Experience Modification Rate & X Mod Explained
One of the biggest expenses for any business can be Workers Compensation Insurance. Knowing this, business owners and managers have a strong motivation to find ways to save on this expense while also protecting the company’s assets and mitigating risks. When navigating this often-confusing landscape, one of the most important components to consider is the “Experience Modification Rate”, or X Mod (also known as the experience modification, experience modification rating, EMR, X Mod, XMod, the mod, and more).
The X Mod can be thought of like a credit score, but instead of determining the interest rate an individual will pay for a loan, it instead is the driving factor that determines the premium a business is going to be charged by an insurance company. But unlike a credit score, a business should seek to lower their X-Mod, and institute policies and practices to keep it low.
The ‘average’ X Mod is set at 100, and raises and lowers based on whether a company is experiencing more or less work comp claims cost compared to their industry average. If a company has lower claims cost than the average for their industry, the rate will be below 100 and translate into lower premiums, and conversely, if a company experiences more work comp claims cost compared to their industry average, the rate will be set above 100, and premiums will increase. For reference, an X Mod of 120 mean a company will be paying 20% more for its insurance, while the company that maintains an XMod of 80 should expect to save 20%. With Work Comp Insurance costs on the rise, this can be an incredibly impactful metric to consider, and the only meaningful area that is controllable by the company.
The Experience Modification Rate is calculated based on the actual losses incurred divided by the expected losses for companies of similar size in the same industry. The calculation typically includes 3 years of claims data, usually excluding the most recent year. It seems rather simple at first, but there are many other factors along the way that can influence how your X Mod is generated, and for most companies understanding the intricacies and hidden details of this can be a daunting task.
Whiteboard Risk and Insurance Solutions can help you navigate the confusing and muddy waters of workers compensation, and provide solutions to not only save your company money, but also insulate and protect your assets from liabilities that can arise within the Work Comp claim system. When you partner with Whiteboard, you can have peace of mind that we have the expertise and resources to look out for your company’s best interests. But to understand this process better we have compiled this short guide to how your X Mod is calculated, how the way claims are handled can affect it, and most importantly what we can do together to keep your rating low and protect your company’s bottom line.
The Truth Behind Quoting Work Comp
Whether you are shopping your company’s insurance options for the first time, or have been doing this for many years, there are some important things you need to know about how to interact with insurance brokers to insure you make the best decision for your company, and ensure that you are receiving the best and accurate information about what rates and plans are available.
Every year you need to renew your workers compensation insurance, and there are thousands of companies that work in the US. But depending on the nature of your company’s business and the geographical area you are located in, there is a number of factors that determine whether certain insurance companies will write policies for your company. Years ago, it was common practice that each broker represented a specific insurance group, but today this is no longer the case. Now, virtually every single broker can represent every single insurance company, all at the same time. It seems confusing, and it can be a challenge to know what to believe, because despite what some brokers may tell you, they do not dictate the price. Most brokers want to simply give quotes, and would like you to think that they have both the power and relationships that matter. So, what does matter?
The truth is, your company’s quoted insurance premiums are calculated by the insurance company’s underwriters, and they are based on three main factors. These are your company’s exposures to risk, your claim history, and your efforts to mitigate the future risk. Most brokers don’t want you to know this, and have been operating in the same manner for decades. You should choose a broker that instead of just providing quotes, brings value to your business by maintaining a low X Mod for your company, to ensure the quotes you do receive will be as low as possible, then allow them to shop your rate to the entire insurance market, and gather all the quotes for you in one place. Only then can you decide with peace of mind what is the best option for your company.
How to Find Your Company’s X Mod
The first step in developing an action plan to lower workers comp premiums is to know your company’s X Mod rate. If your X Mod is high, it is likely your work comp rate is high, but the good news is there are ways we can help. We would be happy to look it up for you, but you can also look it up for yourself using the WCIRB (Worker’s Compensation Insurance Rating Bureau) website at WCIRB.com/ratesheet. Click the link to request your company’s Experience Rating Form. You will need to provide your personal information, as well as the company’s information, and then you have the option to choose whether to receive this information via regular mail or email. Once you receive your X Mod, and if it is over 100, it does mean you are significantly overpaying for your worker’s compensation insurance premium, but it also means that we can help.
Understanding Your X Mod Worksheet
Your Experience Modification Rate can cause the most severe swings in the cost of your company’s insurance premium, so it’s important to know where this rating comes from. The WCRIB compiles all this data in a document known as your Experience Modification Worksheet. Once you have pulled this worksheet or have had us pull a copy for you, take a look at the top righthand corner of the document. Here you will find the name of your insurer and all the relevant policy dates. Then if you look at the left-hand columns of the main chart, you will see your class codes, payroll per class code, and the expected losses for each. On the right side of the chart, you will find the claims your company has actually experienced, injury types, the status of the claims, and how much the losses were. Then below that you will see three horizontal rows that represent the three years that they use to compile for your X Mod, with the category totals listed below that. At the very bottom, you will see your X Mod calculation resulting in what your rate will be for that year. If this rate is higher than you want it to be (anything over 100), don’t hesitate to contact us for the help you need to get this potentially expensive problem solved.
What is Your Primary Threshold?
Depending on the size of your company and the nature of your business, you will have a unique amount assigned to you based on expected losses. This is called the Primary Threshold. Generally, the larger your company, the greater this amount is going to be. You can find your unique amount on the top righthand corner of your Experience Modification Worksheet. This number is very important because it represents the maximum primary loss value that a claim can have. For example, if your Primary Threshold is $10,000, and you have a claim that is $15,000, only the first $10,000 will actually impact your X Mod. When trying to understand policies and reviewing your claims and practices, this figure is very useful to know and we are here to help you understand why it stands where it is and what you can do to affect this number in the future.
