A common term that brokers, insureds and prospects will come across when shopping for the appropriate Healthcare Workers’ Compensation Coverage is an “experience modification factor.” In order to obtain the best coverage possible, it’s essential to understand terms such as this, and the effect it will have on individual policies.
The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) defines an experience modification, also referred to as an e-mod, as a comparison of actual losses to expected losses. If a particular home care agency or other healthcare firm has a loss experience that is more costly on the average than a comparable company’s loss experience in their industry, that firm would have to pay a surcharge on their premiums, known as a debit e-mod. However if that same firm’s loss experience is less costly than the industry average, that individual firm will receive a discount, or a credit e-mod, on their premium.
Where do Insurers Get Rating Information?
Each state subscribes to an independent statistical organization or bureau, most often the National Council on Compensation Insurance (NCCI), in order to gather and analyze data and trends within the industry. Insurance companies are required each year to submit to the NCCI or their state bureau information for each employer that they insure. These reports are known as unit statistical reports and include classification codes, audited payrolls by class, premium information, and claim information.
How Are These Ratings Determined?
This will vary by state, however in general the experience rating method will use an individual’s or groups’ historic data as a proxy for risk in the future. These ratings are completed every year, and the factors used to determine them include business class codes, payrolls, and losses from the last five years. It’s important to note that if the business is sold, or if a different insurance company provides coverage for the healthcare organization, the factors that are used to determine their e-mod will remain the same.
Do All Healthcare Employers Qualify For an E-Mod?
In most cases, according to the Insurance Learning Center, if an employer’s premium averages $3,000 or more before discounts, they are eligible for an experience modification rating. As mentioned previously, a firm’s e-mod rating will be either determined by the NCCI or an independent agency. An insurance agent can advise the firm on where their mod is calculated and help determine if they will qualify.
How Can E-Mod Ratings Be Lowered?
By developing and maintaining a robust workplace safety and training program and a solid return-to-work plan, healthcare industry leaders could effectively lower their e-mod rating. Implementing appropriate loss prevent procedures is important as well, in effectively managing workers’ compensation costs and lowering an e-mod rating. It’s important to remember that the current year’s claims will typically present the greatest opportunity for cost reductions, and that the frequency and severity of workers’ compensation claims will also affect ratings.
At Manchester Specialty, we specialize in offering workers’ compensation insurance coverage for the home health care, hospice, and medical staffing industries. In addition to this important coverage, we offer tools and strategies through our carriers for these industry segments, to help gain control over ongoing costs and rising premiums, assist employees in returning to work, stem fraud, and other risk management measures. To find out more about our operation and all of our specialty insurance programs, you or your local insurance broker can give us a call today at 855-972-9399.