Benefits – Setnor Byer Insurance & Risk

Assignment of Insurance Benefits: How Will Florida’s AOB Reform Affect Floridians?

An assignment of insurance benefits (AOB) allows a vendor to collect insurance proceeds directly from the insurance company instead of the insured. Many are surprised to discover that AOBs are quite common. In fact, if you ever had property damage that required a construction contractor or water remediation company, you probably signed an AOB. Surprised?

In recent years, AOBs have become common in property insurance claims. A typical example involves a property owner (the “Assignor”) assigning benefits under a property insurance policy to a contractor, water remediation company or other vendor (the “Assignee”) who repairs the damaged property and bills the insurer for the work.

According to the Florida Office of Insurance Regulation (OIR), the increasing use and abuse of AOBs are negatively impacting Florida’s property insurance market. Property insurance claims have significantly increased in frequency and severity. Claims that involve an AOB are also more likely to end up in litigation. Why is this significant? In 2018, the average cost of litigated water claims was nearly $20,000 higher than non-litigated claims.

This year, when the OIR testified that continuing post-loss AOB abuse will result in higher premiums and fewer options as insurers exit the market, the Florida Legislature was listening. The result was sweeping statutory reform that should substantially change the future AOBs in Florida. This reform includes new laws designed to address the abuse of post-loss AOBs for property insurance claims by:

establishing requirements for AOB contracts (execution, validity, rescission, etc.);
capping the amount an Assignee (contractor, water remediation company, etc.) can receive under an AOB for emergency residential property insurance claims;
allowing insurance policies to limit or prohibit AOBs under certain conditions;
transferring certain pre-lawsuit duties under an insurance policy to the Assignee;
restructuring the statutory entitlement to attorney’s fees in litigated AOB claims; and
requiring insurance companies to report specific AOB claim data annually.

Will these reforms be effective? Will they stop the bad actors from abusing AOBs? Will they stop the good actors from providing critical services to Floridians who suffered property damage? It’s too soon to know, but time will tell.

In the coming weeks, we will be covering some of the more substantial changes made by the new AOB laws. Stay tuned!

Affordable Care Act: Will Your Group Health Plan be Affordable in 2019?

Unlike the Individual Mandate, the Affordable Care Act’s Employer Mandate isn’t going anywhere in 2019. Employers with 50 or more full-time and full-time equivalent employees will still have to offer “affordable” health coverage to avoid ACA penalties. But, there is a sliver of good news. Next year, employers will be able to increase the required employee contribution for coverage under their group health plans.

To satisfy the ACA’s initial affordability requirement, an employee’s required contribution for the lowest cost, self-only coverage could not be more than 9.5 percent of the employee’s household income. However, the initial affordability percentage is adjusted annually by the Internal Revenue Service. In 2019, the affordability percentage will be 9.86 percent.

When compared to prior years, the 2019 affordability adjustment represents the largest percentage increase under the ACA.

2014 9.5

2015 9.56

2016 9.66

2017 9.69

2018 9.56

2019 9.86

We can use the ACA’s affordability safe harbors to translate this percentage increase into dollars and cents. These safe harbors provide various methods for calculating the most an employer can charge employees for the lowest cost, self-only health coverage option without exceeding the ACA’s affordability threshold.

W-2 Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) who works 40 hours per week for 52 weeks in 2019 will be $123.91 (+ $3.77).
Rate of Pay Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) in 2019 will be $92.93 (+ $2.83).
Federal Poverty Line Safe Harbor. Based on the 2018 single individual FPL of $12,140, the maximum monthly contribution in 2019 will be $99.75 (+ $3.03).

These increases may be modest, but they can add up quickly for very large employers. They can also provide some much-needed wiggle room for employers teetering on the edge of unaffordability. The ultimate impact of the 2019 affordability percentage increase can be inconsequential or substantial. Employers will need to reevaluate their cost-sharing structure to find out.

Please contact us if you would like to learn more about ACA-compliant group health plans.

The Affordable Care Act: What Does President Trump’s Executive Order Mean for Employers?

It wasn’t long before campaign promises to repeal Obamacare became official White House policy. On his first day in office, President Trump issued an Executive Order stating that “it is the policy of my Administration to seek the prompt repeal of the Patient Protection and Affordable Care Act.” This clearly marks the beginning of a long period of uncertainty about the future of Obamacare. What isn’t so clear is how the President’s Executive Order will affect employers.

