Workers’ Compensation Contribution Criteria Explained
The easiest way to think about it is to think about what Workers’ Compensation covers: people.
Think about what the people at your district actually do, and that will give you a sense of how the numbers flow. Each position at your organization can affect your district’s rates. Below is a step-by-step rundown of how we do that.
Step 1 – Employee payroll and class code
To start, we classify your district based on your primary operation. Then, we group your covered employees into class codes based on job function. For instance, office employees fall into class code 8810, while class code 7710 includes all full-time career firefighters.
Each class code has a rate that reflects the hazards inherent to that kind of work. For example, because firefighting is more dangerous than office work, it is comparatively more expensive. These rates are set by the National Council on Compensation Insurance (NCCI) and appear on your invoice.
Step 2 – Experience rating
We calculate a price by multiplying each payroll for each class code by the corresponding rate. After that, we apply your loss record. We use a modifier which changes your price depending on your loss history.
This is listed on your invoice as “Experience Modification.” A factor of 1.45 means an increase of 45% due to an adverse loss history. On the other hand, a factor of 0.9 discounts the contribution due to a favorable loss history.
Not all districts are eligible for experience rating. To qualify, the manual contribution must meet a threshold established by NCCI. We calculate the experience rating factor based on three consecutive years ending one prior to present. For example, the rating for 2020 will include payroll and claims data from years 2016, 2017, and 2018.
Since we use this data to calculate the experience rating factor, we cutoff claims data on June 30. All of this creates a new subtotal marked on your invoice as the “Modified Contribution.”
Step 3 – Discounts and adjustments
The Modified Contribution is then adjusted by a number of other factors. These include:
- Contribution Volume Credit – This is a credit based on the size of your contribution. It grows as your district grows. This means the more contribution you pay, the greater discount you can anticipate.
- Designated Provider Discount – Although mandated, this is a 2.5% credit for utilizing designated medical providers.
- Deductible Credit (if any) – Deductibles reduce contribution. Therefore, taking a higher deductible may yield a significant discount. This is because taking a deductible means your district is self-insuring a portion of potential losses.
- Cost Containment Credit – This is a 5% credit based on claims and whether you have maintained certain safety and loss prevention procedures. This includes things like having an active safety committee. This credit is subject to onsite verification by the Pool’s safety consultant.
- Manual Adjustment – This may be a credit or debit subject to the underwriter’s judgment. Underwriting weighs the quality of safety management and best practices at your district.
- Direct Discount – We provide a discount to members that work directly with the CSD Pool without a broker.
- Annual Early Payment – A discount based on receipt of payment prior to the date shown on your invoice.
All of these things (except the last one) are then calculated into the Modified Contribution, which brings you to the Total Estimated Contribution. As stated, if your district pays before the due date, then the amount is dropped as indicated in number seven above.
We hope this simplified summary of contribution calculations is helpful. If you have any more questions, we’d love to hear it. Reach out to us at ask@csdpool.org.
