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Save Money with Good Grades
Many entities have the misunderstanding that a workers’ compensation experience modifier or “ex-mod” rate of 1.0 is good, but wouldn’t you rather be better than average? Fortunately, a diligent risk management program can pay off with an improved ex-mod rate just as diligent studying resulted in improved grades on your old report card. And just like earning a dollar for every “A” on that report card, your good ex-mod rate can help your entity save money.
AMLJIA computes each member’s percent of exposure (their contribution) relative to the group (all members) over a five-year period. The percent of their losses is computed over the same period of time, weighted by an actuarial credibility factor. AMLJIA uses five years of data to limit the potential of one bad loss year skewing the factor.
This comparison results in an experience modification (ex-mod rate) that may increase or decrease your entity’s workers’ compensation or liability contributions. Basically, if your losses exceed your contributions, you are assigned a debit modification; but if losses are less than your contributions, you are given a credit for “good experience.”
Say, for example, that your workers’ compensation premium is $100,000. Your low losses over the five-year period and the actuarial factor result in an ex-mod rate of 0.8, which lowers your premium to $80,000.
“How can I lower my ex-mod?” you ask. The ex-mod will improve if you decrease your losses and/or increase your payroll (thus increasing your contribution). Obviously, unless you have reason to double your workforce, decreasing losses is the most workable solution.
To help reduce losses, AMLJIA provides a variety of loss control services including on-site training, loss-control audits, contract review, police consultations, and our Employment Law Hotline. For information on any of these services, please e-mail Grady Fisher, Director of Risk Management, at gradyf@amljia.org, or call our Juneau office at 907-586-3222.
Johanna Grasso, Claims Manager, is also available to assist members with the claims reporting process and return to work programs, as well as to provide on-site training in workers’ compensation matters. You can e-mail Johanna at johannag@amljia.org, or call our Anchorage office toll-free at 800-337-3682.
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