Hawaii Heavy Rate Increase – It's The Medical Severity Stupid

A few weeks ago, I wrote an article on the 27+% rate disparity between the NCCI rated states.  I promised to review why the reason for the 2020 Hawaii heavy rate increase when most states were lowering their advisory rates.

The stupid was me for not looking at the supplemental 2020 info provided by NCCI when I published the original article. The answer was right in front of me.

These two NCCI PDF files provided the information needed to find the answer.   Check them out for reference.

• Hawaii State Advisory Forum November 2020 
• 2020 Supplemental Info 

Wait, hold on, I think the reason was beyond just the medical part of the workers’ compensation claim severity.   Let us look at two charts from the above links.

By the way, NCCI has a map of what states are covered in the State Advisory Forums.   If you operate in any of the states that NCCI covers, you might consider looking at the last State Advisory Forums for those states.   NCCI has a Submit Questions link on the page if you have any questions on the forums.

The Hawaii Heavy Rate Increase Reason in Two Charts

2020 Medical Severity

The chart below shows the spike in medical severity for Hawaii over the last 10+ years.  The chart is from page 9 in from the above first Hawaii NCCI link.

Policy years 2016 and 2018 both show a spike in medical claim severity even though the 2017 policy year indicated a decrease.

NCCI does not often produce a supplement to their State Advisory Forums.  In the case of the 2020 Hawaii information, it produced another group of slides that you will find in the above second NCCI link.

2020 Number of Claims By Type

(c) NCCI

Looking at the above chart, 46% of claims involved indemnity benefits or reserves.   Even if benefits were not paid, the files were reserved by the claims adjusters with indemnity benefits included on the claims.

Comparatively, the regional states and the US indemnity-based claims were 23% and 24%. Hawaii has double the number of indemnity claims than other states.  One could see a Hawaii heavy rate increase coming soon.

With Loss Cost Multipliers, the carriers operating in the Aloha state may reduce some of the rate spikes.  We shall see in 2022 and 2023 if the Hawaii heavy rate increases are lessened by the state.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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