As an agent, it is important to know what affects the e-mod to prove you are the work comp expert. When speaking to clients and prospects, sharing what is excluded will help you to do this. Let’s dive into what excluded from the e-mod.
How is the e-mod calculated?
Just a brief overview – the experience modification factor is a multiplier that affects the workers’ compensation premium. The e-mod is mainly derived from your client’s prior claims history vs predicted losses. Depending on where a business operates, the state or national rating bureau will calculate the e-mod.
What claims are excluded from the e-mod?
Not every kind of claim has a significant impact on a company’s experience mod. You can expect the following types to have a negligible effect.
Medical only claims
While medical only claims are not completely excluded, they have a greatly reduced influence on the e-mod. In addition to “medical only” claims, there are “Medical and indemnity claims”.
Here is a brief overview of the differences:
- Medical and indemnity: This is usually for more severe claims but can also include medical bills and a few days of lost time at work. Workers compensation wage payments are made to the employee for the employee’s lost time, meaning that they are unable to work due to a work-related injury. This also includes claims where the injury is so severe that the injured worker may receive a disability payment for injuries sustained
- Medical Only: These are usually minor claims. The injured employee seeks medical treatment and is able to return to work and there is no lost time. When an employee returns to work under a return-to-work program or light duty program the job may differ temporarily to accommodate return to work restrictions. A 70% discount is applied to these claims (in most states)!
Most states have approved the Experience Rating Adjustment (ERA) in order to disincentivize employers from paying out these claims without reporting them to insurance companies. In most states workers compensation is the sole remedy for employees and employers and claims should always be turned in to the insurance company. The ERA limits the amount of losses used in the rating formula that come from medical-only claims. It’s important to note that if $1 of indemnity is paid out, the claim will not be discounted.
This is SO important to know as an agent, educating your clients can save them money in the long term. TIP: This point on medical only claims is very helpful when it comes to implementing a proper return-to-work program.
Split point
In an effort to normalize claims, each claim is subject to a split point or what is commonly known as the threshold or primary threshold. The split point separates the claim into primary and excess loss amounts in the rating formula.
The split point can vary from state to state. It’s important to refer to each states regulatory authority to determine what the split point is for your state.
- Primary Loss: The amount of the loss up to the split point. Meant to reflect frequency.
- Excess Loss: Any losses that are in excess of the split point. Meant to reflect the severity of the loss.
Depending on the state determines how excess losses are used in the calculation. In most states excess losses are reduced in the calculation or excluded all together. This means that more priority on claims is placed on the primary loss.
Also, if a loss amount is less than the primary threshold, then 100% of the claim will be primary and there will be no excess loss used in the calculation.
What Can You Do?
Educating your clients and helping them understand how each claim impacts what they end up paying for insurance is very important. Using Mod Advisor, you can show them the problem during the review and provide the solution – this can be through a return to work program, nurse triage, improving the reporting process, etc. Learn more about strategies, presenting problems, and providing solutions to help your clients navigate workers comp with Mod Advisor.