Workers Comp Insurance: 5 Killer Ways to Lower EMR Rating

Nov 6, 2021 | Business Insurance

Many business owners wonder why EMR is important when it comes to workers’ compensation insurance. Experience Modification Rate (EMR) is critical in estimating the cost of workers’ comp premiums. EMR is a grade or point system given by the state rating bureau National Council on Compensation Insurance (NCCI). NCCI calculates a company’s e-mod based on its actual injury claims losses and possible risks in the future. Maintaining a low experience mod rating lessens the cost of workers’ compensation rates. To save money on workers comp insurance, here are 5 killer ways to lower EMR rating.

5 Killer Ways to Lower EMR Rating

The main goal is to lessen your company’s frequency and severity of claims as e-mod rating depends on your company’s actual incurred losses. Follow these tips to improve your experience modification rating.

Reduce Cost of Claims

1. Develop programs and procedures to lessen the frequency and severity of claims or losses.

  • Safety Program

A safety program provides clear and safe work processes for employees. The company’s management must properly inform employees about safe work procedures. Make sure employees know and understand the safety program to avoid safety violations. Safety work conditions help prevent occupational injuries and illnesses.

  • Accident Investigation Program

An accident investigation program helps determine the cause of workplace accidents. Having an insight into how, what, when, and where the accident happened makes it easier to identify what caused the accident. From there, companies can develop measures to prevent accidents from happening again.

  • Accident Prevention Procedures

Develop safety procedures based on the results of accident investigations. Identifying possible risks and hazards is not enough in preventing workplace accidents. Creating solutions to workplace problems is the key to improving a company’s e-mod rating.

  • Return To Work Program

A return-to-work program helps injured workers get back to work quickly after an injury. An employee with a temporary disability is an open claim. An open claim stays on the company’s experience mod rating until it gets closed. It is important to quickly close claims to clear your claims history and improve your e-mod rating.

  • Claims Management Program

An effective claims management helps in the fast and efficient filing, settling, and closing of claims. Claims stay on claims history for three years. The faster you clear your company’s claim history, the better e-mod rating you will get.

  • Develop an Injury Triage

Employees may suffer from different types of injuries. Some are major injuries needing emergency medical treatment. Some may be minor injuries that can be managed by an occupational health nurse, trained safety officer, or by the employee itself. Having an injury triage will help identify which injury needs medical attention and which doesn’t. Triaging injuries significantly lowers the number of unnecessary claims. Insurance carriers like Travelers and AmTrust Financial offer a 24/7 nurse triage line. A nurse triage line helps employees determine if their injuries need urgent medical attention.

  • Provide Workplace Training to Employees.

Workplace training develops knowledge, enhances employee skills and efficiency. Well-trained employees are less likely to make workplace mistakes. Fewer mistakes mean less risk of accidents and injuries.

Employee Training to Lower the Risks of Workplace Accidents
  • Orientation
  • Onboarding
  • Technical Skills Development
  • Safety Training
  • Team Training

2. Experience Rating Adjustment (ERA)

Most states approved the rule of experience rating adjustment. With ERA, rating bureaus reduce 70% of the cost of medical-only claims in the estimation of e-mod rating. Nearly all states under NCCI follow ERA rule except for Colorado, Massachusetts, and Oregon. ERA helps companies lower their incurred losses which result in lowered EMR ratings.

3. Proper Classification of Employee Codes

Insurance companies use three factors in calculating a company’s workman’s compensation rates. It includes class codes, payroll, and experience modification rates. Class codes indicate the level of risk a specific type of job role has. Employees working in construction, mining, and logging industries usually have higher classification codes. The more risks a job role has, the higher the class codes. Improper classification of employees can cause you to pay more in workers’ comp premiums.

