03-29-2012 Council Agenda - Laserfiche WebLink

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plans offered by private insurers, LMCIT's retro- rating formula doesn't use a "loss conversion factor." The city will be billed or refunded the difference between the net deposit premium and the final premium. This is accomplished by annual adjustments. The first adjustment will be made approximately six months after the expiration of the agreement period, based on the total incurred cost of losses known at that time. Further adjustments will be made annually thereafter until all claim activity ceases permanently. This includes activity on claims that reopen and claims for injuries that are filed later for an accident occurring within the retro year. How long do annual adjustments continue? The city selects a retro - rating option for each coverage year. The annual premium adjustments will continue as long as any claims remain open or until the retro year is closed. If a closed claim re- opens, or if a new claim is filed for an injury from that year, the annual retro- rating adjustments for that coverage year will resume unless the retro year has been closed by the city. Beginning five years after the first adjustment is made on a retro year, the city has the option to close out a retro -rated year so no further adjustments will be made. There is an additional charge to close out a retro -rated year, which varies by age — the longer it is after the coverage year, the lower the charge to close it out. A city may elect the close out by sending a written request to LMCIT. The request must be made within 60 days following their annual workers' compensation retro adjustment invoice letter. Beginning in 2010, LMCIT will automatically close retro years after 16 years, unless the city specifies that it wants to hold the old retro year open. LMCIT is making this change to ease administration for cities and to help cities avoid surprises for old claims that re -open. Retro cities will be notified of the automatic closure and the option to hold retro years open longer. Learn More Read more about closing out retro - rated years in: Workers' Compensation Retro Close -Out Option Do retro rating options replace the experience modification factor? No. The experience modification factor is separate from, and in addition to, any retrospective rating adjustments. Whether or not the city is on a retro does not affect the experience modification calculation. While the experience modification factor does adjust the premium to reflect a city's loss experience, this is done in a calculation using several years' worth of data. Not only is the retrospective rating adjustment a more immediate reaction to loss experience, but it also can potentially offer larger reductions or additions to the premium. When can our city select a rating option? Retrospective rating option election will be accepted on or after the beginning date of the agreement period. The signed form must be received in the service contractor's offices prior to that date. 8