Category Archives: Audit

Uncovering Loss Cost Multipliers

I’d written previously about knowing your carriers LCM and why that’s important to you.  If you don’t know what it is, start HERE

If you’re ready for step two, I’m sharing links to the various states LCM’s.  These aren’t always easy to find and some states deliberately don’t publish them.  In some instances, the link will go directly to a list, others will involve another step or two to complete the search.

Note, even if the list is dated as you’ll see in some jurisdictions, even if the filed LCM has changed slightly, it’s most likely the order of the pricing tier remains accurate.  For example, if a carrier has 5 pricing tiers in a state and you’re in the highest, even if the LCM has changed slightly, it’s still most likely that carriers highest rated pricing tier.

Continue reading Uncovering Loss Cost Multipliers

the officer minimum

The insurance audit…

Rarely do we hear great stories about insurance audits. Seems policyholders often find some unpleasant rules post audit. One of them is the officer minimum payroll. As insurance brokers or agents, of course we tend to think it’s a good practice to INCLUDE yourself on the WC policy for a host of reasons. After all, you know the rate, so it should be relatively easy calculate the total cost to include yourself or your ownership team in coverage.

But…

Then comes the audit. It’s only your first year in business and the agent persuaded you take the safe road and include yourself in coverage. After all, maybe you don’t have a health plan, you are actively working in the field, it’s the right call. You had anticipated paying yourself a modest income during the first few years of business if you could afford it, but really the first six months, it’s all hustle and no compensation to yourself. Of course, the goal is to make more, but step one is making the business profitable above all else. Your first 12 months are in the books and you only paid yourself $21,000.

The WC rate was $2.20.

$2.20 times your salary (WC rates are charged per $100 in payroll) gives you a final estimated premium for yourself of $462.

The audit bill comes in with an additional premium of $1,544.40 for JUST YOU as a single owner. What gives? You request the audit worksheets and the auditor shows your paryoll as $70,200!

Welcome to the officer minimum.

That’s right. There’s a minimum payroll in almost every state for Workers’ Compensation coverage for sole proprietors, corporate officers, LLC members, and partnerships. These minimums have gone up considerably in many states across the country. Again, what you don’t know can hurt you and throw your insurance premiums estimates out the window! To compound the pain, audits typically occur just after the policy renewal which may have had some hefty down payments.

See the table below for the breakdown. Take note, many states increase these figures annually! Know the details BEFORE it’s time for the audit, unless of course you don’t mind the additional premium surprises.

STATEOFFICER MINOFFICER MAXPARTNER MAXPOLICY EFF. AFTER
Alabama54,600213,20053,400 Flat3/1/2023
Alaska31,200119,60038,800 Flat1/1/2023
Arizona *******62,400249,60061,933 Max1/1/2023
Arkansas52,000202,80051,100 Flat7/1/2023
Californiaw57,200149,500149,500 Max9/1/2022
Colorado70,200 Flat70,200 Flat70,200 Flat1/1/2023
Connecticut78,000156,00078,500 Flat1/1/2023
Delaware ******64,168257,400257,400 Max12/1/2022
District of Columbia85,800338,00084,800 Flat11/1/2022
Florida*57,200171,60057,100 Flat1/1/2023
Georgia62,400254,80063,200 Flat3/1/2023
Hawaii52,000208,00051,600 Flat1/1/2023
Idaho46,800187,20023,600 Flat1/1/2023
Illinois67,600270,40067,700 Flat1/1/2023
Indiana46,800223,600223,600 Max1/1/2023
Iowa26,000218,400218,400 Max1/1/2023
Kansas52,000213,20053,000 Flat1/1/2023
Kentucky52,000202,80050,800 Flat1/1/2023
Louisiana54,600161,20053,400 Flat5/1/2023
Maine54,600213,20053,900 Flat4/1/2023
Maryland70,200280,80069,600 Flat1/1/2023
Massachusetts14,56073,32064,300 Max10/1/2022
Michigan30,264119,60023,900 Flat1/1/2023
Minnesota66,924267,696267,696 Max1/1/2023
Mississippi44,200145,60043,000 Flat3/1/2023
Missouri51,700 Flat51,700 Flat51,700 Flat1/1/2023
Montana*****10,40075,92075,920 Max7/1/2023
Nebraska52,000202,80051,100 Flat2/1/2023
Nevada **6,00036,0003,600 Flat1/7/1999
New Hampshire ****36,400286,00035,900 Flat1/1/2023
New Jersey41,080163,800163,800 Max1/1/2023
New Mexico52,000202,80051,300 Flat1/1/2023
New York *45,500135,200135,200 Max10/1/2022
North Carolina57,200114,40055,900 Flat4/1/2023
Oklahoma49,400197,60049,600 Flat1/1/2023
Oregon70,200275,60068,900 Flat1/1/2023
Pennsylvania******62,660156,000156,000 Max4/1/2023
Rhode Island59,800239,200Not Applicable8/1/2022
South Carolina26,000202,80050,100 Flat4/1/2023
South Dakota49,400192,40048,600 Flat7/1/2002
Tennessee ***57,200234,00058,300 Flat3/1/2023
Texas7,80062,40072,300 Flat7/1/2023
Utah59,800234,00058,800 Flat1/1/2023
Vermont28,600223,60027,800 Flat4/1/2023
Virginia33,800135,20067,100 Flat4/1/2023
West Virginia49,400197,60049,800 Flat11/1/2022
Wisconsin18,09690,42860,268 Flat10/1/2022

