Your workers compensation premium is affected by a number of factors, many of which are actually manageable when you have access to the right tools. This article outlines the factors that affect your workers compensations costs and how we can help you manage those factors in an effective manner.
What is Experience Modification?
Experience modification (also known as “ex-mod”) is a factor used in the calculation of workers compensation premiums. Ex-mods are calculated by rating bureaus based on information reported by insurance companies.
An ex-mod is based on a three-year history of the employer’s workers compensation claims and the premium they have paid. The most current year is not included in the ex-mod because it has not yet been audited in terms of premiums or claims. For example, ex-mods for 2014 were calculated using data from years 2012, 2011, and 2010. Ex-mods for 2013 were calculated using data from years 2011, 2010, and 2009.
Ex-mods are based on actual vs. expected losses. When calculating the ex-mod, the rating bureau takes into consideration the actual claims that have occurred during that period for the employer and weighs it against the expected number of claims for that particular industry. Also weighted into the calculation is the employer’s payroll during that period.
A low ex-mod (anything under 100) is considered positive and is applied as a credit. A high ex-mod (anything over 100) is applied as a surcharge. If the actual number of claims was lower than the expected number of claims, a lower ex-mod will result. A higher ex-mod results when actual losses exceed the number of expected losses.
How do the ex-mod and the standard rate work together to determine what you pay?
Because ex-mods are calculated by independent rating bureaus, your ex-mod follows you regardless of the insurance carrier you are with. Each insurance carrier determines their standard premium rate. Your ex-mod is applied to the standard premium rate to determine your workers compensation premium. For example: If your ex-mod is 85, then your premium will be 15 percent lower than the standard premium. If your ex-mod is 115, your premium is going to be surcharged by 15 percent.
Standard Premium: $100,000
Your Adjusted Premium: $100,000 x 85% = $85,000
Standard Premium: $100,000
Your Adjusted Premium: $100,000 x 115% = $115,000
Ways To Reduce Your Ex-Mod
With our clients, we have experienced great success using a three-pronged approach to reduce ex-mods. Our approach includes accident and loss prevention, Nurse on Call™, and claims oversight. You can reduce your premium costs for your organization overtime by implementing these services. I’ll share with you below how each of these elements positively impacts our clients.
Safety Services and Loss Control Engineering
We employ our own in-house safety engineer who works directly with our clients to help identify areas of risk and implement solutions to reduce loss. Our safety engineer works directly with our clients to help improve the safety culture within their organization and to ensure they are in compliance with safety regulations. Our safety training is customized to each client to help address the issues that are most relevant to them.
Nurse on Call™
Some minor workplace injuries can be treated with first aid onsite and do not require professional medical attention and the filing of a workers compensation claim. However, making that determination is often difficult as employers don’t want to make the wrong decision in determining whether to just use first aid or to send someone to the industrial clinic; thus even minor injuries end up as workers compensation claims. Nurse on Call™ is a 24-hour nurse triage service. Instead of calling the insurance carrier to report a claim, the employer calls the nurse hotline when an injury occurs. With this service, employers will have a three-way conversation with a registered nurse and the injured employee. The nurse takes notes on what has happened and then gives instructions on what to do next – including whether to administer first aid or to send the employee to the industrial clinic. The objective is to get a concrete determination on whether the claim is a first-aid only claim. If the recommendation is to take the employee to the industrial clinic for treatment, the nurse will call the pre-designated clinic and let them know the injured employee is on their way and what kind of treatment the nurse recommends based on his/her conversation with the employer and the employee. In addition, critical documentation is created and maintained by the nurse and a confidential report is immediately sent to the employer for keeping in the employee’s file. This service helps curb workers compensation fraud and keep the cost of claims down.
Claims Advocacy and Oversight
Unmonitored claims result in lost revenue for your business. For our clients, we implement a claims oversight service where we assign a claims advocate to work on their behalf to aggressively negotiate claims reserve reductions and move claims to closure. This also means employers no longer need their HR director or another employee to spend time calling the clinic, the doctor, or the attorney’s office trying to find out why claims haven’t closed. We take over management of all open claims, including claims that occurred before the employer was our client. The sooner we can close the claim, the sooner it will no longer affect your ex-mod. We will provide you with reports every 90 days summarizing our results.
FEWER CLAIMS: Our Nurse on Call™ claims frequency reduction is 23 percent better than the industry.
LESS COSTLY CLAIMS: Our claims oversight program closes claims 60 percent faster with 47 percent less costs.
With lower ex-mods you can experience long-term premium costs savings and receive the most value from your workers compensation program.
Kerry Tuma is a veteran insurance professional who has experience selling multiple lines of commercial coverage with a specialty in workers compensation, general liability, property, directors and officers liability, and professional liability. Kerry is a responsive, value-added resource for his clients and a trusted partner in their business planning process. Kerry uses the Leavitt Group’s marketing strength to provide clients with customized insurance solutions and competitive pricing. This includes a workers compensation carrier exclusive to Leavitt Group agents.