Workers' Compensation Glossary


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ADA Americans with Disabilities Act

Advisory Organization
The new designation for what were formerly known as rating bureaus (such as the NCCI). This new term, recently coined by the National Association of Insurance Commissioners, is meant to reflect more accurately the role of NCCI and other such organizations (like Insurance Services Office) which compile rating data and file policy forms for use by member insurance companies.

ALE - Allocated Loss Expenses
Insurance company costs for adjusting and settling claims which can be identified with a specific claim. The ALE are often then included in the claims costs used to adjust premium in some loss-sensitive premium adjustment types of workers' comp policies, such as sliding scale dividend plans or some retro- or retention plans

AOE Arising Out of Employment
An injury, disease or medical condition must meet the test of both Arising Out of Employment and occurring during the Course Of Employment to be compensable (covered) under Workers Compensation law. For an injury to be eligible for Workers Compensation benefits, the injured party must be an employee/volunteer; the employee/volunteer must be engaged in job activities at the time of injury and job activities must be a proximate cause of the injury.

ARAP - Assigned Risk Adjustment Program
An additional debit charge placed on Assigned Risk policies (In NCCI jurisdictions) with experience modification factors higher than 1.00. The notable exception is Massachusetts, where ARAP stands for All Risk Adjustment Factor. This is a surcharge that increases premiums over and above the experience modifier, and in MA the ARAP can be levied against all employers, not just those in the Assigned Risk Plan.

ASO-Administrative Services Organization
A third party firm that provides certain outsourced human resources services such as payroll and tax filings. These are similar to PEOs (Professional Employer Organizations) but with a key difference: an ASO does not provide Workers Compensation coverage to clients on a blanket bases as a PEO does. An ASO may offer Workers Compensation coverage to clients on an individual basis, particularly via so-called "Pay As You Go" programs.

Assigned Risk Adjustment Program
An additional fee placed on Assigned Risk policies (In NCCI jurisdictions) with experience modification factors higher than 1.00.

Assigned Risk Plan - Assigned Risk Pool - State Fund
A state designated program that ensures all employers can have access to workers' compensation insurance even if insurance companies are not willing to voluntarily write the insurance. Often the last resort option for companies with poor experience ratings. Assigned risk plans usually have higher rates than the voluntary market.

Audit workpaper
Worksheet prepared by the premium auditor, can be either hand-written or computerized, showing how the auditor arrived at the payroll numbers that are used to determine the audited premium.

Audited Premium
The final premium for the policy term, produced by auditing actual payroll exposures.

Average Daily Wage (ADW)
The ADW is a calculation of an injured employee's average daily earnings and is sometimes used to determine entitlement to wage loss benefits following an injury, particularly where the AWW would not be an accurate representation of the employee's earnings.

Average Weekly Wage (AWW)
The AWW is another method which may be utilized in calculating entitlement to wage loss benefits. The average earnings, by week, for a fixed period of time are calculated and wage loss benefits are computed according to that amount.



Break-in Time
The time frame allowed for a new or returning worker to adjust to the job's workload; also referred to as work hardening



Carve-Out (PEO Work Comp Policy)
A hybrid PEO arrangement where the employers maintains their own work comp policy and does not obtain coverage through the PEO work comp master policy.

Certificates- Workers' Compensation Certifications
A certificate issued by a carrier or PEO that demonstrates work comp coverage. Used most often by contractors and sub-contractors to prove to their clients that they are covered for any injury claims and that the client is not liable for workplace injuries of employees of a subcontractor.

Claim - Work Comp Claim
An insurance policy claim for payment due to an injury suffered by an employee.

Classification Code - Workers' Compensation Code
Also called work comp code or class code . Each type of work has risk of injury. Work comp codes are established that identify the type of work being performed and provide an associate code. Work comp premium rates are established by codes and are meant to be commensurate with the risk associated with that workplace exposure. Codes descriptions are maintained by NCCI in the SCOPES manual.

COE Occurring during Course of Employment
An injury, disease or medical condition must meet the test of both arising out of employment and occurring during the Course Of Employment to be compensable (covered) under Workers Compensation law. For an injury to be eligible for Workers Compensation benefits, the injured party must be an employee/volunteer; the employee/volunteer must be engaged in job activities at the time of injury and job activities must be a proximate cause of the injury. death benefit Money payable to financial dependents of an employee who dies as a result of a work-related injury.



