10 Things to Know About Experience Mod
The experience mod largely determines how much your company pays for workers’ compensation coverage. For the first time in more than 20 years, there are substantial changes to the way the experience mod is calculated.
What follows are 10 key tips from Towne Insurance agent James Morgan, Master Certified Workers' Comp Advisor, on how you can impact your experience modification calculation..
You, the employer, have more control over your workers’ compensation program than ever before!
Every business has a different minimum experience mod. You need to make sure you are working with an advisor/agent that can show you what it is, as well as put together a plan to help you achieve it.
The experience mod is a ratio between the checks the insurance company wrote for your employee injuries against the checks that they expected to write. It is important to understand that the estimate for the checks the company expects to write is based on what you do in your business. That means that your mod compares you against your competitors.
There are almost 700 classifications that can be applied to a business. These classifications are very specific about what they do and do not include. Many businesses are misclassified. This can happen when your business buys its first workers’ comp policy and someone chooses the wrong code or when the codes change, as they often do.
Each code has a corresponding Expected Loss Rate (ELR). If your classifications are incorrect (or if payroll is misapplied between different class codes), you get the wrong ELR. Incorrect expected losses lead to your experience mod being different than it should be.
Medical-only injuries, class code six, are discounted by 70 percent when factored into your experience mod. This gives your business a substantial incentive to return employees back to work as quickly as possible. Research shows that employees who return to work get better faster than their counterparts sitting at home.
The split point between primary and excess losses has been $5,000 since 1991. Beginning April 1, 2013 in Virginia and North Carolina, this number increased to $10,000. In 2014, it increased to $13,500, and in 2015, it increased to $15,000. Primary losses are included at full value ($15,000) when the experience mod is calculated, while excess losses are discounted for inclusion in the calculation.
The insurance company sends the rating bureau information on your employee injuries annually, six months after your policy expires. In order to ensure your experience mod is correct, you need to make sure that all open employee injury cases that can be closed, are closed. You should also have conversations with the insurance company regarding any open claims and make sure they have the most up to date information about your injured employees, including their medical and work status.
The “Actual Incurred Losses” on your experience mod includes not only the money the insurance company has spent, but the money they are expecting to spend on employee injury cases that are still open. It is critical that you understand why they are planning to spend that money.
Workers’ compensation is the one type of insurance where you control what you pay. For many businesses, it is the second largest insurance expense behind employee benefits. Take control of your workers’ compensation and unlock the capital that is hidden inside!