If you want to lower your workers’ compensation premium, it’s worth learning about a little number called your e-mod.
Why? Because your premium is determined, in part, by your e-mod — and it’s one factor you can actually manage.
So what does e-mod stand for?
E-mod is short for experience modifier or experience modification factor.
The experience modification factor is a multiplier used to calculate your workers’ compensation premium. It shows how your organization’s workers’ compensation claims experience compares to other businesses similar in size and types of jobs.
If your claims history is average among similar businesses, your e-mod will be 1.0. If your e-mod is:
- above 1.0 it means your business’ claims history is worse than your peers.
- below 1.0 it means your business’ claims history is better than your peers.
An e-mod less than 1.0 directly reduces the premium amount you pay. The lower your e-mod, the greater the reduction.
That’s the short answer. The longer answer is valuable to know if you want to really take control of your workers’ compensation costs.
What goes into the e-mod calculation?
The e-mod usually takes into account three years of claims history, excluding the most recent policy year. For example, the e-mod for a policy period beginning January 1, 2018, includes claim costs for the policy periods beginning:
- January 1, 2014
- January 1, 2015
- January 1, 2016
Who determines your e-mod?
A state or national rating bureau — not your insurer — calculates experience modification factors.
Depending on your state, either your state rating bureau (such as the Minnesota Workers’ Compensation Insurers Association or the Wisconsin Workers’ Compensation Rating Bureau) or the National Council on Compensation Insurance determines your e-mod. These data collection organizations use statewide claim data to calculate expected losses for different types of operations.
They also calculate individual employers’ e-mods using the claims cost data reported by insurers.
Your data collection organization recalculates your e-mod each year about 90 days prior to your policy renewal date and reports it to you and your workers’ compensation insurer.
Who gets assigned an e-mod?
Not every business is large enough to have an e-mod.
Your workers’ compensation premium has to be above a certain dollar threshold specified by your state before your organization will be assigned an e-mod. This minimum premium amount is usually around $3,000-$7,000.
Which claims costs are excluded from the e-mod?
Not all claims costs are included in the e-mod calculation.
If a claim is medical-only (meaning the employee doesn’t miss any work time due to the injury, or returns to work within the state waiting period), only 30 percent of the claim costs are included in the e-mod calculation. That’s one of the many reasons for a strong return-to-work program.
If the claim is larger, typically involving lost time, there is a discounted rate for losses over a certain amount. This is known as the split point, and is set by each state. For example, in Minnesota in 2017, the split point is $16,250. That means that when the e-mod is calculated, less weight is given to a claim’s dollars over $16,250.
Where to find your e-mod
If your organization is large enough to have an experience modifier and you’re an SFM policyholder, you can find it in three places.
- The official notice you receive from your rating bureau each year prior to your policy renewal date
- Your SFM policy information page
- In CompOnline under the "Policy" tab, on the "Policy information" screen
How to calculate your e-mod yourself
You may want to try to figure out what your e-mod will be following a significant claim, or test out "what if" scenarios.
Each state rating agency calculates e-mods differently, so this isn't always easy.
The Minnesota Workers' Compensation Insurers Association offers a free Minnesota Experience Modification calculator . The Wisconsin Compensation Rating Bureau and National Council on Compensation Insurance (rating agency for Iowa, Nebraska, Kansas and South Dakota) offer similar tools for a fee.
To learn more about the e-mod calculation formula in your state, see the following resources:
- Minnesota: Experience rating frequently asked questions
- Iowa, Nebraska, Kansas and South Dakota: ABCs of Experience Rating brochure
Keeping an eye on your e-mod is a good habit that will help you understand and then work on lowering your workers’ compensation premium.
Learn more in SFM’s E-mods CompTalk .