Let’s start by clarifying that the Executive Order did not amend or repeal the Affordable Care Act (ACA). Only an act of Congress can do that. Instead, President Trump essentially issued marching orders to the heads of executive agencies about how their ACA-related authorities and responsibilities must be exercised under his administration. As head of the Executive Branch, this is within the President’s authority.

Specifically, the President directed these executive agencies to exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any ACA provision or requirement that would impose costs, fees, taxes, penalties or regulatory burdens. Can a directive as simple as this really change the ACA?

No, it can’t change the law itself. What it can do is change how the ACA is interpreted and enforced. This is because Congress sometimes uses broad strokes to enact a law. It then empowers one or more federal agencies to fill in the details. When it comes to the ACA, Congress did this quite a bit.

For example, Congress gave various federal agencies, including the Department of Health and Human Services(HHS) and the Internal Revenue Service (IRS), the general authority to promulgate any rules and regulations that may be necessary or appropriate to carry out a number of ACA provisions. Congress also gave these agencies some very specific and significant authority.

Hardship Exemptions. Congress included a hardship exemption in the ACA so deserving individuals can avoid the penalty for failing to have health insurance. Congress authorized HHS to define and determine whether someone qualifies for a hardship exemption.
Large Employer Reporting Requirements. Congress required applicable large employers to furnish and file information reports detailing offers of health insurance coverage to full-time employees. Congress authorized the IRS to determine how these reports must be prepared and when they are due.
Reasonable Cause Waivers. Congress included a waiver provision in the ACA so employers showing reasonable cause could avoid the penalty for failing to comply with the ACA’s reporting requirements. Congress authorized the IRS to define and determine whether an employer qualifies for a reasonable cause waiver.
Large Employer Penalty. Congress created a penalty for applicable large employers failing to offer full-time employees a minimum level of health insurance coverage, which must be paid when the employer receives a notice and demand for payment. Congress made the IRS responsible for not only determining when payments would be due, but for sending the actual demand for payment.

As you can see, various executive agencies have quite a bit of power to affect how the ACA is interpreted, applied and enforced. This power was given to them by Congress when the ACA was enacted. The Executive Order merely directs how these agencies must exercise the authorities and powers they already had under the ACA.

However, there are limits to this power. Formal rule and regulatory changes should be subject to the Administrative Procedure Act’s notice and publication requirements. This process can take months, possibly years. There may be a bit more flexibility when it comes to less-than-formal agency actions, but there are still statutory and constitutional limits that cannot be exceeded.

How far will President Trump and the executive agencies take the Executive Order to push their agenda? How far will opponents let them go before pushing back? How will the courts rule if (when) lawsuits are filed? The only thing we know for sure is that change is coming.

Setnor Byer Insurance & Risk is committed to guiding you through the constantly developing health care landscape. Check back with us periodically for future informational updates about the Affordable Care Act or contact us if you would like to discuss how we can help you comply with health care reform.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Is Your Business Ready for New FLSA White-Collar Overtime Rules?

Over two years ago, the possibility of new overtime rules for white-collar employees under the Fair Labor Standard Act (FLSA) first appeared on the horizon. Last year, the Department of Labor (DOL) released proposed revisions to overtime exemption regulations, including those for executive, administrative and professional employees. Today, that once looming possibility is looking more like a fast approaching reality. Fast, as in possibly by mid-July, fast.

On March 14, 2016, the DOL submitted its final version of the revised overtime exemption regulations to the White House’s Office of Management and Budget (OMB) for review. Once the OMB completes its review, the final regulations will be published. After that, it’s just a matter of time. Unfortunately, there are some details we still don’t know about the final regulations. Minor details, really, like what they are or when they will go into effect.

What will be different under the final regulations?

No one really knows. The final regulations will not be made public until the OMB completes its review, and few details have leaked or been disclosed. Many expect the final regulations to be identical or very similar to the proposed regulations issued in July 2015, including the DOL’s proposal to:

Increase the minimum salary requirement for white collar exemptions from $455 per week ($23,660/year) to $921 per week ($47,892/year);
Increase the minimum compensation requirement for the Highly Compensated Employee exemption from $100,000 to $122,148 per year; and
Automatically update the new minimum salary and compensation levels annually.

