Consultants On Workers Compensation Premiums, Audits,
Classification Codes, Experience Modifiers
Pennsylvania Workers' Compensation
In the Keystone State (well, Commonwealth, to be
precise) there are some unique aspects to Workers'
Compensation insurance that employers would
do well to understand. Here are some important
aspects of the Workers' Comp system in
Pennsylvania. We've tried to answer some of the
most common questions. First off, though is
something we here at AIM have discovered that
affects what contractors in Pennsylvania pay for
their Workers Compensation insurance:
A 2012 study by the PCRB (Pennsylvania CompensationRating Bureau) found that 90%
of eligible contractors were missing a
their Workers Compensation insurance.
Now, Advanced Insurance Management specializes in
finding and fixing premium overcharges in Workers
Compensation insurance. We don't sell insurance, we
just recover money back for employers by correcting
mistakes on past policies.
So this PCRB study tells
us that there are many, many contractors in
Pennsylvania who have been overcharged for Workers
Comp insurance in recent years.
And because we are available to work on a contingent-fee basis, we
can check if
a company has been overcharged without it costing
that company anything for our services. We only
earn a fee if we can successfully recover money. No
recovery, no charge.
To talk with us about this and to see if we
can get money back for your company, call us at 800-288-9256. Or email us.
There's no cost for us to check if your company has
been overcharged because of this common error.
Who has to get Workers Compensation coverage
In Pennsylvania, any
has workers, full or part-time, is required to
meet their statutory Workers Compensation obligations by
either getting an insurance policy, or by being approved
as a self-insurer (only practical for large companies)
or by getting coverage from the
State Workers' Insurance Fund (SWIF).
In Pennsylvania, an employer may be excluded from the
requirement to insure its workers’ compensation
liability only if ALL workers employed by it fall
into one or more of the following categories:
- licensed real estate salespersons or associate real
estate brokers affiliated with a licensed real
estate broker or a licensed insurance agent
affiliated with a licensed insurance agency, under a
written agreement, remunerated on a commission-only
basis and qualifying as independent contractors for
State tax purposes or for Federal tax purposes under
the Internal Revenue Code of 1986.
NOTE: unless ALL employees meet one or more of the
above exclusions, you must insure your workers’
compensation liability even if the workers are
working limited hours part-time or are family
members such as your spouse or children.
Employers may request exemption from the provisions of
the Workers’ Compensation Act for any employees who are
members of a recognized religious sect and adhere to its
established tenets or teachings which conscientiously
oppose acceptance of public or private insurance
benefits by filing a "Section 304.2 Application for
Religious Exception of Specified Employees from the
Provisions of the Pennsylvania Workers’ Compensation
Act," concurrently with the appropriate number of
properly executed forms LIBC-14B, "Employee’s Affidavit
and Waiver of Workers’ Compensation Benefits and
Statement of Religious Sect" with the Compliance
Section, Bureau of Workers’ Compensation. If the
Compliance Section grants exemption, the employer may
omit insuring its workers’ compensation liability only with
respect to the particular employees exempted for as long
as the particular employee is a member of and adheres to
the tenets of that religious sect and the sect continues
to conscientiously oppose acceptance of public or
private insurance benefits.
A non-profit corporation may request exclusion of
any of its executive officers who serve voluntarily
and without remuneration. A subchapter S for-profit
corporation may request exclusion of any of its
executive officers who have an ownership interest as
defined by Tax Reform Code of 1971. A subchapter C
for-profit corporation may request exclusion of its
executive officers if they have at least a 5%
interest in the corporation.
To request exclusion of permissible executive
officers from the provisions of the Workers’
Compensation Act, complete and file an "Application
for Executive Officer Exception," form LIBC-509,
concurrently with the appropriate number of properly
executed "Executive Officer’s Declarations," form
LIBC-513. These forms must be filed with the
employer’s insurance carrier if the employer has a
policy covering its other employees. The forms must
be filed with the Compliance Section, Bureau of
Workers’ Compensation if the employer has no other
What About Independent Contractors?
