Understanding Your Work Comp Ex-Mod and Its Rate Impact

Are your employees experiencing injuries more often than expected? If so, you may be paying higher workers’ compensation costs. Your workers’ compensation experience modification factor – often called the work comp ex-mod factor – is based on your loss history and has a significant impact on your rates.

What Is the Work Comp Ex-Mod?

Some industries are more dangerous than others. For example, if you’re operating a lumber mill, you have greater workplace injury exposures than if you’re operating a call center. This is why different industries pay different workers’ compensation rates.

Even within an industry, though, some businesses have a higher rate of injuries than other, similar businesses. For example, one lumber mill may have a dozen injuries a year, whereas another comparable company of the same size may only have one and another might have 20. The same is true for any type of industry.

This comparison between like companies is where the work comp ex-mod factor comes into play. Your business’s ex-mod factor is based on your company’s loss history. An ex-mod of 1.0 represents the average.

• Exactly 1.0 – Your loss history matches what’s expected for a company like yours. New businesses that have insufficient claims history to calculate an ex-mod may also receive a rating of 1.0. You will pay the average workers’ compensation rate for businesses in your industry, of your size, and in your state.
• Below 1.0 – Better-than-expected claims history. You will pay less for workers’ compensation insurance compared to similar businesses. The lower your ex-mod, the more you save.
• Above 1.0 – Worse-than-expected claims history. You will pay more for workers’ compensation insurance than other similar businesses. The higher your ex-mod, the more you pay.

How the Ex-Mod Works

The ex-mod factor is usually based on a three-year period.

Imagine there are two small restaurants with the same number of employees and in the same state.

• The average workers’ compensation cost for a restaurant like theirs is $10,000 a year.
• However, Restaurant A has good safety practices in place and worker injuries are rare. Restaurant A’s ex-mod is .60, meaning workers’ compensation costs are only $6,000 a year.
• Restaurant B, on the other hand, has a higher-than-average claims history. The ex-mod is 1.5, meaning the company pays $15,000 a year on workers’ compensation insurance.

Restaurant B decides to focus on improving safety. Worker injuries become less common, thanks to new training initiatives and environmental controls. The restaurant lowers total costs through better claims management. It takes a while for the ex-mod factor to change, but it decreases over the years, as do the company’s workers’ compensation premiums.

How to Improve Your Work Comp Ex-Mod

You can’t control the workers’ compensation rates for your industry, but you can influence your ex-mod factor. Below are some effective ways to bring down your ex-mod and costs:

• Prevent injuries. The best way to improve your work comp ex-mod is to create a safe work environment in which injuries are rare. This leads to other benefits, such as a reduced risk of OSHA fines and improved worker morale. Focus on safety training, hazard controls, and a workplace culture that prioritizes safety.
• Manage claims. When claims occur, how you handle them will have a significant impact on total costs. When workers are injured, a quick and caring response will help get the claim off to a good start.
• Use a nurse triage program. A nurse triage program can help you respond to injuries quickly and direct care appropriately, helping the injured worker to recover more quickly.
• Implement a return-to-work program. A return-to-work program helps employees get back to work after an injury, reducing the number of missed days. This will also bring down your claims costs and your ex-mod.
• Fight fraud. When workers are injured in the course of their duties, they deserve compensation. However, some workers may exaggerate or even fake their injuries to get money or may cover up disqualifying factors, such as the fact they were intoxicated at the time of the injury. A prompt investigation will help catch fraud.

Do You Need Help with Your Workers’ Compensation Coverage?

Navigating workers’ compensation and the work comp ex-mod factor is challenging. Making mistakes could end up raising your costs. Heffernan Insurance Brokers can help. Learn more.