4. Unit Statistical Date

Every business has a unit statistical date. A unit statistical date is a cut-off date where insurance carriers report the company’s annual claims statistics to the rating bureau. The reports include open claims, closed claims, claims adjustment, and claims reserves. Every time a company has an open claim; the insurance provider will assign an open reserve for the claim. An open reserve is the amount of money insurance companies set aside for the expected expenses of policyholders’ claims. The insurance company will reserve a cap to pay for medical and benefit claims. The cap insurance companies reserve usually put for claims is higher than the actual settlement costs. That’s why it is critical to have efficient claims management for the timely settlement of workers’ comp claims. It is important to file accurate claims reports before your company’s unit statistical date as it affects your next e-mod rating. 

Schedule of Unistat Date

Don’t forget to update your company’s claims records before your unit statistical date. To get your Unistat Date, just add 180 days or 6 months to your policy renewal date.

5. Net Deductible

Some states allow insurance companies to offer a net deductible plan to business owners. If state laws allow, business owners can get net deductibles on their workers’ compensation policies. When employers opt for net deductible plans, they have to pay a certain amount every time their employees file claims. Net deductibles help lower EMR rating as insurance companies only report the net costs of claims in NCCI. Remember, the basis of a company’s modification rating is their incurred losses. When you share the cost of employee claims, your company’s incurred losses decrease. Employers can get small or medium net deductibles, whichever their state laws allow. Small deductibles range from $100 to $10,000. Medium deductibles range from $10,000 up to $75,000. Depending on the state laws, the net deductible may apply to medical or compensation claims or both. States like Colorado allow business owners to have small deductible claims. Business owners in Colorado can opt for a net deductible ranging from $500-$5,000. The net deductible applies to both medical and compensation claims. 

How E-MOD Works and Calculated

To effectively improve their e-mod rate, companies must understand how an experience mod is calculated. Rating bureaus use an experience modifier to determine a company’s level of risk. Newly opened businesses typically start with an x-mod of 1.0, which is the average. After four years, NCCI will get the company’s claim history for 3 consecutive years, excluding the most recent year. To get the latest EMR, NCCI will compare the company’s claim history with other businesses within the same industry.

How Can a Company Qualify for an Experience Modification Rate?

Qualification for experience mod rate varies as states have different workers’ compensation laws. In Colorado, a business can qualify if it pays a minimum of $4,000 for workers’ comp premiums for 3 consecutive years.

What is a Good Experience Mod Rate?

New businesses typically get an average e-mod rating of 1.0. NCCI compares the risk a business has with other businesses in the same industry. An experience mod rate is considered high if it is more than the industry average. Employers must maintain an average or lower than average EMR to get lower workers comp costs.

How to Lower Workers’ Compensation Premiums

Though EMR is one of the major factors that influence the cost of your insurance premiums, some variables impact the price of workers comp. Aside from improving your company’s experience modification rating, there are also some ways you can save on your workers’ compensation premiums.

  • Discounts

Private insurance companies typically offer different types of discounts to their customers. Business owners can save a lot of money by getting discounts. Talk to your insurance agent about the discounts your company is eligible for.

  • Bundling different insurance policies

Business owners usually need different business insurance policies to protect their business. Insurance companies usually give discounted premiums to clients with multiple insurance coverage.

Insurance Coverage Every Business Needs

  • Shop around 

By shopping around, you can get the best possible deal on workers’ comp insurance. It is important to find the best workers comp company in terms of affordability and coverage. Sometimes it’s not all about the cost of workers comp premiums but also the quality of coverage an insurance company provides.

Though there are many ways to prevent workplace risks, having workers’ compensation insurance on standby is vital. It’s true, prevention is better than cure. But, we also know accidents happen. Though workers’ compensation laws’ main goal is to provide financial support to injured or ill employees, it also protects employers as well. Workers comp policy protects employers from state fines and penalties. It also protects business owners from unexpected financial expenses resulting from workplace accidents and illnesses. 

Team AIS have insurance agents expert in workers’ compensation laws. We are an independent insurance agency that provides adequate protection to all businesses. Contact us now, and we will assist you to find the right coverage according to your business needs.