What is an experience modifier?
An experience modifier (EMR/Xmod) is a multiplier or a factor applied to the premium of an eligible policy and provides an incentive for loss prevention. Workers Compensation rating bureaus like the National Council on Compensation Insurance (NCCI) in Florida and the Workers' Compensation Insurance Rating Bureau of California (WCIRB) in California calculate experience modifiers. There are independent bureaus in other states that do the same function. There are 39 of 50 states that use NCCI as their official rating bureau. Including California, New York, New Jersey, Pennsylvania, North Carolina, Massachusetts, Michigan, Delaware, Wisconsin, Indiana, and Minnesota don't use NCCI as their Workers Comp rating bureau. If a company or employer has business in one of those 39 states, an eligible company or employer must comply with the rate calculated by NCCI.
An experience modifier constitutes either a credit or debit relevant to the amount to be paid for insurance that we call premium. This credit or debit is applied even before the discounts. If a company or employer experiences loss that is costing a lot on the average than other company’s or employer’s loss experience in the same line of business, the result is a debit e-mod or surcharge on premiums. If a company’s loss experience does not cost much, the company will receive a credit e-mod on their premium. The same multipliers are used to determine the amount of each employer’s experience modification no matter what insurance company provides the coverage. The beauty of e-mod is that it stays with the company even if the company undergoes a transfer of ownership.
All companies or employers with premiums that start with at least $4,000 a year before discounts for a three-year period are qualified for an experience modification rating. On the other hand, companies or employers with less than $4,000 in premium are not experience-rated because of their low-priced claims. If an employer or company is not eligible for e-mod, they can pay the basic industry rate for their coverage or pay the net of any appropriate adjustments from their insurance providers.
It might be complex how e-mod is calculated but as mentioned, it has something to do with comparing one company to another under the same industry. It could be about the loss experience of a company or manning or staffing or the frequency versus the gravity of illness and injury from one company to the next.
As an employer of the company, it is important not just to keep an eye on your experience modifier but to also to understand how it works. Like it or not, the rate calculated by a certain rating bureau will apply to your company if you qualify for the basic eligibility premium criteria set by the state.
One independent insurance agency was able to save a client’s experience modifier simply because the client contacted the insurance agency to verify the accuracy of his e-mod. The client was a business owner who was not aware of the impact of experience modification on his company's insurance premiums. Through a trusted insurance agent, the client found out that he was paying more because he lacked the knowledge on how e-mod applies to his company’s insurance premiums and he didn’t have much information on effective loss prevention measures.
With the help of an independent insurance agency, the client’s e-mod was saved because they started with educating him. The insurance agency explained to that client that in any insurance, the more you use, the higher your premium. It is easy to give the default advice that employees must avoid accidents at work as that would result in claims and losses but that was not what happened. The client instead was directed first to safety and training programs and was encouraged to invest time to improve their company’s track record to lower their experience modifier. The client not only able to initiate a safety program on injury prevention, but he was also able to evaluate the employee wellness activities of his company. Remember the frequency versus gravity mentioned? Small, frequent losses have more impact than hardly any.
The independent insurance agency also taught the client to create an effective return-to-work program. The client was made aware that if an injured worker does not receive wage-replacement benefits, the discount for claim costs can go up 70 percent.
The client was provided with tips by the independent insurance company on triage injury. Some injuries can be treated within the workplace and do not require hospitalisation. If those are minor cuts or bruises, they may not need to become full-fledged claims. If there is no company nurse, having managers and supervisors trained on how to manage injured employees based on injury triage can help distinguish insignificant injuries from injuries that require immediate medical attention.
The independent insurance agency encouraged the client to conduct regular drills related to fire, earthquake and other disasters as these can leave a massive set back on the business. These drills can be included in the company’s health and safety plans. If employees and employers have a clear picture of compliance with the company’s safety measures, this can also improve the employer-employee relationship, reduce mitigation and prevent future litigations.
The client received another important advice from the independent insurance agency. He was informed that if an injury happens in the workplace, it should be reported immediately. A study shows fast injury reporting lowers the cost of claims. If an injury is reported promptly, patient outcomes and safety through improved management can be addressed properly. It can also reduce medication error and speed up communication with medical assistance and insurance providers.
These are some of the self-care options that an independent insurance agency did to the client to help him with his experience modifier. There may have been additional suggestions that trusted insurance agents can offer which not only save your e-mod but your business in general so it is recommended to hear them out.
Still struggling with your company’s EMR/XMod Rating? Call us today toll-free at 1-877-658-2472 for a complimentary insurance audit and help get a better Experience Modifier.