Washington Administrative Code › Title 296 - Labor and Industries, Department of › Chapter 296-17 - General reporting rules, audit and recordkeeping, rates and rating system for Washington workers' compensation insurance › Section 296-17-855 - Experience modification

Current through Register Vol. 24-14, July 15, 2024
The basis of the experience modification shall be a comparison
				of the actual losses charged to an employer during the experience period with
				the expected losses for an average employer reporting the same exposures in
				each classification. The comparison shall contain actuarial refinements
				designed to weigh the extent to which the actual experience is credible, due
				consideration being given to the volume of the employer's experience. Except
				for those employers who qualify for an adjusted experience modification as
				specified in WAC
				296-17-860 or
				296-17-865, the experience
				modification factor shall be calculated from the formula:
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				to view image
The meaning and function of each term in the formula is
				specified below.
For each claim, the actual primary loss is the first dollar
				portion of the claim costs, which has been shown in actuarial studies, to have
				the greater credibility in predicting future experience. These amounts are
				summed over all claims. For each claim in excess of $25,170 the actual primary
				loss shall be determined from the formula:
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				to view image
For each claim, less than $25,170 the full value of the claim
				shall be considered a primary loss.
For each claim, the excess actual loss is the remaining portion
				of the claim costs, which have been shown in actuarial studies to have less
				credibility in predicting future experience. The excess actual loss for each
				claim shall be determined by subtracting the primary loss from the total loss.
				These amounts are summed over all claims.
For any claim without disability benefits (time loss, partial
				permanent disability, total permanent disability or death) either actually paid
				or estimated to be paid, the total actual losses for calculating the primary
				loss and excess loss shall first be reduced by the lesser of $3,670 or the
				total cost of the claim. Here are some examples for these claims:
Total Loss
Type of Claim
Total Loss (after deduction)
Primary Loss
Excess Loss
2,000
Medical Only
0
0
0
5,000
Medical Only
1,330
1,330
0
5,000
Timeloss
5,000
5,000
0
30,000
Medical Only
26,330
25,853
477
30,000
Timeloss
30,000
27,861
2,139
90,000
PPD
90,000
44,327
45,673
150,000
PPD
150,000
50,269
99,731
500,000
TPD Pension
405,520
57,562
347,958
2,000,000
TPD Pension
405,520
57,562
347,958
Note:
The deduction, $3,670, is twice the average case
						  incurred cost of these types of claims occurring during the three year period
						  used for experience rating. On average this results in reducing the average
						  actual loss about 70 percent for these types of claims adjusted. This is done
						  to help make the transition between the two different experience rating methods
						  better by helping make the change in experience factor reasonable for small
						  changes to the actual losses.
For each employer, the primary credibility and the excess
				credibility determines the percentage weight given to the corresponding actual
				primary losses and the actual excess losses, included in the calculation of the
				experience modification, based on the volume of expected losses. Primary
				credibility and excess credibility values are set forth in Table II.
An employer's expected losses shall be determined by summing
				the expected loss for each of the three years of the experience period, which
				are calculated by multiplying the reported exposure in each classification
				during the year by the corresponding classification expected loss rate and
				rounding the result to the nearest cent. Classification expected loss rates by
				year are set forth in Table III.
Expected losses in each classification shall be multiplied by
				the classification "Primary-Ratio" to obtain "expected primary losses" which
				shall be rounded to the nearest cent. Expected excess losses shall then be
				calculated by subtracting expected primary losses from expected total losses
				rounded to the nearest cent. Primary-Ratios are also set forth in Table
				III.
Statutory Authority:
				  RCW
				   51.16.035,
				  51.32.073,
				  51.08.010, and
				  51.04.020(1).
				  12-24-048, § 296-17-855, filed 11/30/12, effective 1/1/13; 11-24-026,
				  § 296-17-855, filed 12/1/11, effective 1/1/12. Statutory Authority:
				  RCW
				   51.16.035,
				  51.32.073,
				  51.18.010, and
				  51.04.020(1).
