Updated News: Big Changes Started 4/1/24 for the PCRB Experience Rating Plan
The Pennsylvania Compensation Rating Bureau (PCRB) changed the manner in which experience modifications factors are calculated. This change took effect for policies renewing after April 1, 2024. Outlined below are the key changes:
The eligibility threshold will be lowered from $10,000 to $5,000.
Result: This means smaller businesses who were not previously eligible for the plan will be eligible under the recent changes.
Credibility values for smaller risks will be increased significantly, with the minimum credibility increasing from 28.3% to 69.0% for the smallest eligible risks.
Result: Higher emphasis on loss history. Better loss history will get rewarded.
The maximum primary loss value for a single claim will vary from $10,000 for the smallest risks to $300,000 for the largest risks. Previously, these amounts were fixed at $42,500 regardless of risk size and loss potential.
Result: Previously, losses which were capped at $42,500. Now, companies with larger losses will get punished. This will affect larger companies more significantly as their cap will be higher. Organizations should be focused on mitigating larger losses with the help of their broker’s claims advocacy professionals.
The new capping rule will replace the current +/-25% swing limits and the secondary capping rule. It will introduce a formula-driven maximum modification. Additionally, the proposed plan will retain only an upward swing limit of +40% and eliminating secondary capping.
Result: Previously the mod could only swing +/- 25% in any given year. The new cap is +/40%.
Therefore, the penalty / opportunity is greater than ever.
As stated before, there will be a two-year transition rule that will be implemented from 4/1/2024 to 3/31/2026 to manage any substantial changes resulting from plan adoption, both upward and downward movement. During this period, the current capping rule will remain in effect along with the use of the maximum modification formula.
KMRD has the resources and tools to predict these changes for your business!
If you are interested in reading the PCRB Circular just click here.
Ingrid Dunlap, CIC
Ingrid coordinates risk management and insurance brokerage for her clients using KMRD's unique servicing model.