Dec Page - Declaration Page
The agreement page of a workers' compensation insurance policy that defines the work comp codes in use. It defines all associated charges for the policy.

Delay In Decision
A notice to the employee advising that a decision to accept or deny liability for the claim will be delayed for 90 days or less. This allows adequate time to investigate claims and gather medical records to support the claim without risking a penalty for failure to provide benefits within a reasonable time.

Direct Writer
An insurance company that does not work through independent insurance agents. The largest direct writer of workers' compensation insurance is Liberty Mutual. Agents for direct writers are employees of the insurance company.

Disability
The ADA defines disability as follows:
I. a physical or mental impairment that substantially limits one or more of the major life activities (such as caring for ones self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working);
II. anyone having a record of such an impairment; or
III. anyone regarded as having such an impairment

Dividend
A return of premium, calculated after policy expiration, based on the over-all performance of the insurance company or of a group of insureds. Dividends cannot be guaranteed in advance, although they are often shown on proposals for insurance.

D-Ratio
In the Experience Modification factor calculation, this is a factor applied to the expected losses to determine what percentage of those expected losses are to be considered as primary losses within the rating formula.



EAP Employee Assistance Program

EEO Equal Employment Opportunity

EH&S Environmental Health & Safety

Emergency Medical Condition
A medical condition manifesting itself by an acute symptom of sufficient severity, including severe pain, such that the absence of immediate medical attention could reasonably be expected to result in placing the health of the individual in serious jeopardy, serious impairment to bodily functions, or serious dysfunction of any bodily organ or part.

Employers' Liability
Section B of the standard Workers' Compensation insurance policy, this is the part of the policy that has a dollar limit shown for the coverage. This section insures employers for liability towards employees that is not covered by the statutory Workers' Compensation provisions of the state (which are insured in Section A and have no set dollar limit on the policy).

EPD Employee-Paid Disability

Ergonomics
The science of fitting work or workplace to the human body, to help avoid injury or illness due to occupational stressors.

Excess Losses
In the Experience Modification Factor, this is the amount of any single claim that exceeds the cut-off point for inclusion as a primary loss. In the NCCI experience rating formula, this threshold is $5,000. In the formulas used by by other rating bureaus, the threshold varies.

Expected Loss Ratio (ELR)
In the Experience Modification Factor, ELR is a percentage factor applied to an employer's past audited payroll to calculated what the expected losses should be for a company of the same type and size as the employer.

Experience Modification Factor
An adjustment to Manual Premium, calculated by an advisory organization (also known as rating bureaus) such as NCCI, based on historic loss and payroll data of a particular insured. Also called Experience Modifier, or Experience Mod.

Experience Period
The window of time from which loss and payroll data is used to calculate an experience modification factor for an employer. Normally this window is a three year period, starting four years prior to the effective date of the experience modifier. However, rating bureaus do not wait until three full years of data are in the experience period before producing an experience rating for an employer. If an employer reaches a certain, relatively low threshold of workers' compensation insurance premiums in any one of the three years in the experience period "window", this will make that employer eligible for experience rating.

Extended Sick Leave - ESL
A University benefit that provides the injured employee with up to 26 weeks of 80% salary after sick leave credits are exhausted. The department pays the difference between temporary disability rate and the 80% salary.



FEHA Fair Employment and Housing Act

FMLA Family Medical Leave Act



Governing Classification
The classification code on an employer's workers' compensation insurance policy that generates the most payroll aside from standard exception classifications such as clerical or outside sales (unless there is no other workplace classification applicable other than a standard exception).

Guaranteed Cost
A Workers' Compensation insurance policy that is not subject to adjustment due to losses that occur during the policy term. In a guaranteed cost policy, the only variable affecting premium that should change between policy inception and audit is payroll.



Incurred Losses
Paid losses plus loss reserves for estimated future claims costs. Many loss sensitive insurance policies adjust premium based on incurred losses rather than just on paid losses.

Indemnity Claim
A claim that includes not just medical payments but also payments for lost time by the injured worker. These tend to be more expensive than medical-only claims.

