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Moore: Are Workers' Comp Carriers Fined for Never Reporting Data?

  • National

The number of workers' comp carriers fined for late reporting in 2018 and 2019 may surprise you. 

James Moore

James Moore

The late reporting referred to here stems from insurance carriers habitually reporting the claims data (total Incurred) late to the rate bureaus — think National Council on Compensation Insurance, the Workers' Compensation Insurance Rating Bureau of California and the independent rating bureaus. 

The Pennsylvania Department of Insurance fined Brickstreet/Highmark more than $200,000 last year for highly inaccurate reporting, basically never reporting certain insureds’ data.    

The reporting error sent the Pennsylvania workers' comp rating system into a tailspin resulting in systemic premium overcharges. I will save you having to read a long explanation of how not reporting data can cause employers to pay more in premium.

Pennsylvania has its own rating agency, the Pennsylvania Compensation Rating Bureau. The reporting errors were amplified, as the PCRB has a smaller number of insureds than NCCI or the WCIRB. The error was spread across a smaller data set. 

Over the years, workers' comp carriers fined for inaccurately reporting data remains very rare. 

Other than that one instance noted above, carriers are rarely, if ever, fined for habitually reporting data late. Reporting claims data late can have a disastrous effect on insureds’ experience modification factors (mods).    

NCCI rule on reporting claims data timing 

The rule by NCCI (and most other rating bureaus) is (paraphrased): 

  • Data is initially valued 18 months after the policy inception date; the extra six months is for claim development.
  • The first (data) report is due 18 to 20 months after the policy inception date — 60 days for the carrier to report the 18-month data. 
  • Subsequent reports for open, reopened and newly arising claims are due in 12-month intervals with up to a total of 10 report levels required: 30th month, 42nd month, etc. 

You can read more in this file on unit statistical reporting. The manual comes from NCCI's Annual Data Reporting Conference. I try to attend every year if possible. 

Mod effect: an example

One of our clients started using J&L’s services after receiving what it thought was its final mod for 2020. The mod was actually a contingent mod provided by its agent.  The mod was .91, which represents a relatively safe employer. 

The carrier reported late claims loss data after the employer received the first mod. 

A basic mod formula is actual losses/expected losses. The employer was expecting 343,000/376,923, which equals the .91 mod. 

The employer could bid on government projects, as its mod was below 1.0. This requirement shows up quite often in requests for proposals. 

The carrier then late-reports payroll and losses after the next policy inception, where the formula is now 454,000/412,727 = 1.10.    

The employer calls us to have J&L go through the mod numbers. We informed it that the carrier had reported its numbers late to the rating bureau.  

The client asked if workers' comp carriers fined for this situation. I said no, almost never.  

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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