Your EMR Directly Impacts Your Premium
Your experience modification rate compares your claims history to similar businesses. It's a multiplier that directly affects what you pay for workers' compensation. Understanding how it works helps you manage costs.
What EMR Means
| EMR Value | Interpretation | |-----|--------------| | 1.0 | Average for your industry and size | | Below 1.0 | Fewer or smaller claims than average | | Above 1.0 | More or larger claims than average |
The difference is significant. A 0.8 EMR means you pay 20% less than baseline. A 1.3 EMR means you pay 30% more.
How EMR Affects Your Bill
Your premium is calculated as base rate multiplied by payroll divided by 100, then multiplied by your EMR.
Example with $500,000 payroll at a $10 rate:
At 1.0 EMR, you pay $50,000. At 0.8 EMR, you pay $40,000. At 1.2 EMR, you pay $60,000.
That's a $20,000 swing between the best and worst scenarios in this example.
How EMR Is Calculated
The calculation considers your claims frequency, claim severity, and how your experience compares to similar businesses in your state and classification.
The experience period looks at three years of history, excluding the most recent year. Claims from two to four years ago are currently affecting your rate.
What Hurts Your EMR
High Claim Frequency
Multiple small claims hurt more than one large claim. Frequent claims suggest systematic safety problems. Each claim gets weighted in the formula.
Severe Claims
Large losses with high medical costs, extended time off work, and permanent disabilities drive EMR up. However, frequency is weighted more heavily than severity in the calculation.
Open Claims
Unresolved claims are carried at reserve estimates, which may be higher than final settlement. Closing claims can help your EMR.
Improving Your EMR
Prevent Claims
The best strategy is avoiding injuries entirely. Safety programs, training, proper equipment, and hazard elimination all reduce claim frequency.
Manage Claims Well
When injuries occur, report immediately. Provide quality medical care. Implement return-to-work programs to get injured employees back on modified duty. Stay engaged with your carrier on claim management.
Review Your Worksheet
Get your mod worksheet from your agent and check for errors. Claims that aren't yours. Closed claims still showing as open. Classification errors that affect calculations.
Timeline of EMR Impact
| Year After Claim | Impact on EMR | |------|--------| | Year 1 | Not yet included in calculation | | Years 2-4 | Full impact on your rate | | Year 5+ | Drops out of calculation |
This means the effects of a bad claim persist for three years. Improvements also take time to fully reflect.
Working With Your Agent
Your agent can obtain your mod worksheet, review it for accuracy, identify improvement strategies, and explain the calculations. Use this expertise. Small errors in mod worksheets are more common than you'd expect.
Common Questions
When does EMR start applying?
When your workers' comp premium exceeds a threshold, typically around $5,000 to $10,000 annually depending on state and circumstances.
Can I reduce EMR quickly?
No quick fixes exist. Improvements take 2 to 4 years to fully reflect as old claims roll off and new clean history enters the calculation. Start improving safety now.
Do all claims affect EMR equally?
No. Frequency hurts more than severity. Many small claims damage your EMR more than one large claim.