Your Unit Statistical Reporting Date (and Why It’s Important)
Don’t make the critical mistake of waiting to think about your workers compensation insurance until the month or two until your company needs to renew. To better understand the reason why this is such an important issue, you need to become familiar with the timeline in which your company’s Experience Modification Rate is calculated. The date that this occurs is referred to as your Unit Statistical Reporting Date, which is six months after your policy begins or renews. This date is when all statistical data must be submitted to the WCRIB by your previous carriers.
It’s very important that you close all possible claims and reduce your reserves on the claims that are still active before this data is submitted, otherwise they will have a negative impact on your X Mod for the next year. That’s why speaking with a Whiteboard representative about these issues is so important, even if you won’t be renewing or quoting for new workers comp insurance for many months. Having the lowest X Mod possible is a yearlong endeavor, and you’ll be most prepared and more successful with us in your corner.
Understanding Claim Reserves (and How They Impact You)
Another way Whiteboard can help you keep your company’s X Mod low and save you money is our expertise and knowledge of claims management. When a company experiences a Work Comp claim, the carrier covers immediate costs, but a commonly overlooked but very important factor to consider in this process is the claim reserve.
Claim reserves are funds set aside in a holding account for the purpose of paying out future expenses such as continued medical care and lost wages. When a loss occurs, each claim reserve is set based on statistical data, and is valued at a worst case scenario. This reserve amount is included when compiling the data to calculate your actual losses for the year even if the money is never used. This can artificially inflate your losses and vastly affect X Mod rating in a very negative way.
We staff a team of work comp claims managers to make sure that when you incur a loss and a claim is started, that the claim reserves are updated continually, with the goal of getting these claims closed as quickly as possible. This way they can’t be used to calculate your losses and drive up your X Mod when your Unit Statistical Date occurs. We aggressively negotiate claims in the most efficient manner, and will make sure insurers avoid the mistake of failing to update these claim reserves once they’re set. So, reach out to us today to start your Whiteboard partnership and allow us to work and fight for you.
(Freshen up on all of the basic X Mod information by watching our tutorials, here: https://www.whiteboardrisk.com/tutorials-x-mod/ )
Identifying the Problems with the Work Comp System
Unfortunately, the way the Work Comp System currently operates, everybody involved in the process has a financial incentive to drive up the cost of your claims. Doctors over-schedule follow up treatments and medications, and are quick to take employees off work. The employees themselves can exaggerate injuries and take unnecessary time off, and in worse case scenarios even retire on the Work Comp system. Attorneys can direct claims through expensive legal processes and find ways to add to injuries to inflate settlements. Insurance carriers are not incentivized to investigate claims thoroughly, and will settle claims even when it is not in the best interest of the policyholder. And one of the dirty little secrets of the industry is that they charge an average of $4 for every $1 (in future premiums over the next three years) that they spend on claims. That means that your company is not only paying for their own claims, they carriers are making up to four time more in premiums because of these claims.
As you can see, the deck is stacked against the policyholder, and the average company does not have the time, knowledge and resources to combat the inflationary nature of this system that has a vested interest to drive up costs of claims and keep your premiums high. It’s very important to make sure that someone is fighting on your behalf to ensure claims are handled to the full extent of the carrier’s ability, and have the most effective strategies in place to protect you from each of the other parties in this system.
Whiteboard Risk and Insurance Solutions has constructed a network of support from the ground up that proactively fights for the policy holder even before any losses occur. We’ve developed wholly unique strategies and resources designed to protect your company from the broken work comp system. The final result is having an entire system designed around reducing the frequency of injuries and the severity of claims cost.
The Solution to a Very Complex Problem
By now you can clearly see how your company’s X Mod is the primary force that influences the rate you pay for your insurance premiums, and it can be either your best friend or worst enemy when you are looking to reduce costs in this category. Insurance brokers in the industry do not understand the intricacies that effect your X Mod the way we do. We can breakdown to the penny how every dollar of your workman’s comp claims will affect your bottom line.
Whiteboard goes far beyond the average broker when it comes to representing the best interests of your company. This extends to how we assist employers and educate them how to handle a claim from the moment it initially occurs. Our team goes out and to train managers and owners on a completely new and more effective way to handle employee injuries that is vastly different than the typical Work Comp process. We have a 24 hour a day telephonic triage unit to handle injuries, and have the option to dispatch an injury tech to treat employees for minor injuries at their location, which results in the vast majority of injuries never turning into claims. Employees receive care under the OSHA guidelines of first aide that is often much quicker than proceeding with the traditional route. We stop an astounding 87% of all injuries from ever becoming claims, by doing this we keep it from entering the Work Comp system entirely.
We can also assist employees directly when an injury claim does occur, and help them navigate a system that is just as confusing for them as it is for the employers. Many times, employees seek the help of an attorney not because they are looking to game the system, but because they are so confused by the process and are just seeking to get sufficient care. Unfortunately, once an attorney is involved, the vast majority of them will steer an employee towards a course of action and treatment that inflates the cost of a claim in order to make the attorney more money. Whiteboard can help employees cut through all the confusing red tape and avoid this messy situation from occurring in the first place, resulting not only in better care for the injured employee, but reduced costs and liability for the employer as well.
The bottom line is by partnering with Whiteboard, you are protecting your financial bottom line. You will bring to your company a wealth of knowledge and resources that relieve the headache of trying to manage this complex system yourself. We have a proven track record with both statistical data and client testimonials to show the effectiveness of our services, and how our creative methods and relentless communication work to bring your Experience Modification Rate down and save you money.