				  11-04-069, § 296-17-855, filed 1/28/11, effective 2/28/11; 09-24-086,
				  § 296-17-855, filed 11/30/09, effective 1/1/10; 08-24-074, §
				  296-17-855, filed 12/1/08, effective 1/1/09; 07-24-046, § 296-17-855,
				  filed 12/1/07, effective 1/1/08; 06-24-054, § 296-17-855, filed 12/1/06,
				  effective 1/1/07. Statutory Authority:
				  RCW
				   51.04.020,
				  51.16.035, and
				  51.32.073. 05-23-162, §
				  296-17-855, filed 11/22/05, effective 1/1/06; 04-24-025, § 296-17-855,
				  filed 11/23/04, effective 1/1/05. Statutory Authority:
				  RCW
				   51.04.020,
				  51.16.035,
				  51.32.073, and
				  51.18.010. 03-24-066, §
				  296-17-855, filed 12/1/03, effective 1/1/04. Statutory Authority:
				  RCW
				   51.16.035,
				  51.32.073,
				  51.18.010, and
				  51.04.020(1).
				  02-24-029, § 296-17-855, filed 11/27/02, effective 1/1/03. Statutory
				  Authority:
				  RCW
				   51.04.020,
				  51.16.035,
				  51.32.073,
				  51.18.010. 01-23-061, §
				  296-17-855, filed 11/20/01, effective 1/1/02; 00-23-101, § 296-17-855,
				  filed 11/21/00, effective 1/1/01. Statutory Authority:
				  RCW
				   51.16.035,
				  51.04.020. 00-14-052, §
				  296-17-855, filed 7/1/00, effective 7/1/00. Statutory Authority:
				  RCW
				   51.04.020,
				  51.16.035 and
				  51.32.073. 99-24-055, §
				  296-17-855, filed 11/29/99, effective 12/31/99; 98-24-094, § 296-17-855,
				  filed 12/1/98, effective 1/1/99; 97-24-062, § 296-17-855, filed 12/1/97,
				  effective 1/1/98; 96-24-063, § 296-17-855, filed 11/29/96, effective
				  1/1/97. Statutory Authority:
				  RCW
				   51.04.020. 95-23-080, § 296-17-855,
				  filed 11/20/95, effective 1/1/96; 94-24-007, § 296-17-855, filed 11/28/94,
				  effective 1/1/95; 93-24-114, § 296-17-855, filed 12/1/93, effective
				  1/1/94. Statutory Authority:
				  RCW
				   51.04.020(1) and
				  51.16.035. 93-12-093, §
				  296-17-855, filed 5/31/93, effective 7/1/93; 92-24-063, § 296-17-855,
				  filed 11/30/92, effective 1/1/93; 91-24-053, § 296-17-855, filed 11/27/91,
				  effective 1/1/92; 90-24-042, § 296-17-855, filed 11/30/90, effective
				  1/1/91; 89-24-051 (Order 89-22), § 296-17-855, filed 12/1/89, effective
				  1/1/90. Statutory Authority:
				  RCW
				   51.16.035 and
				  51.04.020. 88-24-012 (Order
				  88-30), § 296-17-855, filed 12/1/88, effective 1/1/89. Statutory
				  Authority:
				  RCW
				   51.16.035. 87-24-060 (Order 87-26), §
				  296-17-855, filed 12/1/87, effective 1/1/88. Statutory Authority:
				  RCW
				   51.04.020(1) and
				  51.16.035. 86-24-042 (Order
				  86-41), § 296-17-855, filed 11/26/86. Statutory Authority:
				  RCW
				   51.16.035. 85-24-032 (Order 85-33), §
				  296-17-855, filed 11/27/85, effective 1/1/86; 84-24-016 (Order 84-23), §
				  296-17-855, filed 11/28/84, effective 1/1/85; 83-24-017 (Order 83-36), §
				  296-17-855, filed 11/30/83, effective 1/1/84; 82-24-047 (Order 82-38), §
				  296-17-855, filed 11/29/82, effective 1/1/83; 81-24-042 (Order 81-30), §
				  296-17-855, filed 11/30/81, effective 1/1/82; 80-17-016 (Order 80-23), §
				  296-17-855, filed 11/13/80, effective 1/1/81. Statutory Authority:
				  RCW
				   51.04.030 and
				  51.16.035. 79-12-086 (Order
				  79-18), § 296-17-855, filed 11/30/79, effective 1/1/80; Order 77-27,
				  § 296-17-855, filed 11/30/77, effective 1/1/78; Order 74-40, §
				  296-17-855, filed 11/27/74, effective 1/1/75; Order 73-22, § 296-17-855,
				  filed 11/9/73, effective 1/1/74.