTrust, Zurich, Chubb, Fairfax, and Employers. 

Our advice for 2021:

• Have your companies 2021 XMOD projected today, if not at least 6 months before your policy is set to renew.

• Meet with your insurance professional 120 days before renewal to determine the renewal strategy.

• If you are discussing different carrier options with your agent, ask the next level questions:

  • What other landscape companies does this carrier work with?

  • What is their rating?

  • How long have they written workers’ compensation in California?

  • Are claims handled in house or by a third party?

The numbers above indicate the perpetuation of a soft market, however, we are steadily seeing the delta of decrease shorten.  Take this information to help your company formulate your renewal strategy and impact the discussions you have with your insurance agent in 2021.

If you have questions about your workers’ compensation renewal, contact me at (619) 937-0200 or drewgarcia@ranhcomesa.com.

Post COVID-19 XMODs Threaten a Double Whammy

Author, Kevin Howard, C.R.I.S., Account Executive, Rancho Mesa Insurance Services, Inc.

COVID-19 has created a multitude of challenges for California business owners in the first half of 2020. A concerning trend is the potential combination of lower payrolls and the California Workers’ Compensation Insurance Rating Bureau’s (WCIRB) recommendation to lower expected loss rates, creating what very likely could be significant Experience Modification Rate (XMOD) increases for numerous California businesses.

Whammy #1 - Lower Payrolls

With the economy screeching to a halt in March of this year due to the shelter in place restrictions, payrolls and employee counts have been dramatically reduced. Since the XMOD calculation is based on a rolling three years of payroll and claims, should the year dropping out of the calculation have larger payrolls than the year entering and assuming the same claim amounts for each year, the XMOD would increase.   

Whammy #2 – Lower Expected Loss Rates (ELR)

ELRs are the factors used to anticipate a class code’s claim cost per $100 for the experience rating period. Stated simply, it’s a rate per, $100 of payroll by class code that projects the claim amounts the WCIRB believes should occur for that class code. Thus, should ELRs decrease; it would have the effect, given no change in the claims, of raising the XMOD.

California businesses should pay close attention to their individual ELRs as the WCIRB annually recommends updated rates during their June regulatory filing period. The 2021 rates were recently proposed on June 25, 2020 by the WCIRB and will be waiting approval in September by Insurance Commissioner Ricardo Lara.

Below is a breakdown of the 2021 proposed ELRs by class code with notable double digit increases highlighted:

2021 Proposed ELRs

Class Code	2020 ELRs	2021 Proposed ELRs	Increase/Decrease %
3724 Solar/Millwright	1.74	1.81	4%
5187 Plumbing > $28	1.18	1.13	-4%
5183 Plumbing < $28	2.6	2.6	0%
5542 Sheet Metal > $27	1.4	1.35	-3%
5538 Sheet Metal < $27	2.3	2.39	-12%
6258 Foundation Prep	2.65	2.48	2%
0042 Landscape Gardening	2.59	2.38	-8%
0106 Tree Pruning	3.91	4.11	5%
5140 Electrical Wiring > $23	0.81	0.73	-10%
5190 Electrical Wiring < $23	1.89	1.82	-4%
5470 Glaziers > $33	1.63	1.81	11%
5467 Glaziers < $33	4.3	3.81	-11%
5028 Masonry > $28	2.17	2.13	-1.8%
5027 Masonry < $28	4.73	4.03	-14%
5482 Painting/ Waterproofing > $28	1.42	1.57	10%
5474 Painting/ Waterproofing < $28	3.68	4.08	10%
5186 Automatic Sprinkler Install > $29	1.11	1.14	3%
5185 Automatic Sprinkler Install < $29	2.45	2.2	-10%
5205 Concrete/Cement work > $28	1.95	1.71	-12%
5201 Concrete/Cement work < $28	3.95	3.45	-12%
5432 Carpentry > $35	2.01	2.05	2%
5403 Carpentry < $35	5.27	4.91	-7%
5447 Wallboard Application > $36	1.34	1.14	-14%
5446 Wallboard Application < $36	2.76	2.67	-3%
5485 Plastering or Stucco >$32	2.66	2.55	-4%
5484 Plastering or Stucco < $32	4.78	4.41	-8%
5443 Lathing	2.37	2.23	-6%
5553 Roofing > $27	3.9	3.89	-2%
5552 Roofing < $27	9.85	9.23	-6%
6220 Excavation/Grading > $34	1.24	1.08	-12%
6218 Excavation/Grading < $34	2.34	2.59	10%
5436 Hardwood Flooring	2.03	2.01	-1%
3066 Sheet Metal Prod Mfg.	1.94	2.00	3%
8018 Stores - Wholesale	2.67	2.81	5%
8804 Shelter/Social Rehab	1.25	1.30	4%
8827 Hospice and Homecare	1.72	1.54	-10%
9059 Childcare	0.99	1.07	8%
8834 Physicians	0.34	0.34	0%
8868 Colleges/ Professors Private-Teachers	0.36	0.37	3%
9101 Colleges/Schools Private-Other	2.50	2.13	-14%

Should Commissioner Lara approve the ELR changes in September, a majority of class codes will be seeing a decrease which can lead to higher XMOD’s in many cases. That possibility, combined with lower incoming payrolls, requires proactive risk mitigation, claim management and detailed planning with your broker. 