Interstate Rating
An experience modification factor that applies across more than one state. I nterstate ratings are calculated by NCCI for employers whose past workers compensation insurance policies show payroll in more than one state. Most, but not all states, participate in the interstate rating system. A few states, such as Michigan, Pennsylvania, and Delaware, do not participate in interstate rating, but instead continue to calculate separate experience ratings for employers who operate in their jurisdictions, even if those employers also qualify for interstate rating. Those employers thus have one experience modifier applying to their operations in most states but a separate modifier calculated by the stand-alone state rating bureau. The separate stand-alone mod would apply only to workers compensation insurance premiums developed for the employer's operations in that stand-alone state.



Loss Runs - Workers' Compensation Loss Runs or Loss History
A report prepared by the insurance provider or master policy holder (PEO) that details the cost associated with actual claims paid during a defined time period.

Loss-Sensitive Policy
A Workers Compensation insurance policy that adjusts premium charges based on the cost of losses covered by the policy. Types of Loss Sensitive policies include Sliding Scale Dividend Plans, Large Deductible policies, and Retrospective Rating.



Manual Premium
Workers' compensation premium calculated by multiplying payrolls by appropriate rates, before application of experience modifier, schedule credit, or premium discount.

Medical-Only Claims
Claims for which the only cost is medical care, without any lost-time benefits being paid.

Merit Rating
A premium adjustment used in some NCCI states for employers too small to qualify for an experience modification factor. It provides either a premium credit or a debit for such employers based on prior claims (or lack of them.)

Modified Premium
Workers' Compensation premium calculated after application of experience modification factor. Similar to standard premium, but does not reflect any schedule credits or debits.



NCCI: The National Council on Compensation Insurance
The organization responsible in many states for determining proper Workers' Compensation classifications, experience modification factors, and collecting data used for ratemaking. NCCI also writes the manuals used in many states to calculate Workers' Compensation premiums, and also administers the Assigned Risk Plan in many jurisdictions. NCCI is a private organization, not connected with government, although it is often mistakenly thought to be a governmental agency. In fact, it is a non-profit privately held corporation owned by major insurance companies, whose executives constitute a majority of the directors on NCCI's board.

No-Fault
Neither the employee nor the employer needs to be proven negligent for a Workers Compensation claim to be accepted.



Occupational Injury
Any injury, such as a cut, fracture, sprain, amputation, etc., that results from a work-related event or from a single instantaneous exposure in the work environment.



Permanent and Stationary - P&S
The condition that exists when an injured employee has reached the maximum point of recovery as determined by the treating physician.

Permanent Disability - PD
When the injury is found to be permanent and stationary, the employee may be entitled to a permanent disability rating. The extent of the work preclusion is determined by a physician. The physician's report is rated and given a dollar value based on state guidelines and the injured worker receives a cash award.

Permanent Partial Disability (PPD)
PPD benefits are payable, in most jurisdictions, to an employee who has sustained a permanent, but not complete, disability. Many state statutes have pre-set values for a host of different PPD injuries involving specific body parts or conditions.

Permanent Total Disability (PTD)
PTD benefits are available if an injured employee is permanently and totally disabled from work.

Physical Therapy (PT)
Many injured employees are entitled to receive physical therapy as a form of medical treatment to recover from injuries. On forms, or in medical records, you may see a reference to "PT." That is short for "physical therapy."

Premium Auditor
A harmless drudge (with apologies to Samuel Johnson and auditors everywhere -- just kidding!) The premium auditor determines actual exposure (remuneration) for a policy period, in order to determine the final audited premium. The auditor typically works either directly for the insurance company, or for a third-party company retained by the insurance company.

Premium Discount
A premium credit, based on size of the premium paid. It is normally given automatically on voluntary market policies, although retrospective rating or sliding scale dividend policies usually do not have a premium discount.

Primary Losses
In the experience modification factor, the first $5,000 of any single loss.



Rating Bureau, or Rating Organization
See NCCI. Some states maintain their own separate rating bureau, although these often follow NCCI rules and use NCCI manuals. Currently, the states of California, Delaware, Hawaii, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, Texas, and Wyoming operate their own non-NCCI rating bureaus. Many of these largely follow NCCI rules for computing premiums and classifications, but California, Delaware, Texas, and Pennsylvania are notably different than NCCI in some aspects of classification and premium computation.

Remuneration
The basis for calculating Workers' Compensation premium. Remuneration is primarily payroll, but may also include other forms of employee compensation. Workers' Compensation premium is computed by applying varying rates (for different classifications) (per hundred dollars of remuneration).

