NCCI updates: Split point, indemnity reporting and Medicare set asides

Split point

Employer relying on the National Council on Compensation Insurance (NCCI) for workers' compensation began experiencing a change in the primary/excess loss split point in 2013. At that time, it rose from $5,000 to $10,000; in 2014 the rise was to $13,500. The figures are now being released for 2015 and, for the first time, there is variance among states. Going forward, it is planned that the split point will change every year and be based on the actual average cost of an employee injury at that time.

The rates that have been released so far are:

NM: $15,500
IL: $15,500
IA: $15,000
MD: $15,500
MO: $13,500
MN: $16,250
MI: $15,000

All these states have effective dates of 1/1/2015.

Takeaway:

The split point figure is the amount of each injury that is included 100% in the experience mod, while all money over it is discounted based on the industry and the employees' wages. The split point change creates an opportunity for employers to take greater control over their workers' compensation costs than ever before. The changes are dramatic and lasting; the split point will change every year going forward, barring further changes to the experience-rating plan. Smart employers that are on a path to achieve their minimum experience mods will reap the benefits of lower premiums.

Indemnity reporting

In some states, the law explicitly allows employers to pay their employees while they are out of work, in lieu of the insurance company making indemnity payments to the injured worker. In other states, insurance companies have allowed this practice, even though it isn't explicitly allowed. Insurance companies haven't reported indemnity payments in these cases. According to a circular issued by NCCI in April to its member carriers, if an employee is off work, the insurance company MUST report indemnity, even if the injured worker is receiving the full wage while off work. This will essentially end the practice of paying employees their full wage when they are out of work.

Takeaway:

First and foremost, this does not change anything about the power of return to work programs. If an injured employee is doing any work, including light duty they can do at home, employers can pay them the full wage and everything is good, as it's always been. Employers can offer employees the opportunity to read books, listen to audiotapes or watch videos with content related to his/her work at home. Bottom line: Get employees to recover at work. If they can't return to work immediately, keep them working at home and stop indemnity from getting started.

Medicare Set-Asides

NCCI recently issued a brief on Medicare Set-Asides (MSA) and Workers' Compensation. By law, Medicare is a secondary payer for work-related injuries- workers' compensation insurers (including self-insureds) are therefore required to protect Medicare's interests when settling claims.

Key findings of the report include:

• After a period of dramatic lengthening, the Centers for Medicare & Medicaid Services' (CMS) processing time for MSAs has recently declined
• The ratio of CMS-approved MSA amounts to submitted MSA amounts has declined over time
• The differences between proposed and approved MSA settlements have been largely due to prescription drug costs
• Most MSAs are for claimants who are Medicare-eligible at the time of settlement because they have been on Social Security Disability for at least two years
• MSAs make up about 40% of total proposed settlements. Of this 40%, prescription drugs make up half.

It's important to recognize that the report findings are based only on the MSAs submitted to CMS for review.

Takeaway:

MSA's remain a major challenge for employers. Every MSA is an independent and subjective event affected by a number of outside factors. CMS continues to counter with higher settlements that can be difficult to justify, need to be researched and negotiated. It's complicated and requires expertise, innovative strategies and persistence.