Section VII - Premium Algorithm
Premium Algorithm
Pennsylvania Premium Algorithm Preface:
Mandatory use for policies effective on or after January 1, 2015.
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.
| Line # | Item Name | Associated Statistical Code | Line # | Source & Derivation | |
|---|---|---|---|---|---|
| (1) | Classification | xxxx | (1) | Carrier value | |
| (2) | Exposure | xxxx | (2) | Risk characteristic | |
| (3) | Carrier Rating Value | xxxx | (3) | Carrier value | |
| (4) | Classification Manual Premium | (4) | (2)/100x(3) if classification has payroll exposure. Special procedures apply to non- payroll classes | ||
| (5) | Total Policy Manual Premium | (5) | Sum of (4) for all classifications on the policy | ||
| (6) | Employer Liability Increased Limits Factor | xxxx | (6) | Carrier value | |
| (7) | Employer Liability Increased Limits Premium Charge | (7) | (5)x[(6) expressed as a decimal] | ||
| (8) | Minimum Premium Employer Liability Increased Limits | 9848 | (8) | Carrier value | |
| (9) | Minimum Premium Employer Liability Increased Limits Premium Charge | 9848 | (9) | [(8)-(7)] if (7)0, otherwise zero | |
| (10) | Subject Deductible Credit Percentage | 9664 | (10) | Carrier value | |
| (11) | Subject Deductible Premium Credit | 9664 | (11) | [(5)+(7)+(9)]x[(-10) expressed as a decimal] | |
| (12) | Waiver of Subrogation Charge | 0930 | (12) | Carrier value - subject to experience modification | |
| (13) | Waiver of Subrogation Premium | 0930 | (13) | Value from Line (12) | |
| (14) | Total Subject Premium | (14) | [(5)+(7)+(9)+(11)+(13)] | ||
| (15) | Experience Modification | 9898 | (15) | Zero for non-experience-rated risks | |
| (16) | Modified Premium | (16) | (14)x(15) | ||
| (17) | Merit Rating Credit Factor | 9885 | (17) | Zero if Merit Rating Credit does not apply | |
| (18) | Merit Rating Credit | 9885 | (18) | (14)x[(-17) expressed as a decimal] | |
| (19) | Merit Rating Neutral Factor | 9884 | (19) | Zero whether Merit Rating Neutral Adjustment (no credit or debit) does or does not apply | |
| (20) | Merit Rating Neutral Adjustment | 9884 | (20) | (14)x[(19) expressed as a decimal] | |
| (21) | Merit Rating Debit Factor | 9886 | (21) | Zero if Merit Rating Debit does not apply | |
| (22) | Merit Rating Charge | 9886 | (22) | (14)x[(21) expressed as a decimal] | |
| (23) | Premium After Experience Modification or Merit Rating | (23) | (16) if Experience-Rated, [(14)+(18)+(20)+(22)] if Merit-Rated, (14) if Non-Rated | ||
| (24) | Non-Ratable Classifications | xxxx | (24) | Carrier Value | |
| (25) | Non-Ratable Classifications Exposure | (25) | Portion of payroll exposure subject to Non-Ratable Classifications | ||
| (26) | Non-Ratable Classification Rating Value | xxxx | (26) | Carrier Value | |
| (27) | Non-Ratable Classification Premium | (27) | (25)/100x(26) [based on applicable Non- Ratable Classification exposure] | ||
| (28) | Workfare Program Employees Exposure (PA) | 0982 | (28) | Number of person weeks. A partial workweek for any worker to be counted as 1 person week. | |
| (29) | Workfare Program Employees Rating Value (PA) | 0982 | (29) | Carrier Value | |
| (30) | Workfare Program Employees Premium (PA) | 0982 | (30) | (28) x (29) | |
| (31) | Non-Ratable Classification Premium Total | (31) | Sum of all (27)+(30) premiums | ||
| (32) | Non-Ratable Classification Increased Limits Factor | xxxx | (32) | Carrier value | |
| (33) | Non-Ratable Classification Increased Limits Premium Charge | xxxx | (33) | (31) x [ (32) expressed as a decimal] | |
| (34) | Minimum Premium Non-Ratable Classification Increased Limits | 9848 | (34) | Carrier value | |
| (35) | Minimum Premium Non-Ratable Classification Increased Limits Premium Charge | 9848 | (35) | [(34)-(33)] if (33) 0, otherwise zero | |
| (36) | Premium Before Schedule Rating | (36) | (23)+(31)+(33)+(35) | ||
| (37) | Schedule Rating Plan Adjustment Factor | 9887/9889 | (37) | Carrier value - use 9887 for schedule credits and 9889 for schedule debits | |
