Q: The PA credit rating bureau has announced revisions to the Experience Rating Plan (ERP) to be effective on 4/1/2024. Why did the Pennsylvania Compensation Rating Bureau (PCRB) make these changes and how will they affect my experience modification factor (Emod)?
A: The changes were made to improve the accuracy and performance of the plan to better incentivize workplace safety.
More employers will receive an Emod. Under the current plan, an employer must generate $10K in base premium for each experience period (3 years) to receive an Emod. Under the new plan, that number will be reduced to $5K. This will bring more employers into the ERP thereby increasing the credibility of the data.
The dollar amount of claims used in your Emod calculation will change. Under the current, plan all employers with an Emod have any one claim capped at $42,500 in the calculation. This is known as the split point. Under the new plan, the maximum amount used (or split point) will vary depending on your classification(s) and payroll.
Larger employers will have higher split points, and smaller employers will have lower split points. By limiting individual losses, the impact of isolated high $$ value claims on your Emod is reduced, especially for smaller employers. The new split points will range from $10,000 on the low end to $300,000 on the high end and will be determined by each insured’s annual payroll amount and workers compensation class codes. For larger employers with current limited losses, the higher split point will cause more claim dollars to be used in the Emod calculation thus increasing the calculated mod.
What remains unchanged is that for a claim under the split point, the full amount of the claim is used in the calculation.
Finally, the capping rules will change but not until 4/1/2026. Under the current plan, your Emod swing is limited to +/- 25% except when the indicated (calculated) Emod is less than 1.00, but the 25% rule prevents it from dropping below 1.00 then the Emod will be set to 1.00. Under the new plan, your Emod can increase by 40% however there is no cap on downward swings.
The new ERP will benefit employers who have better claims experience and penalize those with poor loss experience. If your current experience mod is over 1.20, it’s a good idea to contact your broker to understand the impact the new calculation will have on your mod.
*This applies to Pennsylvania mods only, not NCCI.