RULE VI – RATING VALUES AND PREMIUM DETERMINATION

1. PCRB Loss Cost
   PCRB Loss Costs – Dollar amounts per unit of exposure attributable to the payment of losses under workers compensation and employers liability coverages, filed by the PCRB based on the aggregate experience of all PCRB members and approved by the Insurance Commissioner.
2. Disease Or Radiation Loading
   a.  A supplemental disease loading (e.g. Code 0066) may apply to certain basic classifications (e.g. Code 447). The supplemental disease loading is an additional charge. It is not included within the rating value of the basic classification to which it is assigned. Once authorized, a supplemental disease loading may only be removed upon approval of the Pennsylvania Compensation Rating Bureau.
   b.  The Loss Costs applicable to the basic classifications without a corresponding supplemental disease loading include the usual exposure to diseases associated with those classifications.
   c.  A supplemental occupational disease or radiation loading may be applied to the carrier rate for any individual business where the occupational disease or radiation hazard is abnormal, subject to approval by the Pennsylvania Insurance Commissioner. When a carrier plans to apply for the supplemental loading, the carrier shall supply the PCRB with an inspection report either by an insurance carrier, Department of Labor and Industry or an outside source which supports the abnormal disease or radiation exposure. The carrier shall also recommend a value for the supplemental loading. The request and supporting documentation shall be forwarded by the PCRB to the Insurance Commissioner. Upon approval by the Insurance Commissioner, the supplemental loading shall be published by       the PCRB on the business’ PCRB data card for a minimum of one year. The supplemental loading may be removed only by an inspection report performed by an insurance company, Department of Labor and Industry or another agency evidencing the abnormal exposure no longer exists. The PCRB shall also forward this request and documentation to the Insurance Commissioner for review and action. The supplemental disease or radiation loading is non-ratable in the experience and retrospective rating plans. No supplemental occupational disease or radiation loading shall be used absent explicit approval from the Insurance Commissioner.
3. Premium Adjustment Factor

4. Experience Rating Factor

5. Terrorism
   Premium for Terrorism is calculated on the basis of total payroll according to Rule V. The premium charge is calculated by dividing a risk’s total payroll by $100 and multiplying the result times the carrier’s rating value. This premium is applied after standard premium and is not subject to any other modifications, including, but not limited to, premium discount, experience rating, merit rating, schedule rating, or retrospective rating. Non-Payroll exposures are not subject to premium charges for Terrorism. Policies issued on an “If Any” basis will not be charged this premium, unless premium develops during the policy term or at audit. Per capita charges are not subject to premium for Terrorism.

   Terrorism shall be separately stated on the Standard Policy and shall be designated to Code 9740.

6. Catastrophe (other than Certified Acts of Terrorism)
   Premium for Catastrophe (other than Certified Acts of Terrorism) is calculated on the basis of total payroll according to Rule V. The premium charge is calculated by dividing a risk’s total payroll by$100 and multiplying the result times the carrier’s rating value. This premium is applied after standard premium and is not subject to any other modifications, including, but not limited to, premium discount, experience rating, merit rating, schedule rating, or retrospective rating. Non- payroll exposures are not subject to premium charges for Catastrophe (other than Certified Acts of Terrorism). Policies issued on an “If Any” basis will not be charged this premium, unless premium develops during the policy term or at audit. Per capita charges are not subject to premium for Catastrophe (other than Certified Acts of Terrorism).

   Catastrophe (other than Certified Acts of Terrorism) shall be separately stated on the Standard Policy and shall be designated to Statistical Code 9741.

7. Employer Assessments Pursuant to Act 57 of 1997Act 57 of 1997 requires that “… the assessments for the maintenance of the Subsequent Injury Fund, the Workmen’s Compensation Supersede as Fund and the Workmen’s Compensation Administration Fund under sections 306.2, 443 and 446 of the act of June 2, 1915 (P.L. 736, No.338), known as the “Workers’ Compensation Act, shall no longer be imposed on insurers but shall be imposed, collected and remitted through insurers in accordance with regulations promulgated by the Department of Labor and industry.”

   In compliance with the above referenced provisions of Act 57 of 1997, the insurance carrier issuing any Standard Policy providing workers compensation insurance other than Coal Mine under the Workers’ Compensation Act in Pennsylvania shall impose on and collect from the employer/entity insured thereunder an Employer Assessment computed according to the following formula:

   Employer Assessment equals Act 57 of 1997 Employer Assessment Factor times Employer Assessment Premium Base.

   The Employer Assessment shall be computed, imposed and collected consistent with the following definitions of terms:

   Act 57 of 1997 Employer Assessment Factor – a factor expressed to four decimal places proposed by the Pennsylvania Compensation Rating Bureau and approved by the Pennsylvania Insurance Commissioner for the specific purpose of computing employer assessments in conformance with Act 57of 1997.

   Employer Assessment Premium Base – Calculation of Employer Assessment Premium Base proceeds by adding back to the total policy premium the amount of any applicable Small Deductible Premium Credit or Large Deductible Premium Credit. Small or Large Deductible Premium Credits include either of the following statistical codes in Pennsylvania:

   9663
   9664

   Employer Assessments imposed, collected and remitted pursuant to Act 57 of 1997 shall be separately stated on the Standard Policy and shall be designated by Statistical Code 0938.

   For reference purposes, two examples of the intended determination of the appropriate Employer Assessment Base consistent with this rule are shown below. The first example presents a risk for which a deductible credit applies before experience modification. The second example presents a risk for which a deductible credit applies after experience modification.

