5 Ways to Reduce Your Experience Modification Rate This Year
Your Experience Modification Rate multiplies directly against your workers' compensation premium. A 1.2 EMR means you pay 20% more than the industry average for your classification. A 0.85 means you pay 15% less.
For an employer paying $300,000 in annual manual premium, the difference between a 1.2 and a 0.85 is $105,000 per year—every year. That's not a rounding error. It's a line item that compounds.
The EMR looks backward at three years of loss history (excluding the most recent year), which means the decisions you make today affect premiums 2-4 years from now. But that doesn't mean you're stuck with your current rate. Several strategies can produce measurable improvement within the current or next policy period.
Here are five.
1. Audit Your Experience Modification Worksheet
This is the fastest path to an EMR reduction because it doesn't require changing anything about your operations—it requires verifying that the data used to calculate your rate is correct.
NCCI (or your state rating bureau) produces the experience modification worksheet that calculates your EMR. These worksheets contain errors more often than most employers realize.
What to look for:
Claims that aren't yours. Claims are assigned to employers by FEIN. If your FEIN has ever been associated with a predecessor company, an acquired entity, or a reporting error, you may have claims on your worksheet that belong to someone else.
Open claims with inflated reserves. Your EMR is calculated based on incurred losses (paid + reserves). If your insurance carrier has set reserves higher than the claim will likely cost, your EMR is inflated. Contact your carrier to request reserve reviews on open claims.
Medical-only claims not receiving the discount. Claims that involve only medical treatment (no lost time) receive a 70% discount in the EMR calculation. If a claim is miscoded as a lost-time claim when it was actually medical-only, you're being penalized at the full rate.
Closed claims still showing open. If a claim has been settled or closed but is still showing as open on your worksheet, the reserves are still being counted. Verify that all closed claims are reflected as closed.
Missing subrogation recoveries. If your carrier recovered money from a third party (the party actually responsible for the injury), your incurred losses should be reduced by the recovery amount. Verify that subrogation recoveries are credited on your worksheet.
How to do it: Request your experience modification worksheet from your insurance broker at least 60 days before your policy renewal. Compare every claim listed against your internal records. File disputes with NCCI for any errors.
2. Implement a Return-to-Work Program
Lost-time claims drive your EMR harder than medical-only claims for two reasons: they generate indemnity costs (which carry full weight in the formula), and they don't receive the 70% medical-only discount.
Every day an injured employee stays out of work adds to the indemnity portion of the claim. A structured return-to-work program that brings employees back to modified duty reduces that indemnity cost—often dramatically.
The math:
An employee earning $1,000/week who stays out for 12 weeks generates $12,000 in indemnity costs. If you bring that same employee back to modified duty after 3 days, the indemnity portion drops to approximately $430. That's a $11,570 reduction in incurred losses from a single claim—and it drops the claim below the primary loss threshold for many NCCI split points, which means far less EMR impact.
What a return-to-work program requires:
- A written policy that commits to providing modified duty for injured employees
- A transitional duty inventory prepared before an injury occurs—don't scramble to create light-duty assignments after the fact
- Communication with treating physicians providing them with written descriptions of available modified work so they can make informed return-to-work decisions
- Duration targets based on injury type, tracked and managed actively
- Employee communication starting within 24 hours of injury and continuing throughout recovery
The most common reason return-to-work programs fail is that they exist on paper but aren't executed consistently. The supervisor doesn't contact the employee. The physician isn't given information about available modified duty. The employee isn't told that modified work is available. Execution is everything.
3. Focus on Frequency, Not Just Severity
This is the most counterintuitive aspect of EMR management: multiple small claims hurt your rate more than a single large claim.
The reason is the primary/excess loss split. NCCI divides every claim into primary losses (first portion, typically $5,000-$18,500 depending on year and state) and excess losses (everything above). Primary losses carry much more weight in the EMR formula.
Example:
| Scenario | Total Losses | Primary Impact | EMR Effect |
|---|---|---|---|
| 5 claims at $8,000 each | $40,000 | $40,000 (all primary) | High |
| 1 claim at $40,000 | $40,000 | ~$10,000 (rest is excess) | Moderate |
The five small claims generate 4x the primary loss impact of the single large claim—with identical total dollars.