If you are seeking a partner with the tools to address these needs, please reach out to Kevin Howard at Rancho Mesa Insurance Services, Inc. at (619) 438-6874.

Landscape Companies with Low Experience MODs Do These 5 Things

Author, Drew Garcia, Vice President of the Landscape Group, Rancho Mesa Insurance Services, Inc.

Landscape companies with a low Experience Modification Rating (XMOD/EMR) typically exhibit similar best practices when dealing with work-related injuries. Their proactive approach helps close claims faster and return employees to work sooner than their counterparts.

The XMOD/EMR is a unique number assigned to a business that is made up of their historical loss figures and audited payroll information vs. the same information for companies involved in the company’s same industry. Generally, if your business has experienced more claim activity than the industry average, you will have a XMOD/EMR above 1.00. The opposite is true; if you have had less claim activity, your XMOD/EMR will be below 1.00. The XMOD/EMR impacts the rates you pay for workers’ compensation by crediting (XMOD/EMR below 1.00) or applying a surcharge (XMOD/EMR above 1.00).

Here are the 5 best practices used by landscape companies who have an XMOD/EMR) below 1.00.         

1. An Aggressive Return to Work Program

If you heard our podcast episode with Roscoe Klausing of Klausing Group, you will hear him coin the phrase an “aggressive return to work program” which was a key component to his company, of more than 70 employees, going 3 years without a lost time accident.

Aggressively finding a way to help bring an injured employee back on modified work restrictions has long been proven to provide positive outcomes for everyone involved.  Benefits of bringing an employee back on modified duties include:

• Eliminating temporary disability payments from the claim cost.

• Lower the dollar amount of medical treatments. 

• Reduce the overall cost of the claim.

• Lower the potential impact the claim would have on your XMOD/EMR.

• Improve injured employee morale.

2. Timely Reporting and Accident Detail

It is critical to constantly remind your front line supervisors and employees that they must report all injuries no matter the severity as soon as possible.  Studies have shown that work related injuries reported with the first 5 days have a dramatically lower average claim cost and litigation rates than those reported after 5 days.

Two measurable statistics for you to keep an eye on are:

1. The lag time between when an injury is reported to you from an employee.

2. The amount of time it takes you to report this information to your insurance carrier. 

By conducting a thorough accident investigation at the time of injury and providing a report to your insurance claim professional, you will speed up the claims process and lower costs. Eliminating the time delays caused by the claim professional waiting for details or additional information is critical in making sure your injured employee is on the fast track to recovery.  To assist the landscape industry in completing this necessary step, Rancho Mesa has created a free, fillable, carrier approved accident investigation report for use by the landscape industry.

3. Communication

Keeping in constant communication with employees who are injured is vital to a positive outcome.  At times, the workers’ compensation process can seem slow.  Some injuries will take longer than others.  This can lead injured employees to feel frustrated and uncertain. Make sure you are addressing their concerns and checking in on them, frequently.

4. Know the Basic Principles Behind the XMOD/EMR

You do not need to know the XMOD/EMR formula, but you should have an understanding of the basic concepts that leads to XMOD/EMR inflation.  

• You should know when your claim information will be sent to your rating bureau for next year’s XMOD/EMR calculation and make sure you are familiar with the status of each claim before the information is locked. 

• If your rating bureau uses a Primary Threshold or Split Point, it is good to understand how this number impacts claim cost and each claim’s impact on the XMOD/EMR.

• Know your lowest possible XMOD/EMR, this would be all your payroll with zero claims.  The points between your lowest possible XMOD/EMR and your current XMOD/EMR are the controllable points. 

• Know the policy years that are used to calculate the XMOD/EMR.

5. Relationship With Your Carrier and Claims Professional 

The carrier claims professional who handles your injuries can have a huge impact on the outcome of the claim. If you are fortunate enough to have a dedicated claim adjuster assigned to your company, make it a point to call and introduce yourself before the first claim occurs.  The adjuster should have a very good understanding of:

• Your attitude and policy regarding return to work programs.

• The level of accident information they will receive from you.

• Who will be your company’s main contact throughout the claim process?

Consider these five best practices when handling your workers’ compensation claims to keep your XMOD/EMR under control and your workers’ compensation costs low.

Work Comp Unit Stat: The Meeting That Saves You Money

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

California business owners are aware that their experience modifier (XMOD) is published annually, roughly three to four months before the expiration of their current workers compensation policy term. However, more often than not, companies are missing an incredible opportunity to make an impact on the calculation of their XMOD by strategically evaluating their work comp claims prior to the most critical month in the XMOD calendar known as Unit Stat.

