Experience rating of a workers compensation policy is made up of a complicated gathering of rating data and ultimately the application of that data into a specific employers Experience Modification Rate calculation. Ever wonder how that data is gathered and reported? That’s the function of Unit Statistical Reports otherwise known as UniStat Reports. Let’s learn about these critical reports, how they affect the EMR and why an employer needs to pay attention!
When it comes to UniStat Reports it’s all about data and timing! Insurance companies who provide workers compensation insurance coverage are required, by the rating bureau or advisory organization of authority for the state in which the policy was written, to provide data about those policies.
Policy specific data gathered and sent to the rating bureau includes:
- Exposure in terms of Audited Remuneration and or Payroll –
- Premium – As calculated by the insurance carrier –
- Loss or Claim Information –
It’s from this gathering of policy information that all workers compensation related rating factors are developed. Data gathered will not only affect rate making processes but provide the basis for statistically developed Rating Factors such as the ELR, Expected Loss Rate, Ballast and others used to make the workers compensation machine run.
A big part of the data provided to the rating bureau by an insurance company is used in the development of an individual employer policyholders Experience Modification Rate or EMR. Detailed claim or loss history information for individual employer policyholders is transferred from the insurance company to the rating bureau through the Unit Statistical Reports.
Here’s where these reports really become important to an employer. UniStat Reports are compiled and reported to a rating bureau on a very specific time-table. Keep in mind this works like a snapshot of what’s happening with a claim. Dollars paid, reserved whether for medical, indemnity or a combination, this is when that information is transmitted to the rating bureau. This is the claim information that’s used in calculating the EMR.
Here’s the reporting schedule used by NCCI:
- First Report – Valued 18 months after the effective date of the policy. Must be reported to the rating bureau by the 20th month.
- Second Report – Valued at 30 months after the effective date of the policy and reported by the 32nd month.
- Third Report – Valued at 42 months after the effective date of the policy and reported by the 44th month.
- Fourth Report – Valued at 54 months after the effective date of the policy and reported by the 56th month.
- Fifth Report – Valued at 66 months after the effective date of the policy and reported by the 68th month.
- Sixth Report – Valued at 78 months after the effective date of the policy and reported by the 80th month.
- Seventh Report – Valued at 90 months after the effective date of the policy and reported by the 92nd month.
- Eighth Report – Valued at 102 months after the effective date of the policy and reported by the 104th month.
- Ninth Report – Valued at 114 months after the effective date of the policy and reported by the 116th month.
- Tenth Report – Valued at 126 months after the effective date of the policy and reported by the 128th month.
Wow! Now that’s what I’d call an aggressive data collecting schedule! Keep in mind that other independent rating organizations may use a different schedule.
Why are these report dates important to an employer? I mentioned earlier that this is the time when an employers claim or loss data is reported to the rating bureau. It is the claim data reported on the Unit Statistical Report that is then used in calculating the employers Experience Modification Rate.
Here’s an example:
- An employers experience rated workers compensation policy is effective March 1, 2014.
- The employer incurred two claims. A single large claim ($280,000) in 2010 and a single ($18,000) claim in 2012.
- The employers EMR for March 1, 2014 is calculated at 1.65.
- Both claims are presented within the three-year experience period for this employer.
- The single large claim from 2010 was closed on December 15, 2013 at a reduced total paid amount of $180,000. A reduction of $100,000 over the original reserved amount.
The Unit Statistical Report that was used to gather data for calculation of this employers March 1, 2014 Experience Modification Rate was valued at September 1, 2013. The claim in question had not been closed at that time so the original full value was reported and used in the EMR calculation. If this claim had been closed prior the September 1, 2013 valuation date the updated lower amount of $180,000 would have been used and the employer would have received a significantly lower EMR.
Remember I had mentioned the importance of timing? Correction reports are allowed to be filed only for very specific reasons. Claim settlements are not one of those reasons! So it becomes very clear the importance of monitoring active open claims and working closely with your insurance carriers claim department to get open claims closed in a timely manner!
So what did we learn today about Unit Statistical Reports?
- They are the mechanism used by an insurance company to report policy data to a Rating Bureau.
- Claim information reported is used to calculate an employers Experience Modification Rate or EMR.
- They are reported on a specific time schedule.
- The importance of conducting a Workers Compensation Claim Review.
- The importance of conducting an EMR or Experience Modification Rate review.
- It is important for an employer and his agent to be involved in the claim process. Particularly when it comes to managing open claims with reserves.
- Sometimes negotiating with an insurance company claims department for closure of specific claims can benefit an employer.
- And finally, you have to keep your eyes open! Learn to pay attention to the details when it comes to a workers compensation policy.
Hope this helps you out! Thanks!