What this means for your safety program: Don't focus exclusively on preventing catastrophic injuries (though obviously those matter). Target the frequent, smaller injuries that generate claim volume: slips, trips, falls, strains, sprains, repetitive motion injuries, and lacerations.
Practical steps:
- Analyze your claims by frequency and identify your top 3 claim types
- Implement targeted countermeasures for those specific injury types
- Track near-misses—they predict where your next claims will come from
- Focus new-hire safety training on the injury types that occur most often in their job classification
4. Manage Open Claims Aggressively
Claims management is not your insurance carrier's job alone. Employers who actively participate in managing their claims see materially better outcomes—lower costs, faster closure, and less EMR impact.
Monthly claims review: Schedule a monthly call with your insurance carrier or TPA to review every open claim. For each claim, ask:
- What is the current status?
- What is the total incurred (paid + reserves)?
- Are reserves appropriate, or should they be adjusted?
- What is the return-to-work status?
- Is the claimant treating with appropriate providers?
- Are there any subrogation opportunities (third-party responsibility)?
- What is the expected resolution timeline?
Early intervention: The first 30 days of a claim are the most important. Claims that are actively managed from day one close faster and cost less. Delayed reporting, delayed treatment, and delayed communication all increase costs.
Attorney involvement: If a claimant retains an attorney, claim costs increase by 30-50% on average. The best way to prevent attorney involvement is proactive communication with the injured employee. Employees who feel their employer cares about their recovery are far less likely to retain legal representation.
Settlement strategy: For claims that are developing unfavorably, early settlement often produces better outcomes than prolonged litigation. Work with your carrier to evaluate settlement options when the cost of continued litigation exceeds the settlement value.
5. Verify Your Payroll Classifications
Your EMR is calculated by comparing your actual losses to the expected losses for your NCCI classification codes. If your payroll is classified incorrectly, the expected losses—and your EMR—will be wrong.
Common misclassification issues:
Office employees in operations codes. Employees who work exclusively in an office environment should be classified under clerical codes (NCCI 8810 is the most common). Clerical codes have expected loss rates that are a fraction of operations codes. If your bookkeeper is classified under your construction or manufacturing code, your expected losses are inflated.
Drivers in wrong codes. Drivers have specific NCCI classification codes (7380, 7382, etc.). Using the wrong driver code—or classifying drivers under your general operations code—distorts your expected losses.
Executive officers not excluded. In Texas and many other states, certain executive officers can be excluded from workers' comp coverage. Excluding officers reduces your payroll base and your premium. Check with your carrier to determine which officers qualify for exclusion.
Subcontractor payroll issues. If subcontractors working on your projects don't carry their own workers' comp, their payroll may be added to yours for premium calculation purposes. Verify that all subcontractors provide certificates of insurance confirming their own coverage.
How to verify: Request a detailed payroll breakdown from your carrier showing how each employee is classified. Compare this against actual job duties (not job titles—titles don't determine classification). If you find errors, request reclassification before your next audit.
The Timeline for Results
EMR improvement doesn't happen overnight because the formula uses a three-year experience window. But here's the realistic timeline:
Immediate (this month): Audit your worksheet and correct errors. This can reduce your EMR at your next renewal with no operational changes.
6-12 months: Claims management and return-to-work improvements begin reducing the cost of new claims. These claims will enter your EMR calculation in 2-3 years.
12-24 months: Safety program improvements reduce claims frequency. Fewer new claims mean less primary loss entering the formula.
24-36 months: The compounding effect begins. Lower-cost claims from Year 1 start entering the formula while high-cost claims from prior years begin dropping out. EMR declines noticeably.
The employers who achieve the best EMR results are the ones who start all five strategies simultaneously and maintain them consistently. There is no shortcut, but the financial payoff is substantial and sustained.
How AlignSure Helps
AlignSure automates the data management and workflow tracking that makes EMR improvement sustainable:
- NCCI worksheet comparison: Automated validation of your experience modification worksheet against your claims data
- Return-to-work tracking: Manage modified duty assignments and monitor duration targets
- Claims frequency analytics: Identify top injury types and track reduction progress
- Filing automation: Ensure DWC forms are filed on time, every time
- EMR projection modeling: See how current claims activity will affect your future EMR
Schedule an EMR review to identify your improvement opportunities.