It’s possible that the final regulations may include additional changes, particularly the duties test used to determine eligibility under the current white-collar exemptions . In the proposed regulations, the DOL asked for comments about whether changes need to be made to the duties tests. Though the DOL specifically stated that it’s not proposing any specific regulatory changes to the duties test, we don’t know for sure.

When will the final regulations become effective?

This is also uncertain, but it may be sooner than initially expected. The Solicitor of Labor has indicated that the effective date of the final regulations will be 60 days after publication. But, before they can be published, they must be reviewed. The OMB generally has 90 days to review regulations, which would put the deadline near the middle of June. However, because of the upcoming election, the middle of May is probably the OMB’s real deadline. Here’s why.

Under the Congressional Review Act (CRA), Congress is generally given 60 days to review and disapprove a major rule, like the DOL’s new overtime exemption regulations. However, the CRA makes an exception for “midnight rules” that are issued toward the end of an administration. If a rule is issued too late, the 60-day review period essentially resets to give the next session of Congress an opportunity to review and disapprove the rule.

The current administration does not want this to happen, so the OMB must complete its review before the date on which the CRA’s reset provision is triggered. Otherwise, the new overtime exemption regulations would be at the mercy of the next Congress and a new president.

According to calculations by the Congressional Research Service, this date is estimated to be May 16, 2016.

This date was estimated using projected congressional schedules, so it may change. Nevertheless, if we assume the final regulations are published by May 16, 2016, and add 60 days, the new regulations could become effective around July 15, 2016, maybe even sooner!

Or, maybe later. On March 17, 2016, the Protecting Workplace Advancement and Opportunity Act was introduced as a bill. If passed, this law would essentially void any changes made to the white-collar overtime exemptions. Before proposing any new changes, the law would also require the DOL to undertake a comprehensive analysis of how changing overtime regulations would impact employers, including small businesses.

In the meantime, potentially significant changes to overtime pay requirements for white-collar employees may soon be here. How can employers prepare? Unfortunately, plans cannot be finalized until the final regulations are released, but employers can use the July 2015 proposed regulations as a guide to begin developing preliminary plans. In case there are any surprises, these plans should be flexible and capable of adapting to possible contingencies.

The risk of employment-related lawsuits, particularly those involving overtime under the FLSA, is nothing new for employers. But, the prospect of new rules, and their uncertainty, is expected to increase that risk significantly. Employment Practices Liability Insurance can protect against various employment-related claims, and limited coverage for wage and hour claims may also be available.

Please contact us if you would like to learn more about protecting your business with employment practices liability insurance.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Supreme Court Requests Compromise Options in ACA Contraception Case

In Zubik v. Burwell, the U.S. Supreme Court is considering whether the rights of religiously affiliated nonprofit organizations are violated by the Affordable Care Act’s contraceptive-coverage mandate. Given the sensitive, often contentious issues raised in this case, the public is anxiously awaiting the Court’s decision. However, many were surprised when less than a week after hearing oral arguments, the Court ordered the parties to provide potential compromise solutions.

The ACA generally requires group health insurance plans to cover preventive care and screenings for women without cost sharing elements (copayment, coinsurance, deductible), including all contraceptive methods approved by the Food and Drug Administration. Though generally mandatory for nonprofit employers with no religious affiliation and for-profit employers that are not closely-held (the Hobby Lobby case), religious and religiously affiliated employers can avoid the contraceptive-coverage mandate, either by exemption or accommodation.

Exemption. Federal regulations authorize an exemption for nonprofit religious employers, including churches and their integrated auxiliaries. These employers are not bound by the contraceptive-coverage mandate. Their employees and dependents do not have guaranteed contraceptive coverage.
Accommodation. Religiously affiliated nonprofit corporations may obtain an accommodation that relieves them from complying with the mandate. These employers must notify their insurance company, third-party administrator or the Department of Health and Human Services of their religious objections to providing insurance coverage for contraceptives.

Under the ACA, religious employers are exempt from the mandate, but religiously affiliated employers must take steps to obtain an accommodation. Nevertheless, these employers are not required to contract, arrange or pay for contraceptive coverage. According to the Secretary of Health and Human Services (Burwell), the regulatory process to obtain an accommodation does not substantially burden religiously affiliated employers seeking to avoid the mandate.