   Example: Deductible Credit Before Experience ModificationHypothetical Risk Insured in Classifications 665, Painting and Decorating and 953, Clerical Office. Risk has taken a small deductible policy, and qualifies for Experience Rating, a Schedule Rating Credit, a Pennsylvania Construction Classification Premium Adjustment Credit and a Certified Safety Committee Credit. Individual rating values are selected values used only for purposes of illustrating the derivation of the appropriate Employer Assessment Base given the respective amounts of premium components shown and are not intended to relate to any specific carrier or insured’s actual market premium.

    

   Class Code	Exposure Payrolls	Carrier Rate	Manual Premium
   665	$255,000	$7.84	$19,992
   953	48,000	0.24	115
   		Total Manual Premium:	$20,107
   		Deductible Credit Factor:	0.163
   		Deductible Premium Credit (Code 9664):	$3,227
   		Total Subject Premium:	$16,830
   		Experience Modification:	0.930
   		Total Standard Premium:	$15,652
   		Schedule Rating Credit Factor:	0.250
   		Schedule Rating Credit (Code 9887):	$3,913
   		Standard Premium After Schedule Rating:	$11,739
   		Certified Safety Committee Credit Factor:	0.05
   		PCCPAP Credit Factor:	$587
   		PCCPAP Premium Credit:	0.25
   		Premium Subject to Premium Discount:	$2,935
   		Premium Discount:	$351
   		Final Policy Premium:	$7,866

   Employer Assessment Base:
   Final Policy Premium plus Deductible Premium Credit
   (Stat Code 9664)
   or
   7,866 + $3,277 = $11,143

   Employer Assessment:
   Employer Assessment Base x Employer Assessment Factor, rounded to nearest whole dollar.

   Example: Deductible Credit After Experience Modification

   Hypothetical Risk Insured in Classifications 665, Painting and Decorating and 953, Clerical Office. Risk has taken a large deductible policy, and qualifies for Experience Rating, a Schedule Rating Credit, a Pennsylvania Construction Classification Premium Adjustment Credit and a Certified Safety Committee Credit. Individual rating values are selected values used only for purposes of illustrating the derivation of the appropriate Employer Assessment Base given the respective amounts of premium components shown and are not intended to relate to any specific carrier or insured’s actual market premium.

   Class Code	Exposure (Payrolls)	Carrier Rate	Manual Premium
   665	$255,000	$7.84	$19,992
   953	48,000	0.24	11
   		Total Manual Premium:	$20,107
   		Experience Modification:	0.930
   		Total Standard Premium:	$18,700
   		Schedule Rating Factor:	0.250
   		Schedule Rating Credit (Code 9887)	$4,675
   		Standard Premium After Schedule Rating:	$14,025
   		Certified Safety Committee Premium Credit:	$701
   		PCCPAP Credit Factor	0.25
   		PCCPAP Premium Credit:	$3,506
   		Standard Premium After PCCPAP:	$9,818
   		Deductible Credit Factor:	0.600
   		Deductible Premium Credit (Code 9663):	$5,891
   		Premium Subject to Premium Discount:	$3,927
   		Premium Discount:	$0
   		Final Policy Premium:	$3,927

   Employer Assessment Base:
   Final Policy Premium plus Deductible Premium Credit
   (Stat Code 9663)

   or
   $3,927 + $5,891 = $9,818

   Employer Assessment:
   Employer Assessment Base x Employer assessment factor, rounded to nearest whole dollar.

1. Expense ConstantExpense Constant (if any) is determined by individual carriers’ rating values. It applies to every policy and it covers expenses such as those for issuing, recording and auditing, which are common to all workers compensation policies regardless of size.
2. Minimum PremiumMinimum Premium (if any) is determined by individual carriers’ rating values. It is an expression of the lowest premium amount for which a single risk can be written and carried for any period of time.
3. Premium DiscountPremium Discount (if any) is determined by individual carriers’ rating values. It recognizes that the relative expense of issuing and servicing larger premium policies is less than for smaller policies.
4. Retrospective Rating Factor

Premium for each classification shown on the policy is determined by multiplying the basis of premium by the carrier rate dividing by 100

All premiums shall be shown to nearest dollar. A remainder of $.50 shall be rounded to next higher dollar.

1. If the risk is subject to experience rating, the experience rating modification shall be shown in Item 4 of the Information Page and applied to the premium in accordance with the Experience Rating Plan Section.
2. Copies of Experience Rating Calculationa.  The insurance carrier is furnished with the experience rating calculation. Subsequent insurance carriers may obtain copies of the experience rating calculation            by way of special service at the appropriate charge.b.  The PCRB shall furnish to any insured employer upon his written request, a copy of the experience rating calculation of that employer at an appropriate charge.c.  The insurance carrier of record shall be furnished with an experience rating calculation established by the Experience Rating Procedure not more than 90 days           prior to the effective date of the rating.

Additional rating procedures are in Rules XII and XIII for insurance for employers subject to the U.S. Longshore and Harbor Workers’ Act, the Federal Employers Liability Act and Admiralty Law.

Pennsylvania and Delaware Premium Algorithm Preface:

The computation of workers compensation premium includes a broad complement of potential rating values, pricing programs and other similar or related variables. To the extent that these component parts of premium determination may be applied in a prescribed sequence and using defined formulas and/or relationships, several potential benefits arise including the following:

• Competitive differences within the marketplace can be more clearly defined and consistently applied;
• Similarly situated risks can receive comparable treatment with respect to specific rating values, pricing programs or other factors, increasing the equity of the marketplace;
• Analysis of the effects of various components of overall premium determination can be better understood and more intelligently compared across carriers, states and/or time;
• In the event that new pricing programs or other factors are introduced in the future, the defined existing formulas can provide a consistent basis for the development of programs and system procedures within the workers compensation industry.

Updates optional use November 26, 2002. Mandatory use for policies effective on or after October 1, 2004. Delaware and Pennsylvania Workers Compensation Premium Algorithm Premium Calculation Algorithm