| (38) | Schedule Rating Plan Premium Adjustment | 9887/9889 | (38) | (36)x[(37) expressed as a decimal]. For schedule credits Line (38) will be negative | |
| (39) | Certified Safety Committee Credit Factor (PA) | 9890 | (39) | Credit applies if insured is certified. | |
| (40) | Certified Safety Committee Premium Credit (PA) | 9890 | (40) | [(36)+(38)]x[(-39) expressed as a decimal] | |
| (41) | Workplace Safety Program Credit Factor (DE) | 9880 | (41) | Credit applies if insured qualifies | |
| (42) | Workplace Safety Program Premium Credit (DE) | 9880 | (42) | [(36)+(38)]x[(-41) expressed as a decimal] | |
| (43) | Construction Classification Premium Adjustment Program Credit Factor | 9046 | (43) | Based on wage level(s), application to rating organization | |
| (44) | Construction Classification Premium Adjustment Program Premium Credit | 9046 | (44) | [(36)+(38)]x[(-43) expressed as a decimal] | |
| (45) | Drug-Free Workplace Factor | 9846 | (45) | Carrier value | |
| (46) | Drug-Free Workplace Credit | 9846 | (46) | [(36)+(38)+(42)+(44)]x[(-45) expressed as a decimal] | |
| (47) | Managed Care Factor | 9874 | (47) | Carrier value | |
| (48) | Managed Care Credit | 9874 | (48) | [(36)+(38)+(42)+(44)+(46)]x[(-47) expressed as a decimal] | |
| (49) | Package Credit Factor | 9721 | (49) | Carrier value | |
| (50) | Package Credit | 9721 | (50) | [(36)+(38)+(42)+(44)+(46)+(48)]x[(-49) expressed as a decimal] | |
| (51) | Premium After Managed Care and Package Credit If Applicable | (51) | [(36)+(38)+(40)+(42)+(44)+(46)+(48)+(50)] | ||
| (52) | Assigned Risk Surcharge Factor (DE) | 0277 | (52) | May apply to some or all assigned risks based on plan and characteristics of individual insured | |
| (53) | Assigned Risk Premium Surcharge (DE) | 0277 | (53) | (51)x[(52) expressed as a decimal] | |
| (54) | Deductible Credit Factor | 9663 | (54) | Carrier value | |
| (55) | Deductible Premium Credit | 9663 | (55) | [(51)+(53)]x[(-54) expressed as a decimal] | |
| (56) | Loss Constant | 0032 | (56) | Carrier value - may vary based on risk premium size | |
| (57) | Loss Constant Charge | 0032 | (57) | Line (56) if applicable | |
| (58) | Short Rate Cancellation Factor | 0931 | (58) | Carrier value - zero if short rate cancellation does not apply | |
| (59) | Short Rate Premium | 0931 | (59) | [(51)+(53)+(55)+(57)]x[(58)-1.0000] if (58)>0, otherwise zero | |
| (60) | Expense Constant | 0900 | (60) | Carrier value if applicable | |
| (61) | Expense Constant Charge | 0900 | (61) | Line (60) | |
| (62) | Minimum Premium | 0990 | (62) | Carrier value | |
| (63) | Minimum Premium Charge | 0990 | (63) | If (62)>[(51)+(53)+(55)+(57)+(59)+ (61)], (62)-[(51)+(53)+(55)+(57)+(59)+(61)], otherwise zero | |
| (64) | Unit Statistical Report Total Standard Premium | (64) | [(51)+(53)+(55)+(57)+(59)+(63)] | ||
| (65) | Premium Discount Amount | 0063/0064 | (65) | Carrier value based on [(51)+(53)+(55)+(57)+ (59)+(63)] | |
| (66) | Additional premium Waiver of Subrogation (flat charge) | 9115 | (66) | Carrier value(s) | |
| (67) | Terrorism | 9740 | (67) | (Total payroll/100) x carrier rating value | |
| (68) | Catastrophe (other than Certified Acts of Terrorism) | 9741 | (68) | (Total payroll/100) x carrier rating value | |
| (69) | Total Policy Premium Subject to Employer Assessment | (69) | (61)+(64)-(65)+(66)+(67)+(68) | ||
| (70) | Employer Assessment Factor Pursuant to Act 57 of 1997 (PA) | 0938 | (70) | PCRB value for the specific purpose of computing employer assessments | |
| (71) | Employer Assessment Amount Pursuant to Act 57 of 1997 (PA) | 0938 | (71) | [(69)-(11)-(55)]x(70) NOTE: Cells (11) and (55) are credits. Subtracting these credits as shown effectively adds the premium reduction given for deductible coverage back into the premium for purposes of calculating employer assessments | |
| (72) | Audit Noncompliance Charge | 9757 | (72) | Carrier Value x (69) | |
| (73) | Payments to Paid Furloughed Employees Due to Covid-19 | 1212 | (73) | Risk characteristic |