For the first time since 2010, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) is changing the formula for calculating experience modifications, effective January 1, 2017. This could impact your Workers’ Compensation premiums.

What is an Experience Modification?

Experience rating is a method that compares an employer to other companies in its industry class based on their historical claims experience. It is expressed as a percentage—called an experience modification factor, or “Ex Mod”—and utilizes past loss experience to help predict future losses. The Ex Mod is applied against premium and either penalizes a company (if its loss experience is worse than the industry average) or rewards it (if its loss experience is better than the industry average). Experience modifications create a powerful incentive for employers to prevent claims and control claims costs.

How is it Currently Calculated?

The experience modification rating process uses what is known as a split point of $7,000. An insured’s actual losses below $7,000 are considered primary and go into the formula at full value. Losses above the split point (to a maximum of $175,000) are considered excess losses and have less weight in the formula. Dividing losses into primary and excess components gives greater weight to loss frequency, which is typically more controllable by the employer, than to loss severity, which is typically caused by less predictable catastrophic claims. The current formula, in effect since 2010, is a one-size-fits-all approach for all employers regardless of company size.

How will it be Calculated Starting January 1, 2017?

WCIRB found that the pattern of claim frequency and severity in California has changed over time, and the single $7,000 fixed split point was “no longer producing optimal results.” On January 1, 2017 it will be implementing a variable split point methodology where, depending on the size of the employer, there will be 94 different primary loss split points between $7,000 and $75,000. Losses above an insured’s split point will no longer be used in the experience modification calculation. The overall effect of the change will be to give greater weight to claims frequency while claims severity, although still a factor, will be limited at no more than $75,000.

What is the Potential Impact?

The WCIRB states: “While the variable split point plan represents a fundamental change in the values used to calculate experience modifications, there is no expectation that experience modifications for California employers as a whole (emphasis added) will change.” However, each individual insured’s experience modification will be dependent not only on its losses, but also on its size. Under the new formula, insureds whose split points increase above the current $7,000 level will have a greater amount of their losses designated as primary and will be more negatively affected by frequency than severity.  This in turn could lead to an increase in their Ex Mod. On the positive side, the $75,000 excess cut off limits the impact of catastrophic losses which should especially benefit smaller employers.

This article was first published by Captive Review, and written by Richard Cutcher.

 

California-based Ascension Insurance Services is expecting to add a second cell to its segregated portfolio company (SPC) in the Cayman Islands.

Captive Review reported in February 2015 AARIS Insurance Company SPC, owned by Ascension Insurance Services, had formed the jurisdiction’s first portfolio insurance company (PIC) – AGG 1 PIC.

Legislation enabling PICs, comparable to incorporated cell companies (ICCs) in Guernsey, came into effect in January 2015.

“We were up against a tight deadline because the renewals for the members were in February and the legislation was only passed the month before,” Paul Tamburri, west coast risk management practice leader at Ascension Insurance Services, told Captive Review.  “We had to get the fronting in place and ensure the carrier understood they were now contracting with the PIC rather than AARIS.”

When AGG 1 PIC was established it originally had 13 members.  That has since grown to 15.  All members are agriculture businesses with California or Arizona risks writing workers’ compensation.

The rush to find a solution for the original 13 members came about after the owners of a separate Bermuda segregated account company (SAC) changed hands and the clients in two of the three cells wanted to continue working with Ascension.

Tamburri said one of the reasons the SPC option was so attractive to Ascension was they saw the potential to offer a PIC solution to other groups of clients.

“We are already working on a segregated portfolio which we hope to get running by 1 April,” he added.  “That cell will be for another group of agricultural clients and is also for workers’ compensation.”

Ascension also works with the trucking industry and education institutions.  A large part of its client base is non-profits and the firm is considering setting up another vehicle especially for medical stop-loss.

“The SPC is a big opportunity for our company as a whole, and not just for this one PIC,” Tamburri said.

 

This article was first published by Captive Review, and written by Richard Cutcher. Captive Review was launched in 1999 and caters for the risk management and captive insurance communities.

Ascension is pleased to announce that we will be sponsoring a booth at The CSLN Annual Leadership Conference 2016, at the Dana Hotel on Mission Bay, San Diego, California, from April 14^th  and 15^th 

Hosts Nichole Bogue and Jeff Chenu will be discussing insurance/risk management options unique to the Independent/Supported living care community. We look forward to seeing you there!

Click here for more information on the conference and to register.

Ascension is pleased to announce that we have been invited to speak and will be sponsoring a booth at HR West again this year from March 7^th to March 9^th.