Though some of the employers in Zubik are entitled to an accommodation, they argue that the process itself violates their sincerely held religious beliefs. According to these employers, complying with the regulatory mechanism to obtain an accommodation would make them “complicit in providing contraceptive coverage” in violation of their religion.

The passing of Justice Scalia leaves only eight justices to decide this case. Many believe they are evenly divided. In the event of a 4-4- tie, the lower court rulings would remain intact, which could lead to inconsistent application of the law nationally because the Zubik case is actually a consolidation of several different cases from across the country. Perhaps this explains why the Court issued an order directing the parties to discuss ways to reach an acceptable compromise.

We may never know for sure why the Court did this, but it will be interesting to see if this exercise produces any results. Fortunately, we shouldn’t have to wait long because the Court didn’t give the parties much time. All briefs must be filed by April 20, 2016.

Stay tuned…

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care landscape. In addition to our other valuable risk management solutionse, Setnor Byer Insurance & Risk has an online tool to help clients complete their ACA information reports.

Please contact us if you have any questions or would like to discuss how we can help you comply with health care reform.

Is Telemedicine Right For You?

Telemedicine generally refers to the practice of using telecommunications technologies (phone, Internet, etc.) to diagnose and treat patients, and in case you haven’t noticed, it’s come a long way. Consider this:

The Centers for Medicare & Medicaid Services describes telemedicine as a cost-effective alternative to providing medical care.
The American Medical Association says telemedicine is a key innovation that can maintain patient safety, improve access to health care and control costs.
Industry analysts expect significant growth in the telemedicine market over the next few years.

Employers are taking notice of the benefits of telemedicine. According to a recent survey, 22% of large U.S. employers currently offer telemedicine services to employees as a low-cost alternative to doctor office visits for non-serious medical issues; 37% expect to begin doing so in 2015.

A primary benefit of telemedicine is fewer unscheduled absences by employees needing to see or take their child to a doctor for non-serious medical issues. Research shows that a majority of doctor visits are unnecessary. A cough, for example, can often be treated safely and effectively with telemedicine. (According to the Centers for Disease Control and Prevention, the most frequent reason for going to the doctor is…a cough.)

Employers offering telemedicine services also benefit from:

Healthier employees
Fewer employee sick days
Increased productivity
Measureable reduction in health care (insurance) costs

Telemedicine service plans are typically structured as discount card programs. These plans are not insurance and should not be considered a substitute for health insurance. Employers considering a telemedicine program should work with a reputable broker to find the right plan and avoid those trying to take advantage of a rapidly growing market.

At Setnor Byer Insurance & Risk, we make it easy to:

Evaluate options
Find the best solution
Obtain competitive pricing
Implement and integrate a new plan into existing benefit programs

If you would like more information, please contact us.

Are You Ready for the New Affordable Care Act Reporting Requirements?

The Affordable Care Act (ACA) requires Applicable Large Employers (ALEs) with 50 or more full-time or full-time equivalent employees to file information returns with the Internal Revenue Service and provide statements to their full-time employees about employer-offered health insurance coverage. This information will be used to administer the ACA’s employer shared responsibility provisions (employer mandate) and to determine whether an employee is eligible for the premium tax credit.

Filing Forms (Drafts)

In 2014, the IRS released non-final draft versions of two forms that ALEs can use to satisfy these reporting requirements.

Form 1095-C (Employer-Provided Health Insurance Offer and Coverage)
Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns)

Filing Deadlines

ALEs must file these forms with the IRS on or before February 28 (March 31 if filed electronically) of the year immediately following the calendar year for which the offer of coverage information is reported. For calendar year 2014, there is no filing requirement. For calendar year 2015, these forms must be filed by February 29, 2016 (or March 31, 2016 if filed electronically).

ALEs must also furnish a Form 1095-C to each full-time employee by January 31 of the following year. The first Forms 1095-C are due to these individuals by February 1, 2016.

