NCCI Inspection For Class Code Dispute?

Last week I wrote about a work comp classification dispute between a client and it's insurance carrier. Click here if you'd like to review it. If you ever find yourself in this situation, one possible remedy (for better or worse) for a classification dispute would be to request an NCCI inspection.

On the surface it sounds like a quick and easy way to settle a dispute. But, under what circumstances would you want to engage NCCI? Are there any ways this could cause unintended (even more expensive) consequences?

NCCI's website says that the current charge for a non-affiliate inspection is $160 per hour and less for an affiliate (insurance company). Sounds like an inexpensive investment to make to confirm the proper classification. Especially if you're faced with a large additional premium bill due to a reclassification or reallocation of payroll to more expensive class codes.

Once NCCI makes a determination, I wouldn't say it's final. But, it is pretty close, and your insurance company is going to use that recommended code or codes. The insurance carrier is highly unlikely to dispute an NCCI inspection over a classification; even a determination it considers adverse. The reverse is true if you receive an adverse determination. Most people won't appeal an NCCI inspection due to it being an uphill battle with one expert already weighing in against you.

There are numerous potential pitfalls of an NCCI inspection. As stated, they are difficult and time consuming to dispute. This will absolutely require you to engage an expert to have a chance at overturning an NCCI determination before an appeals board. I know because we have successfully disputed NCCI inspections, and it's a lot of work.

Another pitfall that you have probably inferred from the preceding paragraph; NCCI isn't always right. That isn't meant to be knock against NCCI, but, rather, an illustration of how complicated these issues can become.

Additionally, and most importantly, there are possible outcomes that can and do result from an NCCI inspection that you may have never considered. When you decide to have an inspection performed you are thinking that it is to settle the disagreement over what you and your insurance company believe the proper code (or codes) to be, right? Either this or that.

Before requesting an inspection you must examine the manual for any class codes that could be even remotely related to your operations. Then, find out if those codes are higher rated (more expensive) and evaluate with an expert whether or not they more accurately reflect your operation. It is very possible that you say X, your insurance carrier says Y, and NCCI says Z! In that case you could end up with a rate even higher than the insurance company thought appropriate.

Another unexpected outcome that I've seen from disputing an NCCI inspection is the creation of a new classification. In Missouri we have an appeals board called the Missouri Workers' Compensation Determinations Review Board (DBoard). The Board has within it's purview (which does happen) the authority to review the disputed codes for an employer, and it may resolve the issue "by creating a new classification code, if the board determines that there is sufficient experience to merit a new classification code." Whichever state department of insurance is involved will have the same authority at some appeals level. This is how many of the "state special" class codes are derived. But, talk about uncertainty! How will that impact your Experience Mod?

One of the things we would look at for clients involved in a classification dispute is how their competitors are classified. If you can give us the names of some of your competitors, we can normally find out their governing classification codes; the codes that generate the most premium or capture the most payroll. That could tip you off regarding some codes you haven't considered or, even, if you are on firm ground in your position.

If the classification dispute is over a small department rather than your main operations, remember that an NCCI inspection will be to properly classify your entire operation; everyone. You won't be able to request an inspection over a handful of employees. Inspectors are there to review everything to consider how different departments interact, physical separation, job duties, etc. So, what may start out as a dispute over a few employees in a small department could result in the reclassification of your whole company.

Before considering an NCCI inspection, be sure to do your due diligence. Examine all of the codes and rates that could possibly pertain to your business. Find out how your competitors are classified. If you are convinced of your position and that alternatives to your insurance carrier's determination are not more punitive, ordering an inspection (or asking your carrier to do it - save you the money) can be a good resolution. It'll save you the headache and time spent fighting with your insurance company.