Texas workers compensation carriers had a June 1, 2026 deadline to file rates tied to a new NCCI advisory loss-cost base effective July 1, 2026. Three actuarial adjustments converge on that same date: the statewide advisory loss-cost level drops 3.8%, a new classification code 8871 debuts for clerical telecommuter employees and borrows its initial loss cost from an existing class with no telecommuter loss history, and Commissioner Order No. 2026-9831 reclassifies hazardous material remediation workers into a narrower phraseology that realigns expected loss rates and exposure bases. Translating a single bureau filing into carrier-level manual rates requires untangling all three before a single renewal quote goes out.

3.8%
Statewide advisory loss-cost decrease, Texas WC, effective July 1, 2026 (TDI/NCCI)
8871
New NCCI classification code for clerical telecommuter employees, borrowing initial loss cost from code 8810
June 1
Bulletin B-0001-26 filing deadline for rates based on the July 1 NCCI advisory loss costs

The Texas WC Rate Structure and the Loss-Cost Bridge

Texas operates under a competitive rating framework for workers compensation. Commissioner Bulletin B-0001-26, last updated April 17, 2026, requires every carrier writing Texas workers compensation policies on or after July 1, 2026 to establish rates based on either its own independently developed classification relativities or the NCCI advisory loss costs approved under the July 1 filing. Texas Mutual's May 2026 update confirmed that TDI approved the NCCI recommended filing with an expected 3.8% statewide average decrease.

A carrier that adopts the NCCI advisory basis converts loss costs to manual rates through a loss cost multiplier (LCM). The rate bridge is straightforward at the statewide level:

Manual Rate = Advisory Loss Cost × LCM

The LCM encapsulates the carrier's expense provision, profit loading, premium-related assessments (including Texas Department of Insurance assessments and residual market loadings), and any company-specific development factor applied to the advisory base. A carrier writing at an LCM of 1.45 converts an advisory loss cost of $2.000 per $100 of payroll to a manual rate of $2.900. When the advisory loss cost drops 3.8% to $1.924, the manual rate falls to $2.790, a reduction of $0.11 per $100 of payroll.

The complication is that carriers do not apply a uniform LCM across all classifications. Most Texas carriers maintain company-specific class relativities layered on top of the advisory base, and several carrier-level expense items are state-mandated flat factors that do not move proportionally with advisory loss costs. When those fixed components absorb a larger share of the total rate because the advisory base declined, the effective LCM rises mechanically, partially offsetting the advisory decrease. Filing support submitted to TDI must reconcile this interaction explicitly: the LCM derivation should show the expense provision components separately from any assessment loadings so that the offset is visible rather than embedded.

Code 8871: Borrowing a Rate Before the Data Arrives

Commissioner Order No. 2026-9844, tied to NCCI Item B-1451, creates classification code 8871 (Clerical Telecommuter Employees) effective July 1, 2026. The order separates employees who work exclusively from home in clerical functions from workers assigned to code 8810 (Clerical Office Employees NOC), the long-standing catch-all for in-office administrative roles.

At the filing effective date, no standalone loss cost exists for 8871. Texas has no credible history of telecommuter-specific workers compensation claims as a distinct classification unit, partly because the code did not exist as a discrete category and partly because the remote-work surge since 2020 has not generated sufficient claim development to support an independent actuarial indication. NCCI's initial advisory loss cost for 8871 therefore equals the advisory loss cost for 8810. This is a borrowed-rate approach: the initial rate is not derived from 8871 experience but imputed from the closest reasonable analogue.

The actuarial logic holds up at the outset. A clerical employee working remotely faces injury exposures broadly parallel to those of an in-office clerical worker. The home environment does introduce one exposure category that is largely absent from 8810 experience: slips, trips, and falls in a home workspace, including stairwells, home office setups, and residential ergonomics. Whether remote clericals claim at a materially different rate than their office counterparts is an empirical question that only emerges once credible 8871 data accumulates.

The credibility update that governs when 8871 can support an independent indication follows the limited-fluctuation standard used in NCCI classification ratemaking. Full credibility at the 5% accuracy level under the Poisson frequency model requires approximately 1,082 claims: derived from the formula n = (z / p)^2, where z = 1.645 for 90% confidence and p = 0.05 for the 5% precision band. Until that threshold is approached, the blended indication uses Z = n / (n + k), where n is the number of 8871 claims in the experience window and k is the complement parameter. At 100 claims, Z equals roughly 0.085, meaning 8.5% of the indicated loss cost comes from 8871-specific experience and 91.5% from the 8810 complement. The 8871 rate will not meaningfully depart from 8810 for at least three to five policy years under any realistic claim volume assumption.

