2024 NCCI Mod Calculation Changes
Get ready! Adjustments have been made to how the NCCI calculates your mods.
Depending on the state where your business operates, these new factors could significantly influence your current and future mods.
Per the NCCI - 2024 Mod Changes
“The NCCI periodically evaluates its plan methodology and performance. During the latest review, NCCI identified some opportunities to improve plan performance, with revisions that will result in:
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A more accurate and predictive experience rating modification
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Experience rating modifications that reflect a more equitable determination of primary and excess losses across states with varying cost levels
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More comparable Plan performance in states with claim costs that vary significantly from the countrywide average
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Experience rating modifications less sensitive to large outlier claims without sacrificing predictive accuracy
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More consistent calculation of each employer’s expected claim count, which is expected to result in more appropriate credibility being assigned to each employer’s loss experience
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Recalibrated credibility parameters underlying the weight and ballast values to increase equity across employers
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The elimination of complex calculations where no value is added”
https://www.ncci.com/Articles/Pages/II_ER-Methodology-Filing-Summary.aspx
So, what does this mean for you?
The one change we are going to focus on is the Actual Primary Losses cap amount. Depending on the state where you do business, the cap could be reduced or increased thus putting upwards or downwards pressure on your 2024 and future mods.
The following will explain how your reported claims are used in your NCCI Mod Calculation and the impact an increase in the Actual Primary Losses will have on your 2024 and future NCCI mods and premiums.
How do your claims impact your NCCI Mod Calculation?
Each reported claim is divided when used in the NCCI mod calculation.
If a company had one claim valued at $85,000, this claim amount would be entered on:
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Section H: Actual Incurred Losses (on the mod). – Would reflect the total amount of the $85,000 Claim.
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Section I: Actual Primary Losses allocates the first $18,500 of each claim. This has now changed in 2024.
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Depending on the state you do business in, the cap amount could increase or decrease, which can impact your mods. The higher the cap, the additional upwards pressure is put on your mod.
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This part of the calculation carries the most “weight”, or impact, thus applying upward pressure to your mod.
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Section F: Actual Incurred Expected losses then allocates the remaining claim amount of $66,500.
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This part of the calculation carries less weight or impact on your mod.
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Example Below: IL Construction Company using 2023 Illinois factors
In this second example, 2024 factors are applied.
In this third example, 2024 factors are applied
Single Claim Valued at $85,000 vs. Two Claims Valued at $85,000
One $85,000 claim vs two claims valued at $85,000 increased the mod by 14 points.
Note: For those states that issued a lower Actual Premium Loss Cap of $18,500 starting in 2024, it will put “downwards” pressure on the mods.
The NCCI has a webinar available on this subject: https://www.ncci.com/LearningCenter/Pages/LC_Webinar-ER-Plan-Methodology-Update.aspx