Lower Experience Modification Rate for Increased Profits
This is part 2 of our series on EMR and how it is effecting the profitability of your company. For Part 1, click here.
Is your company looking for a way to increase profitability? Before you cut personnel, before you look for ways to cut expenses, before you try anything else, have you looked at your Worker’s Compensation insurance rate? This is called the experience modification rate, and is calculated based upon your risk rating. To learn more about how your EMR rate is calculated, check out part 1 of this series.
An above average experience modification rate (EMR), can be costing your company valuable profit, and if you’re not aware of it, this can be a hidden profit suck.
So, what can you do?
It isn’t as easy as lowering your car insurance by just switching companies, because the EMR follows your company from insurance company to insurance company. It is a multiple stage approach, which I will lay out for you.
Steps to Lower Experience Modification Rate
The first step is to do a claims review. Many companies request a claims review, then sit there and nod their heads as the company presents the information, which is honestly useless. Just being told about the information doesn’t help you. You need to understand the information and how it can impact your company.
- Was this person or are they currently an employee?
- It occasionally happens where an employee is assigned to the wrong company, so ensure all listed people are properly assigned.
- When was last claim payout? Is it an opportune time to settle the case?
- Why would you settle a claim? Settlement of a claim can lower the impact it has to a claim. If a case was assigned a reserve of $100,000, and has paid out $3,000, there is a reserve of $97,000 which is reflecting on the claim as a high claim case. A settlement of $10,000 would close the case at a value of $13,000, bringing back $87,000 and lowering the impact to the EMR.
- Review of class codes.
- Every employee has a class code under which they are assigned, and ensuring they are properly accounted for in payroll records for hours worked is important for a proper EMR calculation. Why is this so important? If you run an auto repair business, a mechanic has a naturally higher risk classification than an accounts receivable clerk, if someone in your business covers both positions, classifying them under the higher risk code could lower the XMOD calculation simply by having less injuries for a higher risk classification code.
If you have made any corrections or adjustments during this process, have the EMR recalculated, and this could save your company thousands.
With the claims review completed, it is time to conduct a trend analysis.
When just starting in this process, the information will be basic. It will come from your worker’s compensation auditor, during the claims review. What you’re looking for, are accidents increasing or decreasing? Any identifiable patterns to claims/injuries; such as 40% are lifting improperly or such?
As your program matures, you can include items like Near Miss reports, location first aide only incidents, safety committee findings, or anything else your company builds up.
Once you have conducted a thorough tend analysis, the next step is to design a Return to Work (RTW) Program
A Return to Work Program is invaluable to lowering an Experience Modification Rating. It decreases associated costs to provide employees with light duty work, because wages are paid directly to the employee vs paying them from insurance. This decreases the costs paid out by insurance, which is a factor in calculating the EMR.
When implementing a RTW program, it is important that the employee serves a valuable job function, so as to add value to your company, but you also have to take into consideration that the job is within the person’s skill set, and the job is not seen as punitive. What? Yes, some tasks can be seen as punitive, like if the worker is reassigned to a task that provides no value to the company. Companies have done things like having workers sort nuts & bolts, then at the end of the day they mix everything together again. A task like this could be seen as punitive towards the employee, and could have your company under scrutiny for punitive or vindictive actions towards an injured employee.
Keep this in mind while managing a Return to Work Program, and design a program that aids the employer and employee.
Next step in this process is establishing a strong safety program.
When establishing a safety program this is a multi-faceted approach, allow me to lay this out for you:
- Audit for risks in the workplace–
- Hazards can’t be addressed in the workplace without understanding the risks present. This would include conducting a job hazard analysis so risks can be addressed via the hierarchy of control principle.
- Write safety policies, and related training–
- Once you have identified the workplace hazards, this is an opportune time to write policies and develop appropriate training to address the risks identified. On top of that, this is an opportune time to ensure you have the common written policies required by OSHA:
- Hazard Communication Plan
- Lockout/Tagout Program
- Respiratory Protection Program
- Personal Protection Equipment Plan
- Bloodborne Pathogens & Post Exposure Plan
- Emergency Action Plan
- Confined Space Program
- Electrical Safety Plan
- Fire Prevention Plan
- Hearing Conservation Plan
- Crane/Hoist/Sling Inspection Program
- Fall Prevention Program
- First Aide Policy
- Hot Work Program
- Spill Response Plan
- Machine Guarding Policy
- Once you have identified the workplace hazards, this is an opportune time to write policies and develop appropriate training to address the risks identified. On top of that, this is an opportune time to ensure you have the common written policies required by OSHA:
- Work on building a safety culture-
- A safety culture is built from the top down, executives need to embrace workplace safety first, this will show importance to all people in the company. In order for safety to be built into the culture of a company, every operational policy and training will incorporate safety, To learn more about safety culture in the workplace, check out this post.
- Another part of a strong safety culture is a quality safety team. This means the members are committed to safety, and can provide influence in their work areas. To learn some more about safety committees, check out this post.
- Evaluate–
- Reviewing and evaluating the company safety program, at least annually, is important. This ensures the programs are still relevant to any changes in operational procedures, or changes in regulations. The evaluation also provides the opportunity to check the effectiveness of the policy, has it lowered risk, has it decreased injuries?
Following these steps, your company will be able to lower your company’s Experience Modification Rate, which translates into increased profits, and a safer workplace for all employees.
Keep in mind, besides fixing errors, making a change to an EMR is not an instantaneous process, and it will take at least a year to see the impact, while it can take 2 years to see marked improvement, due to getting information to the field employees and building a full and proper safety culture.