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2007 experience rating changes
There are two major changes to the experience rating system for 2007:
- The credibilities used in the formula have been improved.
- Deductions have been applied to the cost of actual Medical Only claims.
Changing the credibilities
The credibilities are the weights applied to a firm's actual losses in the experience rating formula.
The credibilities were revised based on a statistical study of Washington State data in order to improve the accuracy of the rates being charged. For larger firms credibility was reduced and for smaller firms the credibility was increased.
This improvement will result in assessed premiums more closely reflecting the expected future claim costs, thereby reducing subsidies. For smaller firms, the new credibilities also help to reduce the transition when firms that were previously without a compensable claim have their first compensable claim.
Reducing Subsidies
Examples showing how the new experience factors help to reduce subsidies among firms.
Reducing the Transition Between the Two Experience Rating Systems
Discusses how the new plan helps to reduce the transition when firms that were previously without a compensable claim have their first compensable claim.
Medical-Only deduction
Medical-Only claims are non-fatal claims with no timeloss or permanent disability awards.
For Medical-Only claims an amount ($1,510 in 2007) equal to twice the average Medical-Only claim cost will be deducted from the loss amount before beginning any other calculations on the claim.
This will help reduce the transition when firms that were previously without a compensable claim have their first compensable claim. It will also reduce the effect of Medical-Only claims on the regular experience factor calculation.