Pennsylvania doesn't require sole
proprietors or partners to cover themselves for
Workers Compensation. (They are required to get
coverage, though, as soon as they have any
employees.) But as in many other states, if another
company hires a sole proprietor or partner who is
operating their own business, the company that hires
them may well end up being charged extra premium by
their own insurance company, if that independent
contractor is uninsured.
It's a bit of a Catch-22--the state says these sole
proprietors and partners don't have to get Workers
Comp insurance on themselves, but as soon as a third
party hires them that third party can get charged
extra premiums on their policy. But nonetheless,
that's how it works in Pennsylvania and many other
So if you hire such a sole proprietor or
partnership, keep in mind that contractually you can
now require that they get coverage. Pennsylvania
rules were recently changed to enable sole
proprietors and partners to elect to cover
themselves, even though the state doesn't require
it. And companies have the right to insist that any
independent contractor they use be covered for
Workers Compensation, to make sure they don't get
his with a premium charge on their own policies.
Unlike some other states, Pennsylvania currently
does not have a mechanism whereby such sole
proprietors or partners can register and exempt
their customers from Workers Comp premium charges.
So they only way to avoid those premium charges is
to insist that any independent contractors have
their own coverage. even if it is a sole proprietor
How are the premiums calculated?
Workers Compensation premiums are calculated by
assigning classifications to the business operations
(according to a system devised by the Pennsylvania
Compensation Rating Bureau, or
PCRB). Each classification has a particular rate, which
is applied to remuneration (the rate is per hundred
dollars of remuneration). The policy starts out with
estimated remuneration (usually referred to as payroll,
but it can be more than that) and then, when the policy
ends, actual remuneration is determined, and the policy
premium is adjusted by an audit.
Keep in mind, PCRB classifications are used only for
operations within Pennsylvania. If a company also has
operations in other states, then the classification
system used in those other states would be used for
those exposures. Most other states (but not all of
them) use the classification system devised by the
National Council on Compensation Insurance, or NCCI. So
a company's operations in Pennsylvania would be
classified using the PCRB system, while operations
elsewhere would be classified using the NCCI
classification system. Also keep in mind that a few
states don't use the NCCI classification system, but
instead operate their own rating bureaus with their own
The PCRB classification system is quite distinct from
the NCCI classification system. PCRB uses three digit
classification codes, while NCCI and other states use a
four digit classification code. There are fewer
classifications in the PCRB system than in the NCCI
system, also. PCRB has about 350 separate
classifications, while NCCI has more than 500 "National"
classifications, and then another thousand or so "State
Special" classifications that apply only in particular
states within the NCCI jurisdiction.
Insurance companies are also allowed to create
"subclassifications" within the PCRB classification
system, essentially refining the PCRB system by coming
up with their own specialized classifications for
certain kinds of exposures.
Another unique classification feature is that temporary
staffing companies are assigned unique classification
codes for the staffing industry, rather than just taking
the classification code that applies to their client
companies (as is done in other states.)
Premium is further adjusted, for companies paying
$10,000 or more a year in premium, by application of the Experience
Modification Factor. This factor, calculated
annually by PCRB, is based on prior loss and payroll
data of the particular business. And if a company
operates both in Pennsylvania and in other states, there
will be a separate Pennsylvania experience modifier
calculated by PCRB, and then another modifier calculated
by NCCI for non-Pennsylvania operations. (A couple of
other states also have stand-alone modifiers:
California, Michigan, Delaware, and New Jersey).
Companies with less than $10,000 in Pennsylvania WC
premium may qualify for a 5% Merit Rating, based on loss
In Pennsylvania, different insurance companies compete
on price. That is, the rate charged by different
carriers for the same classification may well vary.
They do this by means of a Loss Cost Multiplier (LCM)
that is applied to the base rate for each classification
code. The base rate is calculated by PCRB.
