Employee safety is an essential part of delivering on your mission. Not only is it important to keep your teams safe for their own sake, but employee injuries can also impact your ability to serve your members and guests. These employee safety documents are designed to keep you informed on important employee safety topics. They can also be used to generate discussion at staff meetings to empower your staff to not only keep your members safe, but to keep themselves and their co-workers safe, too.
Workplace injuries are an inevitable part of any job. The safety and well-being of your employees, must be at the forefront of all that you do, and minimizing the occurrence of work-related injuries will not only help to keep your staff safe and injury-free, but it will also serve to keep your experience modification rating (Experience Mod) low.
What is an Experience Mod?
The Experience Mod (EMR) compares your workers’ compensation claims experience to that of other employers of a similar-type business. Keeping track of your Experience Mod is important because it has a direct correlation with how much you pay in Workers’ Compensation Premiums—the lower the Experience Mod, the lower your premiums. In an effort to use your Experience Mod effectively, it’s necessary to understand that your experience modification rating directly relates to/controls your costs in the following ways:
- The Experience Mod Rate is influential, which means that it represents past costs and future chances of risk. The lower your EMR, the lower your premium costs will be.
- The actual loss experience is compared to the expected losses which is called the Experience Rating.
- The Experience Mod is greatly impacted by small frequent losses vs. a large infrequent loss. This means that fewer losses equate to better premium impact.
Example: If you have one claim with a total cost of $50,000, and seven claims totaling $50,000, the seven claims totaling $50,000 will have greater impact on your Mod because of their frequent occurrence.
- The Experience Mod represents the “Credit” or “Debit” applied to a workers’ compensation premium.
What does it mean to apply a credit or debit to my workers’ compensation premium?
A Debit means the losses or dollars paid are worse than expected and the number of losses is above average. A Mod of greater than 1.0 represents a Debit.
A Credit means the losses or dollars paid are less than expected and fewer in number. A Mod of less than 1.0 represents a Credit.
Unity refers to the industry average, which is the standard used to calculate the credit or debit that will be applied to your workers’ comp premium. A Mod of 1.0 is the industry average.
How is it the Experience Mod calculated?
To calculate the Experience Mod, divide the Actual Losses by the Expected Losses.
The Experience Mod is calculated by the National Council on Compensation Insurance (NCCI) or in some states by an independent bureau. Experience rating is a mandatory plan and applies to all employers who meet their state’s premium eligibility criteria for the plan.
The formula penalizes frequency due to the $16,500 threshold the NCCI has placed on claim costs and it balances severity.
Note: North Dakota, Ohio, Washington and Wyoming have “one-payer systems” which are also called monopolistic systems.
(Premium) x (Experience Mod) = Modified Premium
($100,000) x (.75) = $75,000
($100,000) x (1.00) = $100,000
($100,000) x (1.25) = $125,000
As you can see from the examples, an Experience Mod of 1.25 would mean that insurance premiums could be as high as 25% more than an organization with an Experience Mod of 1.0.
What can I do to keep my Experience Mod low?
- Make safety a priority at your organization.
- Create or improve your “Return to Work” program.
- Ensure the timely reporting of injuries, as early reporting reduces claim costs.
- Implement active claims management.
- Create healthy relationships with designated clinics before you need injury management.
- Train front-line supervisors, managers and key players on how to help facilitate the injured worker’s recovery and ways to stay engaged during the process.
- Create sound hiring practices, and adequately screen candidates.
For more information on ways to minimize workplace injuries at your organization or for assistance with processing claims more efficiently, please contact your Redwoods consultant.