Lowering Your Experience Mod

24 Aug Like Golf, When it Comes to Your Experience Mod, The Lower The Score, The Better

Posted at 09:00h in Workers' Compensation Insurance by Gilbert's Risk Solutions 0 Comments

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Businesses that create a safer workplace often have a lower Experience Modification Rate, or EMR. A lower EMR usually means lower Workers’ Compensation premiums and an improved perception of your company.

The following is a brief explanation regarding EMR calculations, the factors that can impact them, and what you can do to lower your EMR.

What is an Experience Modifier Rate?

Basically, your company’s EMR is a rating assigned by agencies that calculate risk. It’s based on the past cost of company injuries and your future chances of risk when compared to other businesses in your state in the same industry.

After a comparative analysis, agencies look at three years of loss data, not including the past year, collected by the National Council on Compensation Insurance.

For instance, calculations for a policy with an August 2017 renewal date include data from August 2013 through August 2016. They analyze each claim during this period to summarize the incident type, number of claims, and the claim amount and they use this data to refine the EMR calculation accordingly.

Then, a complex numerical formula is applied to assign your company’s EMR, with 1.00 indicating an average risk. A rating higher than 1.00 indicates higher than average risk; below 1.00 indicates less risk.

Calculating Premiums

If your business has an EMR greater than 1.00, it is likely because your insurance provider paid out on a workers’ compensation claim (or multiple). This above average EMR raises your premiums to help insurance companies mitigate their risk.

Businesses with an EMR greater than 1.25 pay 25% more for premiums than a company with an EMR of 1.0. Businesses with an EMR or 0.80 pay an average of 20% less. Obviously, this difference in premiums can have a significant long-term impact on your business.

Two other factors affect your Workers’ Compensation premiums:

The rate for each payroll classification in your business, and
The amount of payroll in each classification in your business

Your business cannot control these factors, but it can take measures to reduce or eliminate incidents and lower claim amounts.

Lowering Your EMR

Since your company’s EMR includes three years of historical data, it does take time to lower your EMR. The first step is to establish a strong safety program. This involves identifying and assessing potential hazards to anticipate and prevent injuries and establishing policies and procedures for a safe workplace.

Safety Starts At The Top

Workplace safety begins with a commitment from top stakeholders and filters through the management team that defines safety goals. Employee education and training in accident prevention, potential hazards, proper procedures, and injury response ensure your company meets its safety goals.

An effective safety program always includes management supervision to ensure compliance and specific measures if employees fail to follow safety protocols. Routine workplace safety audits, regular safety meetings, and ongoing training reduce workplace incidents and claims.

Return To Work Program

Measures to speed the return of an injured employee back to work can greatly reduce Workers’ Compensation costs. An injured worker can often return to work in a modified capacity, instead of waiting for full recovery.

Even though it may seem bothersome to accommodate a recovering employee, it offers many benefits for your company and the employee. Employees realize they are a vital part of your business, which increases loyalty and employee retention, and you get to take advantage of their experience by getting them back on the job sooner rather than later.

A shorter claim means fewer claim payments through your company’s policy; very important since your EMR includes this amount in your calculations for three years. For instance, an employee could receive $500 per month for indemnity benefits for 20 months until they’re fully recovered. If they return to light duty, your business avoids a $10,000 increase in your claim’s history and the payments that affect your EMR.

Employee Classifications

Ensure each employee’s job classification corresponds to what they actually do. Employees may change positions, and payroll may not change the code. Human error can also lead to incorrect coding, indicating more people work in riskier jobs than actually do. This figures into EMR calculations and can increase premiums.

Avoid Uninsured Subcontractors

Some companies make the mistake of incorrectly assuming their subcontractors have their own workers’ comp coverage. This has serious implications for your business for several reasons.

First, if a subcontractor does not have the proper coverage in place and hurts themselves while working for your business, your policy kicks in. Even short-term claims can cost your business dearly. Second, any claims made due to uninsured subcontractors affect your premiums. Insurers increase premiums after a loss to mitigate risk. Finally, as we previously mentioned, claim payments affect your EMR for three years. It simply isn’t worth the risk. Always confirm subcontractors have their own workers’ comp coverage.

Employers are legally required by OSHA to provide a safe workplace, free from hazards. However, reducing claims requires consultation, diagnosis, and proactive planning.

At Gilbert’s Risk Solutions, we understand best practices to minimize compliance issues and how to reduce the frequency and severity of any claims. We can highlight issues, suggest corrective measures, and help you get employees back to work as soon as possible.