Experience Rating Worksheet, Part Two

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This is the second of two articles on the NCCI Experience Rating Worksheet. A worksheet is issued to employers that are subject to experience rating under their workers compensation insurance.

Part One of this series explains the worksheet summary and the data contained in the first six columns (classification codes, payroll and expected loss data). This article will explain the remainder of the worksheet.

The last five columns of the worksheet appear on the right side of the page. These columns contain data related to claims and actual incurred losses (meaning losses you have sustained). An example is provided below.

Claims Data I J OFActual Incurred LossesActual Primary Losses
 123456 05 F  18,000 15,000
 654321 05 O  12,000   5,000
 NO.6 06 F  12,000


Claim Data

Claims are listed by claim number under the Claims Data heading. In the above example two claims are listed by number. However, small claims (those under $2000) may be lumped together. A group of claims is identified by the letters "NO." The letters are followed by a number that indicates how many claims are included in the group. In the above example, "NO6" means that six claims are grouped together. Small claims are combined only if they involve the same type of injury, such as medical-only.

Injury Code and Status

To the right of the Claims Data is a column with the heading IJ.

"IJ" means injury code. This is a numeric code that designates the type of claim. For instance, "5" indicates a medical-only claim while "6" means a temporary disability claim (partial or total).

Adjacent to the injury code is a column with the heading OF. These letters designate the claim status as either "O" or "F." The letter "O" means the claim is still open while "F" means it is final (closed).

The table above contains data for eight claims. Six medical-only claims have been grouped together while the two temporary disability claims are listed separately. For the purposes of this example, the threshold for primary losses is $15,000.

Actual Incurred Losses

The last two columns on the far right side of the worksheet contain data regarding your incurred losses. These are benefits (medical expenses and disability payments) your insurer has paid to injured workers on your behalf. Losses include reserves for claims that remain open. A reserve is an amount your insurer has set aside for a future payment.

Actual Incurred Losses means the losses you have sustained with regard to the claim (or group of claims) indicated. Actual Primary Losses represents the portion of your total losses that are considered primary losses. When Actual Primary Losses are subtracted from Actual Incurred Losses, the result is Actual Excess Losses. Only a portion of excess losses is used for experience rating.

Experience Rating Adjustment

In many states medical-only claims are subject to an Experience Rating Adjustment (ERA). When the ERA applies, only 30% of the claim amount is used for experience rating. The remaining 70% is ignored.

The ERA applies to claims that generate medical expenses only. It does not apply to claims that result in disability payments.

Rating Factors

The experience rating formula includes two factors created by actuaries. The first is called a weight factor. This factor determines how much of your actual excess losses are used to calculate your modifier. The weight factor is small for small firms and increases as your company grows. If your company is small and you incur a large loss, the weight factor will limit the impact of the loss on your experience modifier. The loss would have more impact on your modifier if your firm was larger.

The second factor is called the ballast. As its name suggests, the ballast has a stabilizing effect. Its intent is to keep your modifier from deviating too far (up or down) from unity (1.0).


The experience rating formula adjusts both your Actual Losses and your Expected Losses. Once both numbers have been adjusted, your Actual Losses are divided by your Expected Losses. The result is your experience modifier.

  First, your Actual Losses are determined by calculating the sum of the following three items:

  1. Your Actual Primary Losses If the ERA applies in your state, then only 30% of your medical-only claims will be included in the formula.
  2. Stabilizing Value This value is determined by multiplying your Expected Excess Losses by (1 minus the weight factor) and then adding the ballast.
  3. Your Ratable Excess Losses This is the amount of Actual Excess Losses that are used for experience rating. It is calculated by multiplying the weight factor by your Actual Excess Losses.

Next, your Expected Losses are determined by calculating the sum of the following:

  1. Your Expected Primary Losses This number is provided by the rating organization.
  2. Stabilizing Value This value is calculated in the same manner as indicated above
  3. Your Ratable Excess Losses This is the amount of Expected Excess Losses used for experience rating. It is calculated by multiplying the weight factor by your Expected Excess Losses.

Finally, your Actual Losses are divided by your Expected Losses. For example, suppose that your actual losses (based on the formula) were $45,000 and expected losses were $50,000. Your experience modifier would be $45,000 / $50,000 or .90.