Closed Claim Impact on X-Mod Q & A

Closed Claim Impact on X-Mod

Employer: I have an employee whose claim was settled by Stipulated Award and open lifetime Future Medical Award. The carrier has “administratively closed” the claim since he has not sought medical treatment for more than a year. 

Question: Does this administrative closure mean it no longer impacts my Mod Rate? 

ESM Answer:  Unfortunately, this claim will be used in your X-Mod calculation for 2 more years.

The X-Mod is a rolling 3 years of losses. It is a lagging indicator of your loss history and insurance risk. That means that your X-Mod for policy year 4/1/20-21 of 67% was calculated based on the losses that occurred during the policy years 2018, 2017, and 2016.

Congratulations on your 3 years of low loss history and the credit X-Mod of 67%.

The claim for John Smith occurred in policy year 2018, so it will be included on your    X-Mod for an additional 2 years before it rolls out of the calculation.

In the X-Mod calculation, each claim is capped at a certain dollar level. This maximum reporting value is different for each employer based on payroll and class codes. For your company, XYZ Co., the maximum dollar amount per claim that is used in the X-Mod calculation is $26,000. (called the Primary Threshold and is calculated annually). 

This claim for John Smith closed at $29,306, so this claim will be used in the X-Mod calculation at the $26,000 Primary Threshold value for the next 2 years, even though it is now closed.

That one claim increased your X-Mod by 20 points. If you had no losses for 3 years your loss-free X-Mod would be 48%. (the floor, or loss free rating, can vary from year to year)

Maybe it helps to see that explanation graphically by Policy Year.

I hope that explains it. It can be a confusing system.

Keep up your safety efforts and loss prevention and congratulation on your loss-free 2019 and 2020 policy years!