The expense constant is a policy fee that is charged on all workers compensation policies. It is designed to compensate an insurance company for the basic costs of administering the policy. It is applied to all workers compensation policies without consideration of size or amount of premium paid.
The expense constant applies to policies written in both the voluntary and assigned risk markets. Application of the expense constant helps the insurance company recover expenses created due to issuing the policy, record keeping of policy information and the audit process. It is a charge that is applied once at the exception of the workers compensation policy and will not change during the policy period.
The charge normally levied is low, usually found to be around a few hundred dollars on any given policy. In states that allow open competition you'll find the expense constant is filed by individual insurance companies and the amount will vary by company. In closed market states you'll find it is a set amount and will be shown on the state pages.
Here's some rules that apply to the expense constant when approved for use by any specific regulatory authority for a specific insurance company:
It is not subject to the premium discount, experience rating modification, retro adjustments or TRIA;
It is included in the minimum premium and cannot be added to the min premium if the min premium becomes the final premium.
It is shown on the workers compensation policy information page.
If more than one state is insured on the policy then the highest expense constant will be charged.
It is excluded from the calculation of the standard premium.
The full expense constant is charged for short term policies and they are pro-rated when a policy is cancelled. There are some exceptions to this rule.