Come see Ed Bray, SVP, Compliance, and Tuan Nguyen, AVP, present The 2016 ABC’s of Employee Benefits (annually published in Employee Benefit News) on Monday,  March 7^th from 1:50pm – 3:05pm where he will provide a checklist of employee benefit to-do’s for 2016!

Come see Ascension at our booth!  Stop by for a chance to win some fun prizes, including $100 gift cards, and learn how we can we meet your wants, needs and expectations in this new world of employee benefits.

In addition to our session, the conference will feature 88 sessions, and speakers from companies like Pandora, Salesforce and Twitter. Find out about best practices and proven strategies of leading companies in the West that are paving the way for HR innovation. With tracks for startups, small business and technology, plus evergreen topics like employment law, recruiting and leadership, there’s something for everyone at HR West!

Check Out the Complete Session Lineup

HR West Also Brings You:

• Four world-renowned keynote speakers
• Recertification credit toward your SHRM-CP/SHRM-SCP and PHR/SPHR for most sessions
• An Executive Learning Lab led by TEDx presenter, Haas/Princeton professor (senior practitioners only)
• Innovative ways to donate unused vacation hours to the American Heart Association or a charity of your choice
• Community reception, networking lunches, speed networking and dinner meet-ups

The Premier HR Conference on the West Coast

NCHRA Members: $979

Join NCHRA: $1,146

SHRM Affiliate Member: $1,085

SHRM Member: $1,134

Non-member: $1,174

We would love to see you and are offering a $100 special guest discount to join us at HR West!
Use PROMO CODE: Guestofspeaker

Register today

Rates expire on March 3^rd, 2016.

 

Date: Tuesday, February 23 2016
Time: 10am PST
Who Should Attend: Forward thinking Sr HR and Financial Professionals in the Technology Industry
Duration: 60 minutes
Captive Launch Date: January 1 2017

While projections vary, the indisputable facts are that your health care costs will continue to increase, the competition for talent will intensify and you will be tasked with offering a competitive, relevant benefits package that attracts and retains talent. Consider this:

• Almost 50% of CFOs rate the cost of benefits and attracting & retaining talent as top concerns in 2016. Click HERE for survey
• 78% of hiring managers said finding highly-skilled tech talent will be a top hiring priority in 2016. Click HERE for survey
• Median unemployment and starting salary for tech workers in the Bay Area is <3% and $176k, respectively compared to national averages of 7% and $107k

If you have a Total Rewards philosophy and an interest in innovative strategies, funding your benefits through the Technology Captive and sharing risk with like-minded technology leaders may be the solution for your 2017 calendar year.

Join us to learn more about the timeline, opportunities, risks and rewards of funding your benefits through a Captive.

REGISTER NOW.

Congratulations on making it through one of the most legally and administratively challenging years in employee benefits history. But, as you know, employee benefits never sleep. Ed Bray, senior vice president of compliance with Ascension, provides the 2016 ABC’s of employee benefits – what he calls the annual “just tell me what I need to do” list.

See the list.

By Michael Babore, Executive Vice President, Ascension Collegiate Solutions

I have worked in the student insurance marketplace for over 15 years. With the implementation of the Affordable Care Act (ACA), the past three years have been the most challenging for our clients and the marketplace in general.

The first challenge was understanding how the ACA would affect student health insurance plans (SHIPS). SHIPs aren’t like employer plans, and also aren’t like other types of individual plans, so we worked hard with our underwriting partners to understand the new regulations and make the necessary policy adjustments.

But that was only the first step. Next came implementing plans with expanded benefits and higher premiums. For some colleges and universities that had historically offered low-cost, limited-benefit plans that suited a young and healthy population, the higher costs associated with ACA-compliant plans was shocking. At the same time, the state insurance Exchanges came online, offering an option previously unavailable to college-age students. There was also a strong push by the Exchanges to get younger people on these plans with targeted marketing campaigns.

However, now that we have a clearer view of the ACA in terms of the both its regulations as well as what kinds of plans are being offered through the Exchanges, we have a lot more information to help determine what is the best option for students at higher education institutions.

Let’s take a closer look at the Exchanges versus SHIPs.

Exchanges

1. Affordability

   – Plans are generally affordable and priced based on health history as well as income. This seems like an advantage for the “young and healthies” that typically make up college populations. However, students that access the Exchanges for an affordable option often just select the cheapest Bronze option, a High Deductible Health Plan. From the student’s perspective, they are covered and can forget about it. The reality is that the student will still have to satisfy a large deductible ($6,600 for most Bronze plans). Too many students do not understand this, and find themselves paying out-of-pocket for day-to-day accidents or illnesses. Many, if not most, students don’t have the money required to satisfy the first $6,600 of their medical expenses, which could result in students having to decide whether to pay for their education or pay for medical treatment. Since 98% of all medical claims are under $5,000[1], this puts the responsibility of paying for their healthcare squarely on the student’s shoulders.

