Workers Compensation Classification Codes

600 Classifications. There are over 600 officially designated workers’ compensation classification codes an employee may be placed in based on his/her principal job duties. The state specific rating organization (NCCI or the local State Rating Bureau) maintains a detailed, word-by-word, phrase-by phrase description as to each classification code, as to which insurers must adhere.

Why You Should Consider Us:
Because We Literally Wrote the Book on These Issues.

Yes, you could say we Wrote the Book:

  • On Audits;
  • On the Classification System (class code);
  • On the Experience Mod System;
    (or the e-mod; or the experience modification factor);
  • On the formula for High Deductibles;
  • On the definition of “Payroll” for purposes of calculating premium;
  • On all PEO workers comp issues, such as proper corporate combinations for e-mod calculations;
  • On the formula for Retros;
  • On the formula for Schedule Rating;

Because we did. And all of these items drive the final calculation of your workers comp premium.

Why You Should Consider Us: We Know This Stuff.

After all, during our years at the National Council on Compensation Insurance (NCCI), that was precisely our job. NCCI set the rules of the road for Audits; the Classification System; for the calculation of e-mods and High Deductibles and Retros and Scheduled Rating. And while at NCCI, we wrote the rules of the road for PEOs as to workers compensation.

Together with our staff:

  • We oversaw all the rules that are applied to audits;
  • We wrote the descriptions for the 600+ Classifications in the Scopes Manual;
  • We wrote and implemented the U.S. e-mod system; including its formulas;
  • We created and implemented the complex formulas for high deductibles;
  • We authored and implemented the definition of “Payroll”;
  • For PEOs, we wrote the rules for corporate combinations for their e-mods; and most of the other rules that effect PEO premium;
  • We created and implemented the complex formulas for Retros;
  • We created and implemented the complex formulas for Schedule Rating;
  • We wrote the definition of “Payroll” for determining workers compensation premium;
  • We authored and filed some 500 statewide rate filings used throughout much of the U.S., setting the premium levels on about $15 billion of workers compensation premium – every year;
  • We gained regulatory approval to use all of the above formulas and rules;

Earlier in his career, as Iowa Commissioner of Insurance, Bill Hager judged each of these matters and approved or modified the rules as submitted to the Department of Insurance.

Why You Should Consider Us: We Know Classifications.

After all, during our years at the National Council on Compensation Insurance (NCCI), that was precisely our job. NCCI set the rules of the road for audits; the Classification System; for the calculation of e-mods and high deductibles and Retros and Schedule Rating. And while at NCCI, we wrote the rules of the road for PEOs as to classification issues workers compensation.

Why We Can Help: We Literally Wrote the Book On Classifications. We can help because after all, we wrote the book:

  • On classifications (namely, the Scopes Manual) in connection with premium calculations;
  • During our years at the National Council on Compensation Insurance (NCCI), that was precisely our job. Together with our staff we wrote the descriptions for the 600+ classifications that appear in the Scopes Manual.

The Classification System: How it Works. When issuing an insurance policy, the insurance company assigns each employee to a classification code, which in turn determines the premium for that employee’s wages. There are significant differences in rates between classification codes.

The Differential. As an example, in most states, rates for office based workers are about $0.25 per $100 in payroll, while rates for high risk construction workers can be almost 100 times more expensive than office workers - as high as $20 per $100 in payroll – and more.

A misclassification error cost this employer $431,000 in annual premium!

Misclassification Costs Can Be Huge. Needless to say, and as the above example points out, ensuring employees are classified correctly can make a huge difference in overall workers’ compensation costs. As a result, (i) NCCI and the State Rating Bureaus along with (ii) the State Department of Insurance have installed several checks and balances against improper classification.

What We Do, Step One: Did the Insurer Get the Job Correctly Classified? As stated, we know the classification system so we analyze in-depth the job(s) at issue to determine what they in fact consist of. We will then determine the correct classification under the Scopes Manual. As such, the first check is whether the job being evaluated in fact fits in against the related language of the Scopes Manual. This is no minor matter because any number of job classifications are very close in wording proximately to each other, and the difference in a word or two, measured against the job being evaluated can be the difference in a huge amount of premium. So the first key application of our expertise as to your circumstance is whether in fact the insurer has properly classified the job(s) against the Scopes Manual or whether the job is rated too high, resulting in unwarranted premium.

What We Do, Step Two: Challenge the Insurer. If you are the employer and we conclude the insurer has wrongly classified the job, we will take the matter directly to the insurer and insist that they properly classified the job and reduce the premium. We know insurance companies and are confident in working with them. We are both former insurance company executives. If you are the insurer, we will prepare a strong defense to the employer’s challenge of our classification decision.

What We Do, Step Three: Appeal to NCCI or the State Rating Bureau. In the event the insurance company does not agree with the right classification, NCCI and the State Rating Bureaus have an appeal process in place where an employer can appeal an insurer’s classification determination directly to NCCI or the State Rating Bureau. We know NCCI and the State Rating Bureaus. We are confident in our abilities to put forth a powerful case for the right classification. If the rating organization rules in favor of the policyholder, the insurance company must correct the classification and the resulting premium calculation.

What We Do, Step Four: Appeal to Your State Department of Insurance. Additionally, a number of State Departments of Insurance have an appeal process as well. That is to say, absent policyholder success before NCCI or the State Rating Bureau, a second appeal is available to the State Department of Insurance. As above, we are likewise confident in our abilities to work with all state Department of Insurance. We are former state insurance regulators and understand the process. Again, if the State Department of Insurance rules in favor of the policyholder, the insurance company must correct the premium calculation – in the favor of the policyholder.

What We Do: Step Five: Advocate Your Case. Your insurance policy is a contract between you and your insurance company. If your insurance company is not charging a premium allowed by the policy, the supporting rating manuals, and the filed rating factors, we will advocate on your behalf and take the matter to the next higher authority. We will directly apply our high level firepower to the case.

Ready to Work for You Now. This team is prepared now - as in today – to begin working with you.  Please contact Bill Hager at 561-306-5072 or bhager@expertinsurancewitness.com for more information. To determine whether you are paying too much premium because of erroneous experience mod calculations, too much because of erroneous classifications: in short too much premium.


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