And in Pennsylvania, unlike most other states, the
premium portion of overtime pay is NOT excluded when
computing premium charges.
Who regulates Workers Compensation in
Claims matters are handled by the Pennsylvania
Department of Labor & Industry. This body resolves
disputes regarding proper claims settlements, and
compensability of particular claims.
But disputes regarding insurance coverage (other than
claims) are handled by the Pennsylvania
Department of Insurance.
Information about Workers' Compensation in other states
is available through our state by state directory.
For more information about how Workers' Compensation
insurance premiums are calculated, please consult our online
Advanced Insurance Management helps employers reduce
Workers Compensation insurance premium audits,
experience modifiers, double checking technical issues that directly affect the
premium charges made by insurance companies.
We find and recover overcharges in past &
current Workers Compensation insurance premiums paid by employers.
Shocked by your latest
Premium Audit? We may be able to help.
We review Workers Comp insurance audit billings to find and
then fix technical errors that make the premium charges higher than
they really should be--fixing mistakes before you pay that inflated
Experience Modification Factor increase shutting your
company out of work? We help employers lower experience
The new experience rating formula is hurting many employers, and a
mod over 1.00 can shut you out of important projects. A.I.M. lowers
mods for clients by finding and correcting hidden calculation
WC Classification threatening your business?
We help employers successfully appeal
classification code changes by insurers or NCCI.
A.I.M. has helped employers all over the United States fight
mistaken classification changes initiated by insurers or by
rating bureaus such as NCCI.
In litigation over Workers Compensation insurance
premium charges? We provide expert witness services in
legal cases involving Workers Compensation insurance premiums,
audits, classifications, experience modifiers, and related
State and federal courts across the U.S. have recognized A.I.M.
personnel as qualified experts on these issues.
We also can recover overcharges from your past Workers
And we help employers successfully dispute Workers
Compensation premiums and audits made by insurance companies.
In short, we lower Workers Comp insurance costs for employers by finding and
correcting underwriting and auditing errors in Workers Comp premium
calculations and audits.
"I would like to thank you for the great work you
did in investigating the problem with our experience modification rating. Your
discovery of errors as well as insurance companies' failures to submit data to
NCCI were critical to our company's ability to continue to do construction work
on federal projects."--National Resource Management
We Don't Sell Insurance
Advanced Insurance Management LLC is not an insurance agency
or brokerage. We're not looking to compete with or replace your current insurance agent.
That means we can assist you, as consultants, without making any
change in who you buy your Workers Comp insurance from. And we
can work together with your agent, where appropriate, as we are not affiliated
with any insurance agency or insurance company.
"Before we hired Advanced Insurance
Management, we were facing almost $40,000 of workers compensation
premiums for my company that supposedly had one employee. I was facing
the very real possibility of having to close my doors because of these
Advanced Insurance Management was able to negate the premium that the
insurance company was trying to apply. I would highly recommend Advanced
Insurance Management to anyone that is involved in a dispute with their
Workmans Compensation Insurance carrier. They saved my business."--WTLS
"Your review of our past
Workers' Compensation policies produced a refund of just over
$23,000, a refund produced by your finding overcharges in our old
policies that we had never realized had occurred." --Diamond
Such errors and overcharges
are far more common than many in the insurance industry like to admit. The complexities of rules governing proper classification, experience modification factors, payroll audits, and varying state regulations and statutes mean that many employers are overcharged without ever knowing it.
"Thanks to your persistence and effort, we received a refund of over $36,000
from our insurance company."-Polar Tool
you can also listen to an
about our work.
Consultants on Workers Comp Classification Codes,
Experience Modifiers, Payroll Audits, & More
We've been helping employers since 1987, making Advanced Insurance Management
one of the oldest and most experienced firms in the field of premium recovery.
"Advanced Insurance Management has been a tremendous help to Allied
Welding, Inc., and has saved us money and generated a significant
refund on our Workers' Compensation by finding an error in our
classifications. We value their expertise."--Allied