Under the Experience Rating Plan, both actual and expected losses are divided into two groups, primary and excess. For the prior two decades, primary loss has been the first $5,000 of any loss. The entire actual primary loss amount enters into the calculation. Actual excess loss, the amount above $5,000, is discounted from 20% to 96% depending on the size of the employer (specifically, their expected losses).
Beginning on all 2013 ratings, the primary/excess spilt point will transition to $15,500* as follows:
Year 
Split Point 
Through 2012 
$5,000 
2013 
$10,000 
2014 
$13,500 
2015 
$15,500* 
2016 
$16,000 
2017 
$16,500 
Subsequent 
Based on Inflation 
*Initial educational information showed an anticipated 2015 Split Point of $15,000, but with a qualifier it would be indexed for inflation. The 2015 value now has been established at $15,500 (as in most, but not all other states.)
Here are some examples of how the transition will work:
Split Point 

Prior
$5,000 
Year 1 $10,000 
Year 2 $13,500 
$4,000 
Primary 
$4,000 
$4,000 
$4,000 
Claim 
Excess 
$0 
$0 
$0 
$12,000 
Primary 
$5,000 
$10,000 
$12,000 
Claim 
Excess 
$7,000 
$2,000 
$0 
$50,000 
Primary 
$5,000 
$10,000 
$13,500 
Claim 
Excess 
$45,000 
$40,000 
$36,500 
• Statewide average mod across all employers will not change
– Because D ratio also adjusted (The D ratio determines the amount of expected losses considered to be primary.)
• In general, both credits and debits will become larger
• 74% within range of 0.05 to +0.02,
7% > + or  0.10
• 1% will go from credit to debit, and vice versa
• Under first year of transition (2013 at $10,000 split point), 93% of mods will change less than 10 points
Let’s consider how the change might impact a hypothetical plumber with annual payroll of $300,000, all else being equal*:
Actual Incurred Loss 
Mod. @ $5,000 Split Point 
Mod. @ $15,000 Split Point 
$0 
.90 
.87 
$5,000 
1.10 
1.06 
$10,000 
1.11 
1.26 
$50,000 
1.22 
1.56 
Now we’ll assume annual payroll of $1,000,000:
Actual Incurred Loss 
Mod. @ $5,000 Split Point 
Mod. @ $15,000 Split Point 
$0 
.82 
.77 
$5,000 
.93 
.87 
$10,000 
.94 
.98 
$50,000 
1.03 

Mod Examples by Loss Amount & Split Point
* Each year, a new year of experience replaces one that is dropping out of the calculation, and expected loss rates change. So, the examples are for illustrative purposes only.
There also will be a concurrent change to the maximum modification formula. Experience Rating modifications have a maximum allowable debit, based on a formula. The larger the risk, the greater the allowable debit. Previously, the formula moved towards a unity mod (1.00) for the smallest qualifying employer. The new formula moves towards a 1.10 mod.
Additional Information
NCCI website
Other Sources: