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Closed Claims and Adjustments to Your X-Mod

So, you have a workers’ comp claim that’s been growing in terms of costs for the last two years, and finally it has closed.

You’ve been fretting about its impact on your experience modification factor (X-Mod), so now that it’s closed, what happens?

Under the Closed Claims rule of the Workers’ Compensation Insurance Rating Bureau, an experience modification may be subject to revision whenever claims that were used in calculating the experience mod are reported as closed, meaning that no more payouts will be made on the claim.

The WCIRB uses the amount your insurance company has reserved for a particular claim, not the actual payouts to date. In many cases you will find that, on an open claim, the insurance company may have paid out $5,000 to date, but may have $15,000 in total reserved, meaning they estimate the payouts might reach that point some day.

Check with us to make sure your insurance company is closing claims in the system. Once the claim is closed out, then the experience mod will use the sometimes lower actual rather than the reserved number.

If the aggregate value of all closed claims used in calculating your X-Mod is valued collectively at an amount that is less than 60% of the aggregate of the highest value at which each closed claim was previously used in a rating, then the experience rating may be revised downward using the most current reported values.

The good news is that X-Mods will not be revised pursuant to the Closed Claims rule if it results in an increase to the experience modification.

When a claim is first reported by an insurer as closed on a unit statistical report, the WCIRB automatically reviews the policyholder’s current and two immediately preceding X-mods to determine if they should be revised pursuant to the Closed Claims rule. As necessary, revised experience modifications are automatically published and the insurer is notified.

Finally, remember that X-Mods are calculated looking back over a three-year period, and the last year is not included. So, for a renewal date of Jan 1, 2014, your experience mod probably includes claims from Jan. 1, 2010 to Dec. 31, 2012.

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