When your company faces a high EMOD or EMR the business consequences can be devastating. If you happen to be in the construction industry your situation can become even more complicated. The good news is solutions do exist for companies with high experience mod rate problems. The bad news is that the development and implementation of those solutions take time.
The first step is to gain knowledge about how the EMR works. You must learn about the experience rating system and gain an understanding of key components which include:
- The use of correct classification codes;
- Accurate payroll reporting, through the audit system;
- Accurate claim handling by the insurance carrier;
- Accurate claim data reporting to the rating authority;
- Correct application of the rating formula;
- And other data gathered and involved the rating process.
The next step is to analyze your current experience mod situation. You must understand those independent factors that caused your mod to increase or become out of control. You will have to eliminate the potential for mistakes or errors having occurred in the rate development. They do happen. Then you must isolate those situations that caused the increase in your mod. These often include uncontrolled claim situations or incorrectly reserved claims or mishandled claims. Incorrect payroll reporting or incorrect classifications.
As an employer, do you know your perfect EMR? If not you need to ask your insurance agent and if they can’t help you then contact our office. You need to know your perfect experience rating factor because this number will be the best improvement you can expect. How can you tell if your actions to improve you mod are working if you don’t know the location of the goal line? Visit this previous blog post where we discuss the importance of knowing your perfect EMR.
Many employers and insurance carriers blame out of control EMODS or experience mods on out of control claims and injuries incurred by the employees. When most of the time increase in the frequency of claims and claim severity is just a result of a greater underlying problem. Historical loss runs must be carefully examined to discover loss trending for an employer.
Once an overall understanding of how an employer has incurred an out of control EMR has been gained, the healing can start. A plan can be developed and implemented to gain better control over individual workers compensation claims. An active safety program can be worked into the solution with expected results being a safer work environment which will translate into fewer claims incurred.
A simple but accurate statement, and one worth remembering:
- Lower claims equate to lower experience modification rates!
As a final thought, it takes time! Time is required to correct an out of control EMR! These calculations are typically based on data incurred during a 3 year time period beginning 1 year previous. In other words data developed last year will not show up until next year. So the EMR used today is based on data starting four years ago. It works on a sliding scale. New data coming in will replace old data falling off. Just remember it can take up to four years to run the complete cycle and efforts an employer makes today may not show up for several years! Be patient and work the plan!
Hope this helps out!