For pricing actuaries, the immediate implication is that 8871 and 8810 will price identically through the current filing cycle. The value of the new code is classification discipline, not rate differentiation. Carriers that properly assign telecommuter clerical employees to 8871 create a clean separation in their own data that will support a credibility build over the coming years. Carriers that continue to classify remote workers under 8810 contaminate the 8810 experience pool and delay the point at which either code develops a reliable independent indication. Getting the classification right now is the only way to have actuarially defensible 8871 rates in five years.

Hazardous Material Remediation: Phraseology, Exposure Base, and Expected Loss Rates

Commissioner Order No. 2026-9831, tied to NCCI Item B-1450, revises the phraseology and classification assignment for hazardous material remediation contractors. The reclassification does not simply relabel existing exposure. It reassigns workers previously captured under broader classifications into narrower remediation-specific codes with different advisory loss costs and different expected loss rates (ELRs).

The ELR is the factor that anchors experience rating. It converts each classification's manual premium into a projected expected-loss figure used as the denominator in the experience modification calculation:

Expected Losses = (Payroll / 100) × Advisory Loss Cost × ELR Factor

When the remediation reclassification reassigns workers from a higher-loss-cost code into a more narrowly defined remediation code that carries a different advisory loss cost, the expected losses for those workers change even if the underlying payroll and actual loss history do not. An employer whose payroll previously generated $50,000 in expected losses under a broader classification might generate $43,000 under the new narrower code if the advisory loss cost in the new class is lower. That employer's experience modification now compares the same actual loss history against a reduced expected-loss denominator, moving the mod in the adverse direction regardless of whether the employer's safety record changed.

The 3.8% statewide advisory decrease compounds this in either direction. For remediation contractors whose newly assigned class carries an advisory loss cost that declined more than the statewide average, the ELR reduction is larger than average and the modification deterioration is more pronounced. For contractors assigned to a class that declined less, the effect is smaller. The statewide figure is a weighted average that conceals the class-level dispersion, which is where the individual-account impact actually lives.

This interaction is the reason underwriters should not present the 3.8% advisory decrease to remediation contractors as evidence that their renewal premium will decline. The classification change is structurally independent of the loss-cost level change, and the two can move in opposite directions for a given account depending on which code the employer lands in after reclassification.

When the Statewide Decrease Does Not Reach the Account

A 3.8% advisory decrease at the statewide level is a payroll-weighted average across all classifications and employers in the NCCI Texas database. Individual accounts will see deviations in both directions, and the deviations are systematic rather than random.

Class mix is the first driver. An employer concentrated in classifications that received above-average loss-cost decreases will beat the statewide figure. An employer whose dominant classification changed phraseology under Item B-1450 and landed in a code with a higher or unchanged advisory loss cost will see a cost increase even in a decreasing-loss-cost environment. The statewide signal is not visible at the account level without a class-by-class rate reconciliation.

Experience rating applies leverage in the same direction. The experience modification factor is multiplicative: an employer with a mod of 1.25 sees the advisory loss-cost reduction in manual premium before the mod is applied, but the modification itself does not move with the advisory filing unless the employer's loss history changes. A renewaling account with a worsening mod, moving from 0.90 to 1.10 due to a claim-active accident year rolling into the experience period, will see its total cost rise regardless of the advisory direction. The dollar increase from a 20-point mod swing on a $300,000 manual premium is $60,000. A 3.8% advisory decrease on the same premium is $11,400. The two do not net to a decrease.

Schedule rating adds the final layer. A carrier that applied a negative schedule rating credit to a particularly favorable account and withdraws that credit at renewal because of a new claim or a changed operational exposure will generate an additional cost increase from the credit removal alone. Premium discount tables, which compress at the margins for accounts approaching minimum premium, can also amplify or dampen the advisory change depending on where the revised manual premium falls in the discount schedule.

The composite result: any account with a classification change under B-1450, a deteriorating experience mod, or a reduced schedule credit is a candidate for an account-level increase in a filing year with a statewide advisory decrease. Underwriters who present the bureau indication as a ceiling on renewal cost will face difficult conversations when the individual account components resolve differently.