Residual Market
Workers' comp written through an assigned risk plan.

Retrospective Rating
A Workers' compensation insurance policy that makes a subsequent adjustment to premium, after policy expiration, based on losses generated during the policy period. The adjustment can go up or down, within set parameters, based on the losses generated during the policy period.

Retention Plan
Similar to Retrospective Rating, this is a Workers' Compensation policy format that adjusts the premium, up or down, based on losses (and associated costs) that occur during the policy period.



Schedule Credit/Debit
A discretionary premium adjustment based on underwriters evaluation of special characteristics of a risk not reflected in the experience modifier.

ScopesĀ® Manual
Manual produced by NCCI which details what kinds of workplace exposures belong in particular Workers' Compensation classification codes.

SDI State Disability Insurance

Short Rate Penalty
A penalty applied by insurers when a Workers' Compensation insurance policy is cancelled by the insured before the expiration date of the policy. This penalty is steep in the early days of the policy, and gradually tapers off the closer the policy gets to the expiration date.

Sliding Scale Dividend
A return of premium, after policy expiration, based on the actual loss experience of the insured business. The size of the dividend varies with the actual loss ratio of the insured

Social Security Disability Benefits (SSDI)
SSDI benefits are payable to disabled individuals through the Social Security Administration. Many state workers' compensation statutes have specific provisions which dictate whether an injured employee may receive both workers' compensation benefits and SSDI benefits at the same time. Generally, if both benefits are appropriate for the same individual, a complex calculation will be performed to "offset" the benefits so that the individual does not receive more money than they are entitled to from both programs.

Standard Exception
Classifications which are normally not included in the governing classification. These are clerical, outside sales, and often (but not always) drivers.

Standard Premium
Premium after application of Experience Modifier and Schedule Credit/Debit, but before Premium Discount.

Statewide Average Weekly Wage (SAWW)
The statewide average weekly wage is a computation of average wages paid to workers in a jurisdiction for a set period of time and is generally used to calculate the minimum, and maximum, amounts of workers' compensation benefits that an injured employee will be entitled to receive.

Suitable Gainful Employment
Employment that is reasonably attainable and offers an opportunity to restore the employee as soon as is practical and as near as possible to maximum selfsupport. Considerations are given to the employees qualifications, likely permanent disability, vocational interest and aptitudes, pre-injury earnings and future earning capacity, and the present and projected labor market.



Temporary Disability - TD
Money paid to an employee who is temporarily unable to work because of a work-related injury or illness. The Labor Code mandates a payment of two thirds of the average weekly salary up to the maximum amount established by the Labor Code.

Temporary Partial Disability (TPD)
TPD benefits are payable when an injured employee is able to work despite their injury. The benefits are available only for a limited period of time, in recognition of the fact that the employee will recover fully enough in the future that they will be able to resume employment without a wage loss.

Temporary Total Disability (TTD)
TTD benefits are available to employees whose injuries leave them totally unable to work for a period of time. The benefits are no longer payable when the "temporary" disability clears and the employee is able to resume working. In some states, if the employee must return to work at partial hours or at a wage loss while his disability resolves he may be entitled to payment of TPD benefits after receiving TTD benefits.

TPA Third Party Administrator



UPD University-Paid Disability



Vocational Rehabilitation (VR)
Vocational rehabilitation generally includes a melting pot of services that are offered to injured employees to help them return to work following a work injury. VR may involve transferable skills assessments, educational courses, job search assistance, and many other vocational aids. Vocational rehabilitation is sometimes also referred to as "occupational rehabilitation."

Voluntary Compensation
An endorsement to the standard Workers' Compensation insurance policy which extends coverage to employees not required to be covered under the state's statutory Workers' Compensation provisions.

Voluntary Market
Workers' Compensation insurance written outside of the Assigned Risk Plan

VRC Vocational Rehabilitation Counselor



WCAB Workers' Compensation Appeals Board

WCO Workers' Compensation Office

WCU Workers Compensation Unit

Workers Compensation
Formerly known as Workman's Compensation. A series of statutory systems enacted by states and other jurisdictions of the United States obligating employers to pay specified benefits to workers who are injured, made ill, or killed in the course of their employment. Many jurisdictions allow employers to purchase insurance policies to meet these statutory obligations. In many other countries, Workers Compensation is handled by government agencies.