The E-Mod multiplier increases or decreases the amount of premium to be paid during each policy period. What is an Experience Modifier? The Experience Rating Plan (E-Mod) is a multiplier for each employer based on risk classification, payroll, and loss experience.

The fewer claims you have, the lower your experience modifier will be. The Experience Modifier(E-Mod) refers to your claims “experience” and builds your claims history into the calculation of premiums. The more claims you have, the higher your experience modifier rate will be.

The E-Mod multiplier increases or decreases the amount of premium each policy period. THE EXPERIENCE MODIFICATION FACTOR

HOW DOES IT WORK? Premium Mod Modified Premium $100,000 x 0.75 = $75,000 $100,000 x 1.00 = $100,000 $100,000 x 1.25 = $125,000

For example, a policy period of to Use the claims data from policy years effective 2008, 2009, 2010 They are the last three completed years before the current policy period. The claims data used to calculate your E-Mod rate consists of three completed years of claims experience. Policies with an annual subject premium of at least $4,500 is subject to E-mod rating for South Carolina Who Qualifies for E-Mods?

Experience Modification Formula Actual Weighting Value (1 Minus Weighting Value) Primary Ballast Times Times Losses + Value + Actual Excess Losses + Expected Excess Losses = Total A Expected + Ballast + Weighting Value + (1 Minus Weighting Value) = Total B Primary Value Times Times Losses Expected Excess Losses Expected Excess Losses For experience modification, divide Total A by Total B; Round to two decimal places.

TERMS Actual Excess Losses: Obtained by subtracting the Actual Primary Losses form the actual incurred losses. Actual Primary Losses: Reflects claim frequency. The maximum primary value for each loss is $5,000. For each loss equal to or less than $5,000, the entire amount is used as the primary value. For each loss over $5,000, the primary value is $5,000. For medical only losses, the primary value will be reduced by 70%.

TERMS Expected Excess Losses: Expected Excess Losses are obtained by subtracting the Expected Primary Losses from the Expected Losses. Expected Losses: Expected Losses for each classification are obtained by multiplying the Expected Loss Rate by the payroll divided by $100. Total Expected Losses for the risk are obtained by adding the Expected Losses for each classification. Expected Primary Losses: These are obtained by multiplying the Expected Losses by the Discount Ratio.

TERMS Expected Loss Rate: The Expected Loss Rate is the factor used to determine the amount of Expected Losses by classification for each $100 of payroll. These factors can be obtained from the Tables of Expected Loss Rates and Discount Ratios in this plan. Discount Ratio: The Discount Ratio is the factor used to determine the amount of Expected Losses for each classification that are Expected Primary Losses. These factors can be obtained from the Tables of Expected Loss Rates and Discount Ratios.

TERMS Ballast Value: This value is a stabilizing element designed to limit the effect of any single loss on the experience modification. It is added to both the Actual Primary Losses and Expected Primary Losses. The Ballast Value increases as Expected Losses increase. These values may be obtained from the Tables of Weighting and Ballast Values. Weighting Value: This value is a ratio that determines the percentage of excess losses to enter in the experience rating calculation. It is applied to both the Actual Excess Losses and Expected Excess Losses. The Weighting Value is between.07 and.63 which increases as Expected Losses increase. These values may be obtained from the Tables of Weighting and Ballast Values.

The formula only counts 30% of medical only claims payments. It also caps claims payments at the following limits: $299,500 Single Claims* $599,000 Multiple Claims* * Effective Limitations used in the E-Mod formula.

E-MOD CALCULATION $100, , x $248,002 + (1 – 0.16) x $45,156 __________________________________________________ = 2.39 $20, , x $45,156 + (1 – 0.16) x $45,156 Ballast Value:14,800 Weighting Value: 0.16 Actual Primary Losses: $100,664 Actual Excess Losses:$248,002 (1 Minus Weighting Value):( ) Expected Excess Losses: $45,156 Expected Primary Losses:$20,834

E-MOD CALCULATION $50, , x $100,000 + (1 – 0.16) x $45,156 __________________________________________________ = 1.47 $20, , x $45,156 + (1 – 0.16) x $45,156 Ballast Value:14,800 Weighting Value: 0.16 Actual Primary Losses: $50,000 Actual Excess Losses: $100,000 (1 Minus Weighting Value):( ) Expected Excess Losses: $45,156 Expected Primary Losses:$20,834

NCCI Changes to the E-Mod Split Point The Split Point separates claims into primary and excess portions. Currently, this amount is $5,000. The Split Point will be changed from $5,000 to $15,000 over a 3 year period. The First Year will be $10,000 The Second Year will be $13,500 The Third Year will be $15,000 Subsequent year filings will adjust the split point based on inflation

Impact of Experience Rating Changes Overall, rating changes will be premium neutral statewide Corresponding changes to the D-Ratio Generally, employers with favorable loss experience should receive larger credits Employers with less than favorable loss experience should received larger debits For More Information, see NCCI Item E-1402, Circular CW , and CIF

For Questions or additional information, please contact NCCI’s Customer Service Center at: NCCI-123 When are Changes Effective? State Proposed Effective Date South Carolina July 1, 2013 Georgia March 1, 2013 North Carolina April 1, 2013

Questions?