Steps You Can Take To Fix An Out Of Control Experience Modification Rate or EMR

We are often asked by insurance agents, employers and attorneys how to fix an out of control EMR or experience modification rate. Yes, you can fix an EMR, but the answer’s not easy, not the same for every employer and takes time! Here we’ll look at a few things an employer can do to fix a broken EMR!

To begin, you must realize it’s more of a process than a snap your finger, presto chango and it’s fixed kind of thing. You must first gain an understanding of how the EMR got out of control. That starts by analyzing the current and past pertinent supportive documentation. A thorough review is required of an employers:

  • Workers compensation loss history as documented by insurance company loss runs;
  • Closed claims;
  • Open claims;
  • Claim reserves;
  • Payroll by class code;
  • And classification code assignment.

When that’s complete the next step is to conduct a thorough claim review. This is essential to verify that claims used in the process are valid claims and that they have been properly handled in regards payments made and reserves established.

Once this information has been reviewed a verification of the current experience modification rate calculation is required. Mistakes do occur in the EMR calculation process. The documented loss history and payroll information should be used to calculate a test mod in addition to a thorough review of the calculations used to generate current and past EMR.

Armed with this information a complete understanding of how the current EMR was developed is now possible. You should now be able to answer these questions:

  • Is there an identifiable pattern to claims?
  • Are claims trending up or down?
  • Is there a need to dispute any open claims or reserves?
  • What modifications can be made to the current safety program that help reduce claim frequency and severity?
  • Is the current EMR calculated correctly?
  • Are there any obvious errors or mistakes that caused the increased EMR?

Once you’ve correctly identified the problem areas you can start to formulate a plan on how to fix the EMR. But remember it takes time and consistent effort!

Because of the time line experience period used in experience mod rating, todays claims, or better, any reduction of claims will not show up on the EMR until the following year. For example an EMR effective in 2014 will be calculated using experience data from 2012-2013, 2011-2012 and 2010-2011. So data from the most recent past year, 2013-2014 does not go into the calculation until the following year. It’s done that way to allow for the finalization of data to be gathered and reported to the rating authority.   

Not only do you have to know where you’ve been and how you got there, but you must also know where you’re going. I can’t stress how important EMR projections play in this process. Even though an employer may have a favorable currently published EMR, if there have been claims in the yet unreported, uncalculated recently expired policy year, using an EMR projection will give that employer a snapshot of what their EMR will be next year. We use this tool to help our clients better prepare for the future. Many times giving them the heads up they need and allow them to budget today for an increase in the future. An employer should never be surprised by next years experience mod rating. If you’re not receiving this service from your workers compensation insurance agent you should call us!

There’s no one size fits all fix when trying to bring an out of control EMR back to an acceptable level. So to recap, steps to fix a broken EMR include:

Be sure to secure the help of a Work Comp Consultant for assistance with your EMod or EMR problem!

Hope this helps out!