Successful businesses pride themselves on being nimble, able to accommodate slight shifts in strategy or compliance. Sometimes, though, the rules get shuffled and reset in ways that can truly test an organization’s ability to withstand the stress. Such a time appears to be upon us right now.

The Pennsylvania Compensation Rating Bureau (PCRB) has instituted major changes to its workers compensation “experience modifier” calculation, which take effect today, April 1, 2024. No joke.

These changes, the first since 2004, carry significant impact to the more-than 60,000 businesses with experience mods across the state. Under the new system, businesses with the strongest performance in avoiding employee injuries will benefit the most, while poorer performers will see higher modifiers. Either way, the PCRB changes will certainly increase the financial impact – positively or negatively – of employee injuries on workers compensation modifiers.

Experience modifiers use historical employee injury data to forecast future risks and adjust workers’ compensation premiums accordingly. Prior to the change now taking effect, the modifier calculation included all employee injury costs up to $42,500, with annual modifier fluctuations capped at 25%. However, the PCRB’s new plan aims to reflect each business’s loss ratio more accurately by more directly recognizing the balance between injury costs and paid premiums. Key changes include:

• By lowering the premium threshold for modifier eligibility from $10,000 to $5,000, approximately 21,000 additional businesses will become eligible for experience rating.
• The injury cap will now be based on an employer’s size, ranging from $10,000 to $300,000, replacing the flat $42,500 injury cap. This ensures a modifier that better corresponds to an employer’s actual injury history.
• Effective April 1, 2026, the PCRB will revise swing limits by eliminating the cap on decreases while setting a new 40% cap on increases, as well as a maximum modification formula for each business. This means a business’s modifier can only rise by 40% or up to its calculated maximum, whichever is lower.

Contact the professionals at Evergreen Insurance to understand how these new workers’ compensation guidelines can impact your business. We consider all the angles when advising our customers, and that is never more important than when the rules change.

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Evergreen Insurance, LLC. provides these updates for information only, and does not provide legal advice. To make decisions regarding insurance matters, please consult directly with a licensed insurance professional or firm.