A company's insurance experience modification rating, or EMR, measures its past history of workers' compensation claims against other businesses in the same industry. Insurance companies base their workers' compensation premiums on a company's EMR. In most states, the National Council on Compensation Insurance issues the EMRs to each company. However, it may be handled by an independent agency in certain states, so check the procedures in your area if you need to discuss or appeal your EMR.
The initial eligibility threshold for receiving an EMR varies by state. Generally, you must either meet this threshold within the prior two years or meet the threshold when your company's premiums are averaged over the entire time you have been paying for workers' compensation insurance. For example, a Florida company must either pay $10,000 in total workers' compensation premiums over a two-year period or average $5,000 per year for a longer period of time. Once you have received your initial EMR, you will receive an update before the renewal date on your insurance policy. Your new EMR will be based on the company's payroll and losses due to workers' compensation over the three years prior to the policy's effective date.
Insurance companies use EMR to assess their risk of future workers' compensation claims and will adjust your company's premiums as your rating changes. If your company implements a successful accident-prevention program and reduces its workers' compensation claims, it will be rewarded with lower insurance premiums. On the other hand, a history of workplace injuries will raise your premiums as the insurance company tries to reduce its losses. Subcontractors and other vendors also may look at your EMR as an indication of whether working with your company would expose their employees to a higher risk of injury.
Workplace injuries that only result in payment of medical expenses are usually less severe than injuries requiring one or more employees to miss time on the job. The NCCI recognizes this and discounts medical-only claims by 70 percent before figuring them into your company's EMR.
Lost Time Claims
The first $5,000 of each lost time claim is used at full value when the NCCI calculates a new EMR. The remaining claim amount is discounted to reduce the impact of catastrophic losses on a company's workers' compensation insurance premiums. There is also a state accident limitation for lost time claims that imposes a maximum cap for EMR calculation purposes. As a result, a history of small injury claims will raise your company's premiums more than a few large claims. This encourages companies to implement accident prevention programs designed to reduce injuries instead of simply reacting to problems as they occur.
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