2009 Primary Loss Formula and Medical Only Deduction

2009 primary loss formula

For each claim, the actual primary loss is the first dollar portion of the claim costs. The actual primary loss 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 $20,112 the actual primary loss shall be determined from the formula:

Actual Primary Loss = (50,280 × total loss) ÷ (total loss + 30,168).

For each claim less than $20,112, 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. The excess actual loss has 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.

2009 medical only deduction

For any claim without disability benefits (such as 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 $1,790 or the total cost of the claim.

Examples of total, primary and excess loss

Examples of total, primary and excess loss
Total loss	Total loss (after deduction)	Primary loss	Excess loss
200	0	0	0
2,000	210	210	0
20,000	18,210	18,210	0
200,000	198,210	43,638	154,572

Note: The deduction, $1,790, is twice the average case incurred cost of these types of claims that occur during the three-year period used for experience rating. On average this results in reducing the average actual loss about seventy 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.