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PROTEcT/YOURSELF | by Don Leggett | How Workers' Comp Changes Affect Profitibility Controlling your business costs while the world awaits health care decisions. While many business leaders struggle with the endless possibilities that could occur as a result of the political parties in the United States pushing different versions of health care reform, a silent profit killer is stalking your business: the increased cost of workers' compensation insur- ance. Workers' compensation insurance costs will change in 2013. Whether your business profits increase or decrease is a decision you can control while we all wait for the outcome of the political process. Workers' compensation costs have been flat for the last five years, and that is about to change. Insurance carriers currently are losing about 15 cents for every dollar they receive. Those What does this rating change mean for your business? In the past, any amount of a claim over $5,000 was excluded from the frequency calculation. Under the proposed formula the first $15,000 will be included. This change will separate those com- panies that have frequency issues from those that do not. In Cal- ifornia, increased actual primary claim dollars changed from $5,000 to $ 7,000 and some modifications have gone up more than 15 percent. In Florida, the increase from $5,000 to $15,000 and the increased factors will be part of the recalculated modification numbers in late 2012, which means that claims happening right now will affect the 2014 mod. A business with frequency claims While the rhetoric of the presidential election and the associated cost of employee health care and fines will continue until November, savvy business owners will adjust the variables within their control… to increase their company's bottom lines. losses are unsustainable. There are three major initiatives taking place in the workers' compensation arena that will affect the profitability of your company in 2013 and beyond. First: Frequency Issues The National Council on Compensation Insurance, Inc. (NCCI), the nation's largest provider of workers' compensation data, has announced it will change its modification (mod) calcu- lation formula for the first time since 1993. The key area that will be affected is the Primary Loss/Excess Loss point, which will increase from $5,000 to $15,000. 22 issues will likely see an increase of about 20 points on its Work- ers' Compensation mods, and the accounts that have demon- strated better safety programs or those with only one shock loss will see a decrease of about the same. The punishment for having a frequency problem will be much more severe when this change occurs. Second: Claim Escalation The second change has to do with doctors dispensing their own prescriptions. In the United States, the average medical-only workers' compensation claim is $700. Only eight years ago the STORM&SEcURITY PROTEcTION / PEOPLE IN THE KNOW 2012