OhioBWC - Basics: Job (manual) Classification - NCCI Conversion
Job (manual) classification - NCCI conversion
The rate an employer pays to insure an employee in case of a work-related
injury is based on the industry pursuit of the employer. BWC reviews the
information on the coverage application and assigns manual classifications to the
employer that correspond with the work being done and the risk of injury due to
hazards associated to that work.
For example, the manual classification for an office worker carries a lower rate
than the manual classification for a construction worker. This is because there is
less hazard and risk of injury for the office worker and claims costs for office
workers are typically lower than claims costs for construction workers.
BWC converted its manual classifications to those established by the National Council
on Compensation Insurance (NCCI). BWC implemented this change, mandated by law, over a
four-year period, 1996 through 2000. BWC converted to the NCCI classification system because
it represents a more equitable premium rate structure than the previous system. It also is
a more accurate and understandable system, which better classifies employers
by their predominant business. As of January 2002, 42 states and the District of Columbia use the
NCCI classification system.
The Ohio Constitution requires BWC to classify industries according to the degree
of hazard in the business. This is accomplished when BWC assigns manual
classifications to the employer based on the description of work being performed
(this information is taken from the coverage application). Each manual
classification has its own base premium rate.
How are base premium rates determined?
- Base rates are determined by claims costs for a particular classification
industry wide and not just from one employer's experience.
- BWC's actuarial department analyzes the costs of all claims in each manual
classification during the oldest four of the most recent five years.
- This information is used to project the cost of claims that will occur the
next year for each manual classification.
- BWC's administrator uses this actuarial data to make recommendations for
premium rates and assessments.
- Final approval of premium rates comes from the BWC Board of Directors.
- New rates for private, state-fund employers are effective each July 1 and
new rates for public, state-fund employers are effective each January 1.
Base-rated employers pay their workers' compensation premiums according to
base rates recommended by BWC's administrator and approved by the BWC
Board of Directors.
- Base rating allows employers to pay workers compensation premiums based on
the average costs of claims filed against all employers in like industries,
utilizing the same manual classifications.
- Manual classifications are assigned based on the description of work being
performed (this information is supplied by the employer on the initial coverage
- The base rate assigned to a particular manual classification is determined
by a review of combined claims costs in the experiences of all employers
associated to that manual classification.
- An employer's experience is a statistical picture of claims costs during
the oldest four of the most recent five-year period.
- BWC limits the average base-rate increase or decrease to a 25-percent yearly
maximum. This provides relief from the occasional fluctuation that may occur
from one year to the next.
- Approximately 70 percent of all Ohio employers are base-rated.
Experience rating is an incentive system to promote safe working conditions.
Employers who become experience rated can be credit-rated or penalty-rated,
depending on the claims cost record of their particular business.
How does BWC determine if an employer should be experience rated?
An employer with a better-than-average loss experience, compared to others in the
same classification, will receive a credit and pay a rate lower than the base rate.
The maximum credit in policy year 2012 for private employers is 53 percent while for public employers
it's 65 percent.
- BWC reviews payroll information received from every employer.
- Associated to every manual classification rate is an expected loss rate.
- If an employer's payroll and manual classification rates are such that the
expected loss reaches $2,000 or more, then that employer automatically becomes
An employer with a bad loss experience, compared to others in the same
classification, will be penalized and pay a rate higher than the base rate.
There is no limit on the maximum penalty.
Smaller employers are excluded from experience rating for their own benefit. One
serious accident could cause a smaller employer's rates to increase severely, and
the employer's premium stability could be dramatically altered for the next four
Approximately 30 percent of Ohio's employers are experience-rated.
An employer's experience is a statistical snapshot of claims costs for the oldest
four of the most recent five-year period.
Assessments and blended rates
- Each August, BWC provides an
experience exhibit on this website for experience-rated, state-fund
employers. An experience-rated employer is an employer who is expected to have
$2,000 or more in losses.
- The experience exhibit shows all lost-time claims within the experience
period, including compensation awards, medical payments and claim reserves.
- All medical-only claim expenditures are grouped by injury year. Reserves
are not set for medical only claims.
- The exhibit also lists the base rates for each manual classification and
shows any experience modification, the percentage that is applied to the base
rate used to determine premium.
- The experience modification is applied as the result of a credit for an
employer with a better than average loss experience (credit rating) or a penalty
for an employer with a poor loss experience (penalty rating).
The actual rate that appears on the employer's payroll report and is used to
calculate workers compensation premiums is called a blended rate. The blended rate
consists of several assessments added to the premium rate.
The assessments underwrite administrative costs, the operating costs of BWC and the
Industrial Commission of Ohio, and fund the Disabled Workers Relief Fund (DWRF).
The Disabled Workers Relief Fund is for injured workers who have been declared
permanently and totally disabled. DWRF is a supplemental benefit to those injured
workers whose regular benefits have not kept pace with inflation.
There are two separate DWRF assessments. The first DWRF assessment (8 cents per
$100 of payroll) covers injuries that occurred prior to Jan. 1, 1987. BWC bases
the additional DWRF assessment on a percentage of the premium rate. This additional
assessment covers injuries occurring on or after Jan. 1, 1987.
One percent of the premium an employer pays is used to
finance BWC's Division of Safety & Hygiene. The mission of the Division of Safety
& Hygiene is to educate employers to help prevent industrial accidents and
The remaining premium is used to pay compensation and medical benefits for injured