Workers Compensation Experience Mod Change

Workers compensation pricing may now be more volatile for small companies who qualify for an Experience Modifier.

What is the Experience Modifier?

Employers whose annual workers compensation premium is over $4,000 have an "experience modifier" applied to their premium. The mod starts as a 1.0 and adjusts to be a debit to "punish" companies with worse than average losses or a credit to "reward" those with better than average losses. A company with a Mod of 1.10 would pay about 10% more than the average company. This encourages employers to emphasize workplace safety by connecting their losses directly to their premium.

How is your Experience Modifier Calculated?

The calculation for the Experience Mod compares an individual companies payroll & losses with those that perform similar work. To limit the effect any one loss can have, the amount of the loss used in the calculation is capped. This cap had remained the same for the last 20 years and is now being adjusted up to account for the rise in medical costs. Over the next three years, the cap will be gradually increased from $5,000 to $15,000 and will be based on inflation after this point.

The Concern about the New Experience Modifier Calculation

The overall premium collected should remain the same. The change means that the "reward" or "punishment" effect can be greater. Large businesses should not see much change as the calculations average out with high payroll. The issue is that small business owners can see much larger variations in premium from year to year. Also, some companies will not hire contractors with an Experience Mod over a certain number. This can mean lost opportunities for small businesses that would have qualified under the old system.

Workplace safety efforts to prevent workplace injuries and workers compensation claims will be more influential than ever on the success of your business.

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