The Pennsylvania Compensation Rating Bureau (PCRB) introduced major changes to workers' compensation Experience Modifier calculation, which will take effect from April 1, 2024. These changes are significant for employers, marking the first substantial update since 2004.

Impacting the 60,000+ businesses with experience mods in Pennsylvania, some credit modifiers will transition to surcharge modifiers under the new system. In short, best-performing businesses can anticipate lower modifiers, while poorer performers will see higher modifiers. Changes will amplify the financial implications of employee injuries on mods.

Experience Modifiers use historical employee injury data to forecast future risks and adjust workers' compensation premiums accordingly. Until now, the modifier calculation included all employee injury costs up to $42,500, with annual modifier fluctuations capped at 25%. However, the PCRB's new plan aims to reflect each business's loss ratio more accurately—the balance between injury costs and paid premiums.

Key changes include:

• Lowering the premium threshold for modifier eligibility from $10,000 to $5,000 premium makes 21,000+ additional businesses eligible for experience rating.

• The injury cap will now be variable, tied to an employer's size (expected losses), ranging from $10,000 to $300,000 caps instead of the flat $42,500. This ensures a modifier that better corresponds to an employer's actual injury history.

• Effective April 1, 2026, the PCRB will revise swing limits by eliminating the cap on decreases while setting a new +40% cap on increases alongside a unique maximum modification formula for each business. This means a business's modifier can only rise by 40% or up to its calculated maximum, whichever is lower.

It's essential for businesses to stay informed and consult with a Certified WorkComp Advisor to understand these changes and strive for the lowest possible mod. This proactive approach is critical to managing Pennsylvania's new landscape of workers’ compensation costs.