Your organization’s experience modification rating needs to be checked periodically. It’s the indicator of your costs for work injuries, and it may be higher than you want.
By taking steps to reduce injuries and their costs, you can lower your e-mod and could directly impact your workers’ compensation premium and your bottom line.
A higher than average emod can cost you, especially in the construction industry
An experience modification rate or EMR is the modifier a company’s workers’ compensation premium is given based on three years of claims performance (or up to 45 months). A 1.0 EMR is average for all industries meaning that all organizations with an EMR of 1.0 pay a workers’ compensation premium neutral to its peers. If a company has a higher frequency or severity of claims than its peers, the EMR will rise beyond a 1.0 (called a debit mod). If a company has less of both severity and/or frequency of claims than its peers an EMR can drop below 1.0 which means a reduction in workers’ compensation premiums (or a credit EMR).
Many larger organizations, including governmental agency, require bid prequalification around safety performance to be met prior to awarding work. When used for prequalification in the construction industry, often times the EMR threshold to award work is 1.0 or less. This means that an increase of employee injuries that pushes a company’s EMR over 1.0 could result in lost work. In addition to that, higher workers’ compensation premiums result in more operating expenses for a company which can also impact a company’s ability to bid competitively. This also means less funds available for tools, equipment, training, new hires, bonuses, etc… Bottom line (pun intended) – nobody wins when employees are injured on the job. Proactive safety initiatives will have a return on investment.
There are things you can do to control your emod, in all industries
Think big picture. Do what is reasonable and necessary to prevent injuries in order to minimize their costs when they do occur.
Start with good hiring practices. Hire the right people for the job and ensure they are properly trained. Hire with safety in mind. Can the person you’re hiring perform the job tasks? Do they have experience in the field?
Make safety a priority and part of your culture. Educate your employees. Engage employees, ask for their input. Share the message from the top down to ensure they know that management cares about their safety and health. Invest in safety tools and trainings. Influence employees’ behaviors and continue to evaluate your workplace regulary. Make safety changes where needed and be proactive in your efforts.
Focus on injury trends. When an injury happens, look for causes, learn from it, adjust and address the issue. You can make an impact by increasing proactive measures around your greatest injury exposures which may include trends of current injuries. Invest in injury reduction methods and equipment. Work hard to reduce the amount of claims. If there is a claim, how you manage that claim can make all the difference, especially have discussions right before the EMR is calculated to try to reduce reserves. This will ensure that the claim will go into the EMR calculation at the lowest possible value.
Utilize an aggressive return-to-work or light-duty program. Offer temporary or light-duty work. Focusing on returning injured employees to work without lost time is one of the most impactful ways to manage costs. Medical-only claims (in most states) are reduced by 70 percent before the EMR is calculated. It pays to identify modified or light-duty work up front, and to implement this at your organization.
Confirm the accuracy of the experience modification factor calculation. Always check to make sure the EMR is complete with accurate inputted data. Once a claim becomes closed, check for refile potential based on jurisdiction at claim closure. Also, never be caught off guard and consider having an estimate of your experience modification given to you prior to renewal to help you prepare for premiums or lost work potential. Your claims history can be an important tool to identify trends, but the claims impact estimates for your EMR can also help aid in decision making and prioritizing.
Once you establish good practices to reduce and manage claims, ensure you are educating your teams on the best practices you have established. By taking steps to avoid and minimize injuries and costs, you, your insurance provider and your broker can achieve the greatest impact to your e-mod. You’ll positively impact your bottomline and possibly to your organization’s ability to compete as well.
Contact your Marsh & McLennan Agency representative for more specific information about your e-mod or safety initiatives and programs available to you.