Three-Decimal Precision: Small Differences, Large Accounts

NCCI's current filing expresses advisory loss costs, manual rates, and expected loss rates to three decimal places. For accounts with modest payrolls, the additional decimal is a rounding refinement with no practical consequence. For large accounts and retrospective rating plans, precision compounds.

Consider a single-class account with $10 million in auditable payroll and an advisory loss cost of $1.847 per $100 of payroll. At two-decimal rounding, $1.85 produces an advisory loss cost component of $185,000. The three-decimal figure produces $184,700, a difference of $300 before the LCM is applied. At a carrier LCM of 1.45, the premium difference is $435. On a retrospective rating policy with a loss conversion factor of 1.15 and a state tax multiplier of 1.03, the rounding difference flows through two additional multiplicative layers, growing the deviation from the intended rate level to approximately $515 per $10 million in payroll per class.

For accounts with multiple class codes at large payrolls, or for retrospective rating policyholders where per-policy rate accuracy directly affects the retro premium formula, three-decimal precision in the advisory base is not a cosmetic change. It is a real reduction in systematic rounding error that should be reflected in the carrier's rate development worksheets and in the reconciliation exhibits submitted to TDI as part of the rate filing.

The Filing Support Package

Bulletin B-0001-26 does not enumerate the exact exhibits required in a Texas WC rate filing, but standard TDI rate review practice expects actuarial support demonstrating that filed rates are not excessive, inadequate, or unfairly discriminatory under Texas Insurance Code. For a carrier adopting the NCCI advisory basis, the minimum support package covers four components.

First, the current-versus-proposed classification rate exhibit, showing each class's prior and new advisory loss cost, the three-decimal precision values, and the resulting manual rate at the carrier's filed LCM. Second, the LCM derivation, with expense provision components itemized separately: fixed expense loading, variable expense ratio, profit and contingency provision, investment income offset, and any state-specific assessment loading that does not move proportionally with the advisory base. Third, for classifications affected by Item B-1450 and B-1451, a reconciliation exhibit showing how the classification change alters expected losses and what the resulting experience modification distribution looks like relative to the prior filing year's distribution. Fourth, for code 8871 specifically, a statement of the borrowed-rate approach, the intended credibility-build threshold at which the carrier will begin blending standalone 8871 experience, and the data collection mechanism the carrier will use to support that future update.

Carriers using independently developed relativities rather than the NCCI advisory relativities carry an additional documentation obligation: the credibility methodology used to blend state-specific experience with NCCI countrywide data, the credibility weights applied by classification, and a full reconciliation between the carrier's class rate level and the filed NCCI advisory base. The reconciliation is the TDI reviewer's primary tool for verifying that independently filed rates are reasonably grounded in the approved advisory basis.

Isolating the Loss-Cost Signal for Underwriters

Pricing actuaries supporting underwriting renewal discussions face one specific communication task after a filing cycle like this one: separating the pure loss-cost signal from the operational classification and modification effects so that underwriters do not mistake a classification correction for a deterioration in loss trend.

The cleanest approach is a rate component bridge showing the prior premium, then adding or subtracting the change from each source independently: advisory loss-cost level change, class reclassification impact, experience modification change, schedule rating credit change, and premium discount adjustment. When an account's renewal premium rises 12% despite a 3.8% advisory decrease, the bridge shows exactly how much of the increase traces to the worsening modification (say, 9%), how much to the loss of a schedule credit (4%), and how much the advisory decrease offset (negative 3.8%), netting to the 12% result. Presenting that decomposition gives the underwriter a defensible explanation that does not imply the market has deteriorated or that the carrier's pricing process is inconsistent with the bureau filing.

Carriers that do not build this decomposition into their renewal communication process will find that accounts with classification changes under B-1450 are the most difficult to retain, precisely because the premium movement looks disconnected from the advisory signal and from the account's own loss history. The loss-cost signal and the classification signal are not the same thing. The July 1 filing cycle makes that distinction impossible to avoid.

Further Reading

Sources

  1. Texas Department of Insurance: Commissioner Bulletin B-0001-26 (last updated April 17, 2026)
  2. Texas Mutual: TDI & NCCI Updates, May 2026
  3. TDI Commissioner Order No. 2026-9844 (NCCI Item B-1451: Clerical Telecommuter Employees)
  4. TDI Commissioner Order No. 2026-9831 (NCCI Item B-1450: Hazardous Material Remediation Classifications)
  5. NCCI: 2026 State of the Line Report