|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?
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 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 experience-rating years.
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.
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 occupational diseases.
The remaining premium is used to pay compensation and medical benefits for injured workers' claims.