Nevada Insurance Commissioner Alice A. Molasky-Arman announced that the National Council on Compensation Insurance (NCCI) has submitted a filing for an average decrease of 10.5 percent for workers’ compensation voluntary insurance loss costs. The NCCI has also filed for an average decrease of 10.1 percent for workers’ compensation insurance assigned risk rates. The changes vary by classification. By industry group, the proposed average changes are as follows:

The changes are proposed to become effective March 1, 2008.

The NCCI filing also proposes an experience rating formula adjustment to bring the average experience modification closer to 1.00. Experience rating is used to encourage employers to maintain safe workplace environments. Under experience rating, employers with better than average recent historical experience pay less premium than those with worse than average experience for the class of business. Experience rating applies to all but the smallest or newest employers. The impact of this proposed adjustment will be an overall 0.1% premium increase. With the proposed change to the experience rating formula, the overall proposed voluntary premium decrease is 10.4% and the overall proposed assigned risk premium decrease is 10.0%.

When comparing Nevada workers compensation loss costs and loss cost changes to those in other jurisdictions, it is important to keep in mind that the Nevada exposure base, payroll, is capped at $36,000 per employee per policy year. In other states, the full payroll is generally used to compute the premium. When wages increase, workers’ compensation premiums automatically increase since rates are a function of payroll. In Nevada, the rate of increase in premiums, not considering the impact of loss cost changes, is less than the rate of increase in wages because the wages used to calculate the premiums are capped. To keep up with the increased benefits due to higher wage levels and other increasing costs, loss costs in a state where payroll is capped will have to increase more (or decrease less) than loss costs in a state where unlimited payroll is used. The Nevada average annual wage is about $36,000 per year. While the median wage is lower than the average wage, a significant proportion of workers (more than 25 percent but less than 50 percent), earn more than $36,000 per year, according to the Occupational Employment Statistics Wage Survey Data for 2007 (Souce: Nevada Department of Employment, Training & Rehabilitation,  Research & Analysis Bureau).

Decreasing claim frequency is driving the proposed decreases. Decreasing claim frequency more than offsets increasing indemnity and medical costs per claim, the cost of living benefit adjustments that were enacted during the 2003 Legislative session and the impact of the payroll cap.

The NCCI loss costs are only one component of the rates charged by insurers and each insurer must file a loss cost multiplier to include expenses and profit. As a result, not every insurer charges the same rate. Molasky-Arman urges employers to comparison shop for the best rate. In a competitive environment, such behavior is essential to maintain an efficient market.

The proposed rate changes are on file and available for public inspection at the Division of Insurance in Carson City. They have also been posted to the Division’s Web site: http://doi.state.nv.us. Employers may comment on the filing by writing to the Division at 788 Fairview Dr., Suite 300, Carson City, Nevada 89701-5491 or by e-mailing the Division at insinfo@doi.state.nv.us.  Comments must be received by January 2, 2008.

Molasky-Arman anticipates making a decision on the filing by the end of January 2008.

NCCI, selected as the Commissioner’s rating and advisory organization for workers’ compensation, collects annual data on workers’ compensation claims for the insurance industry. The NCCI lost cost filing includes loss experience data filed from insurance companies that write workers’ compensation insurance in Nevada. Insurers providing workers' compensation coverage in Nevada must subscribe to NCCI and adopt the revised loss costs when they become effective. Insurers must also file their expense provisions.