The Workers’ Compensation Insurance Rating Bureau (WCIRB) defines the process of receiving loss and payroll information by classification as the Unit Statistical Report. The information is reported to the WCIRB by insurance carriers at specific intervals based on your company’s policy effective date. The information is valued for the first time 18 months after the inception of your policy and every 12 months thereafter. 

A policy that incepts in January 2020 will be valued for the first time in July of 2021 (18 month mark). This information will remain in your XMOD calculation for the valuations at 30 months and 42 months.

Once this information has been received by the WCIRB, from the respective carriers, it cannot be altered or changed until the following year’s unit stat. Thus, you may have a positive outcome on an existing open claim (reserve reduction or closure) but not see the benefit until the following year. Revisions to the XMOD once published are limited to a few circumstances; more information about revisions can be found here.

The loss information, sent to the WCIRB from the insurance carriers, will be evaluated at the paid (closed claim) or reserved (open claim) amounts. Typically, a claim that has been open for longer than 18 months signifies severity, litigation, lost time, permanent disability, or a combination of the group. For this reason it is absolutely critical that as a part of your risk management process you execute a
pre-unit stat meeting.

• When should I schedule my Unit Stat meeting?

• What should I do at this meeting?

• Who needs to be involved?

• How will this meeting save me money?

As a client of Rancho Mesa, we build this meeting into your annual service plan and take care of engaging the parties who need to be involved for the betterment of your XMOD. 

Ready to learn more about Unit Stat? Join us for a complimentary 25-minute webinar where we will discuss the process in greater detail and take time for Q&A.

Still not sure if further learning is necessary, ask yourself these questions:

• Have you ever been surprised by your XMOD being higher than you would have thought?

• Have you ever had an XMOD above 1.00?

• Has your XMOD ever caused your premium to increase?

The webinar can be viewed on-demand by clicking the link below.

How To Lower Your Experience MOD by Understanding Your Primary Threshold

Author, Drew Garcia, NALP Program Director, Rancho Mesa Insurance Services, Inc. 

The Experience Modifier (i.e., experience MOD, MOD, XMOD, experience modification rating, EMR) weighs heavy on the calculation of your workers' compensation premium. With a MOD rating of 1.00 signifying unity  (i.e., the average for your industry), any MOD above 1.00 is considered adverse. Thus, any MOD below 1.00 is considered better than average. Higher MODs will debit the premium, resulting in higher workers' compensation premiums, while lower MODs will credit the premium, resulting in lower workers' compensation premiums.

How do I decrease my MOD to lower my workers compensation premium?

A few factors can be addressed to reduce the workers' compensation premium. The most important is the primary threshold. Each individual employer has their own primary threshold that is determined by the class of business they operate and the amount of field payroll they accrue over a three year period. The primary threshold is the point at which any claim maximizes its negative impact on the MOD. You must be sensitive to this number because any open claim with paid amounts under the threshold, provides an opportunity to save points to the MOD. Once a claim exceeds paid amounts over your threshold, it no longer can negatively impact your MOD. However, you would still want to monitor and manage these claims to ensure your injured employee is being provided attentive care and to maintain knowledge of your loss experience. 

Example

You’re a landscaping company and your primary threshold is $33,000. The most any claim can affect your MOD is $33,000 and the most points that any claim can add to your MOD is 13.
You have a claim open for $40,000 with paid amounts of $10,000 and reserved amounts of $30,000.

This claim will go into the calculation at $40,000 (Paid + Reserved) but because the total amount succeeds the primary threshold of $33,000, it will only show up on the rating sheet totaling $33,000 of primary loss and contribute 13 points to your MOD.

It would behoove you to analyze and monitor this open claim, because it has paid out amounts well below your primary threshold of $33,000.

If this same claim closes for a total paid amount of $22,000, the closed claim would go into your MOD at $22,000 with 8 points contributing to the MOD.

The difference between a $40,000 claim and a $22,000 claim is 5 points to your MOD, or, 5% to your premium!

Knowing your primary threshold is the most important piece of information when managing your XMOD. Fortunately, Rancho Mesa can help you manage your experience MOD by tracking your primary threshold and maintaining the other critical elements that go into establishing a sustainable low experience MOD.

For more information about lowering your experience MOD or a detailed analysis of your current MOD please reach out to Rancho Mesa.

Below is an example worksheet for Landscapers to determine the primary threshold.

Primary Threshold for Landscape Industry

Annual Landscape Payroll	2018 Primary Threshold	Max Points to MOD	Lowest MOD
$100,000	$5,500	53	.84
$250,000	$10,000	38	.75
$500,000	$15,500	30	.65
$1,000,000	$22,000	21	.56
$1,500,000	$26,000	17	.51
$2,000,000	$30,000	14	.47
$2,500,000	$32,000	12	.45
$3,000,000	$35,000	11	.42
$5,000,000	$41,000	8	.36
$10,000,000	$40,000	5	.30