* FL Construction MIN 28,600; NY Construction codes MAX: 87,786. ** NV Sole proprietor or partner electing higher benefits: $21,600. *** TN Construction codes MIN $28,600; MAX $85,800. **** NH Officers of unincorporated assoc. MIN 18,200, MAX 145,600. *****MT Individual & Partner MIN $10,800 ****** DE for Individuals or Partners not on payroll MIN $64,170.08; PA for Individuals or Partners not on payroll MIN $66,196. ******* AZ Individual & Partner Min $7,200
State requires a signed waiver for officers to be excluded from coverage.

Audits and your Liability Policy

A common topic of discussion is the workers’ comp audit.   Either through the horror stories of friends or self experience, you’ve heard the terrible tale of the large comp audit.   You’re now keenly tuned in to the payrolls and exposures on your work comp policy vowing never to let this happen to your organization again (or ever)!

Perhaps you’ve even transitioned to a “pay as you go” program to virtually eliminate the chance of an audit bill.

But… and there always seems to be a but.  What about your liability policy?  While you find yourself plugging the holes in one area, don’t forget the GL policy is often  an auditable policy like the WC.   Don’t make the mistake of assuming that since you’ve notified your carrier or broker of accurate payrolls for the workers’ compensation policy, those same updates translated to your liability policy!  You might be surprised to learn otherwise and we already know, that’s rarely a good thing.

Keep track of your liability policy exposures just as you do on the WC!

Big Changes with non-compliant Audits!

Ever thought of not complying with your work comp insurance audit? In years past failure to comply with an audit might have caused an estimated audit with exposures inflated by 50% and some carriers were forgiving enough to process non compliant audits with no additional payroll increases.  With the new changes you may want to reconsider unless you’re ready for a potential 200% increase in exposures!

Does your policy have the endorsement WC 00 04 24?

 

2016-14:  Audit Noncompliance Charge for WC Policies

NCCI has established an Audit Noncompliance Charge Endorsement (WC 00 04 24) that will be included on all new and renewal workers’ compensation policies effective January 1, 2017.  The endorsement enables an insurance carrier to apply an Audit Noncompliance Charge to a workers’ compensation policy if the policyholder does not comply with the annual premium audit of their records.  When attached to policies, the endorsement will include the estimated annual payroll (in the Basis of Audit Noncompliance Charge section) and the annual premium multiplier that may be applied for noncompliance (in the Maximum Audit Noncompliance Charge Multiplier section).

Injury Types- What is Permanent Partial?

When reviewing your loss runs or mod worksheet you’ll run into the codes or following descriptions.  A quick overview of the common injury types are outlined below.

  • Fatal—Death claims ƒ
  • Permanent Total—Claimant expected to never be able to return work ƒ
  • Permanent Partial—Claimant expected to return to work but with some permanent impairment or disfigurement ƒ
  • Temporary Total—Claimant expected to recover fully ƒ
  • Medical Only—No benefits for lost wages are expected to be paid

Need help with your ERM/Experience Rating/MOD?

We continue to offer assistance in any area providing experience rating analysis and experience mod management services.
All consultations are confidential. If you or your agent don’t have the resources available, don’t hesitate to give us a call.

We can provide:

  • Premium costs of various losses
    Minimum MOD
    Breakdown of potential premium savings for medical only claims (ERA states)
    Future MOD projections
  • Suggestions to improve the rating, and MOD verification
  • Mod Comparison available for repeat customer Experience MOD reviews

Call or email for options, pricing, and availability.  In some cases, there may be no cost to you for this service.

 

 

What payrolls or compensation are NOT chargeable at audit?

Our previous post,  What Payrolls Do I Need to Have for an Audit  ,  goes through all types of compensation that an auditor will include at the audit, but what about those payrolls that are not chargeable on an audit?

The complete list of “Excluded Remuneration” can be found here.

Continue reading What payrolls or compensation are NOT chargeable at audit?

Can I exclude myself from wc coverage?

Deciding who is included or excluded from workers’ compensation coverage varies state by state.   Before deciding whether or not to include or exclude yourself, you need to consider a few important factors aside from just the premium savings.

Accidents happen.
Accidents happen.

  1. Does my health policy exclude coverage for work related injuries?
  2. What is my risk of injury and the associated premiums for coverage?
  3. Is there a minimum and maximum payroll allocation for officers and workers compensation coverage?  What are those figures?
  4. Does an injury I voluntarily excluded coverage for jeapardize medicare or medicade benefits in the future?

In Maryland,

Workers compensation is  compulsory for corporate officers, who are considered employees of the corporate entity. However, officers of a Maryland Close Corporation, a Professional Corporation, a Farm Corporation or a member of a Limited Liability Company with at least 20% ownership in profits may elect coverage exclusion. Partners and Sole Proprietors are exempt from workers compensation coverage but both Partners and Sole Proprietors may elect coverage.