Form 1095-C

ALEs must file a Form 1095-C (or a substitute form) for each employee who was a full-time employee for any month of the calendar year. This form is used to report specific health insurance coverage information for each full-time employee to the IRS, such as:

which months the employee was a full-time employee
any offers of health coverage that meet the minimum value standard made to the employee and family members each month
the employee’s share of the monthly premium for the lowest-cost insurance that offers minimum value health coverage
whether any safe harbors are applicable to the employee
whether the employee was enrolled in the plan

Form 1094-C

ALEs must use Form 1094-C to transmit its Forms 1095-C to the IRS. A Form 1094-C must be attached to any Forms 1095-C filed by an ALE. One transmittal form can be used to cover all Forms 1095-C filed by an ALE or multiple transmittal forms can be used. The information reported with this form includes:

the total number of Forms 1095-C submitted with this particular transmittal
the total number of Forms 1095-C that will be filed by the ALE
whether the ALE is a member of an aggregate group (multiple employers treated as a single employer)
whether special rules or transition relief apply to the ALE

Though these ACA reporting forms are not due until 2016, large employers cannot wait until the last minute. Given the technical nature and complexity of the new ACA reporting requirements, legal and tax professionals should be consulted when preparing any forms filed with the IRS.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the health care reform process. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Understanding Excepted Benefits Under the Affordable Care Act

Many employers offer benefits packages that provide employees with more than just health insurance coverage. Though some of these benefits, like pre-paid legal service plans, are clearly not health-related, others may provide employees with some health-related benefits. Does this mean they are subject to the Affordable Care Act’s health insurance market reforms? Not necessarily.

Certain types of benefits, due to their nature, are not subject to a number of health-related laws, including the Affordable Care Act, the Health Insurance Portability and Accountability Act, the Mental Health Parity Act and the Genetic Information Nondiscrimination Act. These are known as excepted benefits.

There are four categories of excepted benefits.

Benefits Excepted In All Circumstances

The following benefits, or any combination thereof, are considered excepted benefits in all circumstances:

Coverage only for accident (including accidental death and dismemberment)
Disability income coverage
Liability insurance, including general liability and automobile insurance
Coverage issued as a supplement to liability insurance
Workers’ compensation or similar coverage
Automobile medical payment insurance
Credit-only insurance (for example, mortgage insurance)
Coverage for on-site medical clinics

Limited Excepted Benefits

A number of benefits may be considered excepted benefits if they are provided under a separate policy, certificate or contract of insurance. They can also qualify as a limited excepted benefit if they are not an integral part of a group health plan, which means that participants may decline coverage or that claims for benefits are administered under a separate contract than claims for any other benefits under the plan.

One or more of the following benefits may qualify as a limited excepted benefit:

Limited-scope dental benefits
Limited-scope vision benefits
Long-term care benefits
Health flexible spending arrangements
Employee assistance programs (EAPs)

Noncoordinated Excepted Benefits

Coverage for only a specified disease or illness, such as a cancer-only policy, may qualify as a noncoordinated excepted benefit. Hospital indemnity or other fixed indemnity insurance may also qualify if it pays a fixed dollar amount per day (or per other period) of hospitalization or illness regardless of the amount of expenses incurred.

To qualify as a noncoordinated excepted benefit:

Benefits must be provided under a separate policy, certificate or contract of insurance;
There is no coordination between the benefits provided and an exclusion of benefits under any group health plan maintained by the same employer; and
Benefits are paid regardless of whether benefits are provided under any group health plan maintained by the same employer.

Supplemental Excepted Benefits

The following benefits may qualify as supplemental excepted benefits if they are provided under a separate policy, certificate or contract of insurance:

Medicare supplemental health insurance (Medigap or MedSupp insurance);
Coverage supplemental to the managed health care program established by the Department of Defense (TRICARE); and
Similar supplemental coverage specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles, but which does not include coverage that becomes secondary or supplemental only under a coordination-of-benefits provision.

Excepted benefits must satisfy a number of specific requirements set forth in the federal regulations. Employers should consult a knowledgeable and licensed professional before taking action or making changes to their benefits packages.

If you would like more information about excepted benefits or would like to see how Setnor Byer Insurance & Risk can help with your employee benefits package, contact us.

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Employee Assistance Programs under the Affordable Care Act

Employee Assistance Programs (EAPs) are designed to help employees prevent, identify and resolve various personal issues and matters. Many employers include EAPs in their benefits packages to enhance employee effectiveness and maintain workplace productivity. In addition to providing benefits like pre-paid legal, crisis intervention or professional development services, EAPs commonly provide health-related benefits, such as mental health, substance abuse and wellness services. Does this mean that they must comply with the Affordable Care Act?