2. Subsidies

   – The subsidies offered to people in certain income brackets may sound appealing to students, as they perceive that subsidized Exchange plans are more affordable than the student health plan offered by their school. However, a recent study by the Kaiser Family Foundation that focused on IRS penalties in 2014 found that over 50% of individuals who accepted a subsidy for health insurance were not eligible for the amount they received[2]. We hear frequently that students are going to the Exchanges and answering the income questions accurately from their perspective, only to find out that mom and dad are claiming the student as a dependent on their tax return. Since subsidies are based on the total household income, families will be required to pay back the subsidy a student received in error. In this instance, what originally seemed to be a great value to the student has turned into a tax burden for their family.

3. International Students

   – Not only can the Exchanges be confusing for international students, but this population is not eligible for subsidies or Medicaid, since those are for U.S. Citizens or permanent residents only. Without guidance from foreign student advisors or insurance professionals, these students are unassumingly accepting subsidies without fully understanding the ramifications for doing so. In the past year our firm has seen a large increase of international students being deported for violating the terms of their visa.

4. PPO Networks

   – While Exchange plans have access to national PPO networks, the networks affiliated with Exchange plans are often limited networks, especially in non-metro areas. What’s happening is that national PPO networks will offer a much smaller network carve-out to Exchange plans. We’ve heard reports (and seen first-hand) of signs in doctor’s waiting rooms saying they don’t participate in the Exchange PPO network. The result is that students are left with few choices of in-network providers near campus, and end up paying the higher out-of-network prices – including coinsurance, deductible, and out-of-pocket max – for services they need.

SHIPs

1. SHIPs help the school’s bottom line.

   Our consultants have reported that many colleges and universities no longer see the value of providing a comprehensive health insurance plan to their students. The simple truth is that requiring students to have a health insurance plan is in the best interest of the college or university; keeping students healthy and enrolled has a significant impact on the school’s bottom line.

2. SHIPs are usually the best deal for students.

   Many think the Exchanges are good enough for their students. However, as I pointed out earlier, Exchange plans often include really high deductibles which may be financially overwhelming to a student trying to pay for college. SHIPs, on the other hand, generally have low deductibles, coinsurance, and copays. That means a student enrolled in a SHIP can get the care they need right away, without the need to pay for all expenses out-of-pocket until they meet a (generally unattainable) deductible.

3. Health Center Tie-In (and Buy-In).

   A lot of students are going off-campus to seek medical care, rather than utilizing the on-campus health center. SHIPs can coordinate with student health centers, which can help bring more students in and increase revenue for the campus, as well as keeps insurance costs down for students. It’s a win-win.

4. SHIP premiums are competitive

   Sometimes we hear that SHIP premiums are high compared with Exchange premiums. However, a lot of the low-priced plans on the Exchanges have high deductibles and limited networks (therefore a lot of the charges are being paid at the out-of-network prices). The reality is that, if you are making an apples-to-apples comparison, SHIPs are often less expensive than Exchange plans or than students being insured as dependent on a parent’s plan. Since SHIPs now offer full coverage (rather than limited benefits with low benefit maximums that they did in the past), SHIPs are more expensive than they used to be; however, the value of SHIPs has increased as well.

The bottom line is that a quality insurance plan can cover the costs of high medical expenses that could otherwise prevent a student from continuing his or her education. It’s important to consider all the ramifications to students of sending them off to the Exchanges. For many students, the Exchange reality is very high out-of-pocket expenses, few in-network doctors, and not much coverage in the absence of extreme illness or injury. SHIPs might not be the answer for every campus, but I truly believe that in most cases, they can offer students and schools a much better option.

 

Michael Babore has worked with colleges and universities since 2000, developing roadmaps for successful student health insurance programs. His goal is to deliver the service each and every client requires. Prior to joining the Ascension team, he worked as the Head of Sales for HTH Worldwide in their international student insurance division. Michael is a member of NAFSA,ACHA, URMIA, NAICU and the FORUM. He is a regular presenter at many industry-related events and has traveled to 22 countries in his career. For more information, contact Michael at 310-255-2061 or [email protected].

[1] Claims data based on breakdown of claims for students insured through Ascension for the 2013-2014 and 2014-2015 academic years.

[2] Cox, Cynthia, et al. “Repayments and Refunds: Estimating the Effects of 2014 Premium Tax Credit Reconciliation,” March 24, 2015. Kaiser Family Foundation. Web. <http://kff.org/health-reform/issue-brief/repayments-and-refunds-estimating-the-effects-of-2014-premium-tax-credit-reconciliation/>