93-03: Deductible Plans for Workers' Compensation Policies

* This bulletin was repealed by 08-05

To:           All Workers Compensation Insurers

From:      Jay Angoff, Director

Re:          Deductible Plans for Workers' Compensation Policies

Date:       February 9, 1993

Due to the increased desire of insurers to offer "large" deductible plans, our Department has reviewed its position regarding "allocated loss adjustment expenses" (ALAE). We have decided to allow -- but not require -- ALAE, as that term is defined in section 375.1152, RSMo, to be included as part of the deductible of a "large" deductible plan. However, the Department will not allow a separate fee for ALAE to be charged to the insured outside of the deductible, nor shall we allow a separate fee to be charged to the insured for any adjustment of claims.

The Department shall consider a "large" deductible plan to be one where the standard premium exceeds $500,000, either in interstate or intrastate premium. "Standard premium" shall be considered payroll multiplied by the rate multiplied by the experience modification factor (payroll x rate x exp. mod.). In addition, the deductible amount shall not be less than $100,000 and shall not exceed 40% of the standard premium for the risk. Plans that do not meet this definition of a "large" deductible plan should not be filed until further notice.

Insurers should adhere to the following additional guidelines for large deductible plans, which in some cases differ from those set forth in the Department's 92-11 Bulletin:

Those companies which have filed a large deductible program with our Department shall be notified in the near future whether their filing is acceptable. Insurers with questions should telephone Susan Schulte at (314) 751-3365.