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Correction

Explains rules regarding the correction of class codes and experience ratings, and their effect on premium.;

When a policy needs a change to the classification codes or experience rating modification, we follow certain rules on when the change is effective. Below are summaries of relevant rules. Please refer to the manual(s) for the actual rule wording.
 

 
Class correction: Basic Manual Rule 1.F
 
Note: This Rule does not apply to the reallocation of payroll among classifications already included on the policy.
 
Premium
When
decrease
policy inception

 

increase

a. first 120 days - inception
b. after 120 days & before last 90 days - pro rata
c. last 90 days - renewal

 

exceptions

  • construction or erection firms
  • employee leasing firms
  • labor contractors
  • temporary labor services

  •  
     
    Mod correction: Experience Rating Plan Manual Rule 4-E, Page R21
     
     
    Premium
    When
    decrease
    policy inception (whether during policy or at audit)
    increase
    a. first 90 days - inception
    b. after 90 days - pro rata
    (when carrier receives revised mod)
    increase
    policy inception; when due to:
    a. delays or failures caused by employer or agent
    b. retroactive reclassification
    c. change in ownership (see Rule 3-E-3, old rule Part Two, Rule C.10)


    Revising previous ratings: Experience Rating Plan Manual Rule 3.E.1., Page R14 
    "The rating organization may issue, retract and/or revise the current and up to two preceding modifications due to ownership or combination status changes."

    Recalculated mod due to change in ownership: Experience Rating Plan Manual Rule 3.E.3., Page R16
    • notification within 90 days of change - revise mod as of date of change
    • notification after 90 days of change - revise mod as of next anniversary rating date

      Note: Generally this rule (3.E.3.) is applied to ownership changes unless unusual circumstances might require the application of Rule 3.E.1., Transfer of Experience, or Rule 3.F., Evasion of ER Mod.

    Mod Revision due to Payroll or Loss Changes: Experience Rating Plan Manual Rule 4.B., Page R18
     
    "1. An insurance provider may discover within the audit period (within three years of policy expiration) that previously reported payroll must be revised." We can "revise the current and up to two preceding experience modifications" under several circumstances. For purposes of subrogation and special fund recovery situation, "the time frame for the three (current and two preceding) modifications is limited to the risk's fifth most recent rating effective date."

    Notes:
    Noncompensable claim is addressed in the old manual Part Two, Rule D.4.d., page 7, but not mentioned in the new manual. However, the new manual, Rule 4.B.2.a., requires "Submission of revised unit reports according to the Statistical Plan will result in the automatic recalculation of the current and up to two preceding experience rating modifications."
     
    The Statistical Plan - 2008 Edition, Rule 5-A-1, requires a correction report to be filed without delay when "f. The claim, or any part thereof, is declared noncompensable as defined in Part 4, Item A-1-d—Noncompensable Claims."


    Mod Revision due to Correction in Classification: Experience Rating Plan Manual Rule 4.B.3., page R18
    We can reassign "past payroll to the appropriate classification code and rating values" under several circumstances. We will not revise a mod if the class change is a result of a change in the insured's operations, or a rule change in the classification system (for example, a new code established).

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    The material in this document has been prepared and shared for informational purposes only and should not be relied upon as legal advice on any particular situation.