Nev. Workers’ Compensation Insurance Rates to Decrease

November 13, 2003

Nevada’s employers should see a drop in their 2004 premiums for workers’ compensation as a result of the filing submitted by the National Council on Compensation Insurance Inc. approved by Nevada Insurance Commissioner Alice A. Molasky-Arman. Voluntary loss costs should drop an average of 12.3 percent, while the assigned risk rates should decrease an average of 9.1 percent, to be effective Jan. 1, 2004.

Some employers, however, will still face increases up to 12 percent in the voluntary market and 15 percent in the assigned risk program. The new rates will apply to each employer on its normal anniversary rating date.

Molasky-Arman stated, “This is an exciting, positive path that is diverse from the surrounding troubled states that are experiencing a crisis in the workers’ compensation market. Many states face climbing rates. I am happy that is not the case in Nevada, where we are now seeing the wisdom of the methodologies established here.”

The NCCI originally proposed an average decrease of 16.4 percent in the voluntary market. After reviewing the NCCI data, the Division’s actuaries recommended a smaller decrease, because of uncertainties related to the projected loss development patterns, the impact of the adoption of the revised AMA guide and a likelihood of upward revisions to the medical fee schedule.

Loss costs are the part of premium that covers claim expense and claims handling. Each insurer then adds an expense loading sufficient to cover administrative and other expenses. Employers’ actual premiums next year could vary from the average, based on their record of claims and rate classification.

With respect to the assigned risk market, Molasky-Arman approved the elimination of the Simplified Assigned Risk Adjustment Program (SARAP) with a maximum surcharge of 49 percent and replacement of an Assigned Risk Adjustment Program (ARAP) with a maximum surcharge of 25 percent. ARAP, like its predecessor SARAP, applies to risks eligible for experience rating. The intent of ARAP is to provide an additional incentive for businesses to avoid losses, to encourage businesses to find coverage in the voluntary market and to make it more likely that the assigned risk market will be self supporting. Including this change, the proposed overall assigned risk premium level decrease is 15.6 percent.

NCCI, selected as the Commissioner’s rating and advisory organization for workers’ compensation, collects annual data on workers’ compensation claims for the insurance industry.

Insurers providing workers’ compensation coverage in Nevada must subscribe to the NCCI and adopt the revised loss costs when they become effective. Insurers must also file their expense provisions with the Division.

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