This program is intended for insureds who, while not qualified as self-insurers, nevertheless have the financial ability to handle some losses they incur, subject to an aggregate amount. This program will allow these insureds to elect an amount of loss per claim and an overall aggregate amount of all losses they can absorb and purchase insurance only for losses above those predetermined amounts. The amount of premium credit will vary by size of risk. The election must be made prior to the effective date of the policy. This program shall be made available by
the Massachusetts Workers Compensation Assigned Risk Pool and insurers to every insured with a workers compensation policy which provides coverage in Massachusetts. This program is not
available for insureds with retrospectively rated policies.
Deductible Amount per Claim
A $2,500 per claim deductible amount shall apply separately to each claim for bodily injury by
accident or disease, subject to the aggregate deductible amount. The insurer shall pay all benefits required under the provisions of law directly to the appropriate party. This deductible does not
apply to claims for employers’ liability. Subsequent to insurer payment of any amount which falls
within the $2,500 deductible limit on any claim, the insurer shall seek reimbursement from the policyholder.
Aggregate Deductible Limit for Policy
The aggregate deductible limit is the most that the policyholder must reimburse the insurer for the sum of all medical and indemnity benefits compensable under law for each policy period. Failure to make complete reimbursement for deductibles within thirty days of receipt of a bill from the insurer shall constitute non-payment of premium and be grounds for termination of the policy.
The basis for determining the aggregate deductible limit, applicable at policy inception, is calculated as follows:
Type of Insured Basis for the Aggregate Limit at Policy Inception Experience Rated Adjusted Manual Premium Estimated at Policy Inception x
Experience Modification Factor
Merit Rated Adjusted Manual Premium Estimated at Policy Inception x Merit Rating Factor
Neither Experience Rated
nor Merit Rated
Adjusted Manual Premium Estimated at Policy Inception
If the “Basis for the Aggregate Limit at Policy Inception” is less than or equal to $200,000, an aggregate limit of $10,000 is to be offered.
If the “Basis for the Aggregate Limit at Policy Inception” is greater than $200,000, an aggregate limit equal to 5% of “Basis for the Aggregate Limit at Policy Inception” is to be offered. For example, if an employer has adjusted manual premium of $240,000 and an experience modification factor of 1.25, the “Basis for the Aggregate Limit at Policy Inception” is $300,000 ($240,000 x 1.25) and an aggregate limit of $15,000 ($300,000 x .05) would apply.
SPECIAL PROGRAMS AND EMPLOYERS LIABILITY INSURANCE MANUAL
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Premium Credit Factor at Policy Inception
Use the “Basis for the Aggregate Limit” to determine the premium reduction percentage. The
premium reduction for claim/aggregate deductible coverage is obtained by applying the appropriate premium reduction percentage to the insured's Adjusted Manual Premium, i.e., prior
to the application of any experience modification or merit rating adjustment. These calculations
are made prior to the application of any Premium Discount which is calculated using the Standard Premium.
Refer to the Miscellaneous Values section of Part Three - Basis for the Aggregate Limit, Claim Deductible and Aggregate Deductible amounts, and corresponding Premium Reduction Percentages.
The premium credit amount under this program shall be reported under statistical code 9664. The credit amount is included in Subject Premium.
Impact of Multiple Experience Modification Factors or Merit Rating Factors
If more than one experience modification factor applies to a policy period, calculate the “Basis for the Aggregate Limit” by doing the following:
• Step 1: For each experience modification factor, multiply the adjusted manual premium, associated with the experience modification, by the experience modification.
• Step 2: Sum the results from Step 1.
An analogous procedure would apply if multiple merit rating factors applied to a policy period. Impact of a Revised Experience Modification or Merit Rating Factor
If an experience modification factor or a merit rating factor is revised, recalculate the “Basis for the Aggregate Limit at Policy Inception” using the adjusted manual premium estimated at policy inception and the revised experience modification factor or merit rating factor.
Impact of Premium Audit
If Adjusted Manual Premium increases as a consequence of an audit, recalculate the “Basis for the Aggregate Limit” using the new adjusted manual premium. Use the revised “Basis for the Aggregate Limit” to determine the applicable aggregate limit and the applicable deductible premium credit factor.
If the adjusted manual premium decreases as a consequence of an audit, no adjustment is made to the values determined at policy inception for the aggregate limit and the deductible premium credit factor.
The entire cost of all claims relative to a particular insured shall be included in the experience data used to determine the experience modification of that insured regardless of the requirement that reimbursement must be made for the deductible amount on any claim. In order to maintain integrity in experience and ratemaking data bases, losses for which the deductible applies shall be reported on a gross basis prior to the application of the deductible amount. This methodology applies for the reporting of data via the Workers’ Compensation Unit Statistical Plan, Detailed Claim Information, and the Aggregate Financial Call reporting.
Coverage under this program is to be effected by the attachment of the Massachusetts Benefits Claim and Aggregate Deductible Endorsement (WC 20 06 03) to the Standard Workers Compensation and Employers Liability Insurance Policy.
AND EMPLOYERS LIABILITY INSURANCE MANUAL SPECIAL PROGRAMS
Original Printing Effective January 1, 2008 Page S-9
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