California Insurance Commissioner Ricardo Lara has approved a regulatory filing that will change the premium threshold for employers to qualify for an experience modifier (X-Mod).
The approval was part of a larger regulatory filing the Workers’ Compensation Rating Bureau made to also change expected claims costs, eliminate a few class codes and make new rules for companies that operate multiple enterprises. The newly approved filing also updates expected claims cost rates for all of the state’s more than 500 worker class codes that are used to calculate workers’ comp rates. Here’s a rundown of the changes:
X-Mod change
Currently, the minimum premium an employer must pay annually to receive an X-Mod is $9,900, but that is falling to $9,500, starting Sept. 1. That means any employer that has an annual premium of $9,500 starting that date will be “experience rated,” meaning they will be assigned a number that indicates whether they have a claims history that is either above or below average.
The X-Mod is a number used by insurance companies to either discount or increase the premiums you pay for workers’ compensation insurance. It is based on your company’s workers’ comp claim history and reflects the most recent three years.
Multiple enterprises rule
The new rules also make changes to what is known as the “multiple enterprises rule.” Most businesses are single enterprises, with all operations that the company conducts described by a single workers’ compensation classification assignable to those operations.
But sometimes a company has two or more operations that perform work that would be classified differently. In those cases, the distinct operations shall be classified under the multiple enterprises rule.
In the new rule, separation is the key requirement. If distinct operations are physically separated, each distinct location shall be separately classified.
Separation can be separate operations:
- Located in separate buildings,
- Located on separate floors of a building, or
- Separated by walls if they are on the same floor.
On the other hand, if two or more of the distinct operations are not physically separated, then they must be assigned to the highest-rated classification applicable to the distinct operations conducted in the common workspace.
The new rule also addresses personnel that may float between multiple enterprises, performing different types of work at each operation.
Under the new rule, as the employee performs different tasks integral to each of the two entities, their work may be divided into two classifications. If an employer takes this route, they need to keep accurate and complete records supported by time cards or time book entries that show how much time they spent performing each distinct work task for each entity.
If the employer fails to keep those records, the entire pay of the worker will be assigned to the highest-rated classification applied to any part of the work the employee performs. The new rules also address miscellaneous employees that do a multitude of tasks across classifications that are not integral to the business operations. For such employees, they will be assigned the governing classification of their type of work. There are a number of classification groups that fall under a governing classification, such as construction.
The takeaway
Depending on if you have a high enough premium to qualify, having an X-Mod means you can track your experience rating so you know where you stand in terms of your workers’ compensation claims history. If it’s high, you can take steps to reduce workplace accidents at your facilities.
And if you have multiple locations with floating employees, you’ll need to meet with us to go over how the new changes would affect your policy. And as always, if you have questions, feel free to contact us at Shannon@vma.bz.