The Connection Magazine A.I.M. Mutual Fall 2016 | Page 31

AGGRAVATED INEQUIT Y

Bob Cella
Bob Cella is Vice President for
A.I.M. Mutual and has more than
30 years of experience in workers
compensation underwriting,
operations and commercial sales.

THE CASE OF THE
AGGRAVATED INEQUITY
What You Need to Know

IT’S not that it’s a mystery, at least not in the cloak-and-dagger
sense. Rather, it’s elusive. It’s not always easy to find, and wait too
long and you might miss it.
But identifying an aggravated inequity situation is definitely
worthwhile. It results in a reduction of the experience modification
as of the next rating effective date for your clients. And depending on
the premium, an employer could see a drop of one to three percentage
points between the experience modification and All Risk Adjustment
Program (ARAP), if applicable.
Most requests for revisions under the Aggravated Inequity
Rule are made by the employers and their agents. However, A.I.M.
Mutual provides the service on behalf of our policyholders and
broker partners whenever claims qualify for a revision. (Carriers
that reserve, close, and report the claims that qualify for a revision
under the Aggravated Inequity Rule are allowed to initiate the
request.)

How Aggravated Inequity Works
In Massachusetts, insurance carriers annually report statistical
data to the Workers’ Compensation Rating and Inspection Bureau
of Massachusetts (WCRIBMA), including workers’ compensation
classifications, audited payrolls, and claim valuations (both paid
and reserves) for each of their policyholders. The unit statistical
reports (USRs) are valued as of a specific date—six months after
the expiration of the insured’s policy.
An aggravated inequity results from a claim that closes
between the valuation date of the USRs and the next experience
rating effective date. The claim has to be for an amount less than
the amount previously reported on the USRs.
Certain conditions must be met, as outlined in the MA
Experience Rating Plan Manual published by the National Council
on Compensation Insurance (NCCI) on behalf of the WCRIBMA:

FALL 2016

•

One or more claims reflected in an issued experience
modification must be an open claim, and the valuation
reflected in the experience modification must include
reserves;
• The employer has learned that such claims have since
closed; and
• Such claims closed for amounts less than the reserved
amounts.
When all these conditions have been satisfied, the
WCRIBMA must be notified and asked to revise the
experience modification already issued. The revised
modification will then reflect the closed value of the claim
rather than the previously reported incurred value (including
reserves).
And yes, it’s all time sensitive. Requests for revisions
“must be received by the Bureau within 30 days of the rating
effective date or the rating issue date (whichever is later), or
within a reasonable time thereafter with good cause shown”
according to the NCCI manual.
The Aggravated Inequity Rule as spelled out in
Massachusetts is rather unusual. Only Florida has a similar
rule. Typically, in most states, revisions to previously reported
USRs are only allowed in cases of clerical error and in thirdparty recoveries. The Massachusetts Aggravated Inequity
Rule allows for a more accurate experience modification as a
result of a change in claim valuation due entirely to the timing
of the data reporting.
Aggravated Inequity is a tool that works best when the
employer, agent, and insurance carrier work together to close
claims as quickly as possible and return injured employees
back to productive work.

SPRING 201631 31