According to final regulations issued by the Departments of Labor, Treasury and Health & Human Services on October 1, 2014, the answer is…maybe.

If an EAP qualifies as an excepted benefit, it will generally be exempt from the ACA’s requirements. Otherwise, the EAP must incorporate the market reforms mandated by the ACA, such as no lifetime or annual limits. Under the final regulations, an EAP must satisfy four requirements to qualify as an excepted benefit.

The EAP cannot provide significant benefits in the nature of medical care.

The amount, scope and duration of services are considered when determining whether an EAP meets this requirement. For example, an EAP that provides only limited, short-term outpatient counseling to substance abusers without requiring prior authorization or review for medical necessity, will not be considered an EAP that provides significant benefits in the nature of medical care. Alternatively, EAPs providing disease management services (lab testing, counseling, prescription drugs, etc.) for chronic conditions, such as diabetes, do provide significant benefits in the nature of medical care.

The Departments may provide additional clarification in the future regarding when a program provides significant benefits in the nature of medical care.

Benefits provided by the EAP cannot be coordinated with benefits under another group health plan.

This requirement has two elements:

Participants in the other group health plan must not be required to use and exhaust benefits under the EAP (making the EAP a “gatekeeper”) before becoming eligible for benefits under the other group health plan.
Eligibility for EAP benefits must not be dependent on participation in another group health plan.

Employee premiums or contributions cannot be made a condition of participation in the EAP.
The EAP cannot impose any cost-sharing requirements (co-pay, etc.).

These final regulations apply to group health plans with plan years beginning on or after January 1, 2015. Until then, the Departments will consider EAP benefits meeting the conditions of the 2013 proposed regulations or these final regulations to qualify as excepted benefits.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the ACA’s market reforms. Check back with us periodically for future informational updates about the Affordable Care Act.

If you have specific questions about the ACA or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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How Can Safety Reduce Workers’ Compensation Insurance Premiums?

Workers’ compensation insurance provides indemnity and medical benefits to employees injured on the job. Many states, including Florida, set the premiums for workers’ compensation insurance, so shopping around isn’t the way to save money. However, employers can reduce their workers’ compensation insurance premiums by maintaining a safe workplace

Insurance companies prefer safe workplaces because there are presumably fewer claims to pay. They encourage employers to maintain a safe workplace by using experience modification ratings to adjust premiums. Employers with fewer claims are rewarded with premium credits, and employers with more claims may face increased premiums.

The experience modification rating, or experience mod, is designed to tailor the final premium to an employer’s actual claims experience. An employer’s actual workers’ compensation claims experience, typically over a three year period, is compared to other employers operating in the same type of business with a similar number of employees.

If an employer’s claims experience is consistent with the industry average, the experience mod is 1.0, which when multiplied by the base premium, will not increase or decrease the premium. If the claims experience is 25% better than the industry average, the experience mod will be .75, which when multiplied by the base premium, will decrease the premium by 25%. Alternatively, if the claims experience is 25% worse, the experience mod will be 1.25, which will increase the premium by 25%.

The experience mod gives more weight to accident frequency than to accident severity. In other words, an employer with one loss totaling $100,000 will have a better experience mod than an employer with 10 losses totaling $100,000. Since any single injury could have astronomical costs, an employer with a higher frequency of small claims is considered a greater risk than an employer with a single, expensive claim.

Medical-only claims do impact the experience modification as much as indemnity claims, so employers are not necessarily penalized when they occur. However, the existence of open or unresolved claims can negatively impact the experience mod, so employers benefit from getting claims resolved and closed.

Insurers may offer dividend payments to employers with few or no claims. Dividends, which are generally reserved for the most attractive risks, are usually based on a sliding scale wherein the amount of the dividend decreases as the number of claims increases. Rather than focus on the most generous dividend percentage, employers should compare dividend percentages that comport with their specific claims history.

Employers can reduce their workers’ compensation insurance premiums by taking advantage of the experience modification rating system. Though it requires a commitment to workplace safety and loss control, the savings could be significant. Given the complexity, employers should work with an insurance agent who knows about the experience modification rating system and available dividend plans, and who can ensure claims are treated appropriately and resolved quickly.

If you would like more information about workers’ compensation insurance or how Setnor Byer Insurance & Risk can help control your workers’ compensation insurance costs, please contact us.