Effective January 1, 2024, the National Council on Compensation Insurance (NCCI) and the Colorado Division of Insurance (DOI) have approved changes to the way the experience modification rating (EMOD) is calculated. The EMOD plays a pivotal role in determining the price of worker’s compensation policies and often is considered in prequalifying companies when bidding jobs. The goal of the changes coming from NCCI is to increase equity across employers based on more narrow and applicable comparison groups.

On average nationwide, NCCI is expecting most businesses to see an increase of + or – 5% but there may be more significant changes in some cases.

The EMOD is a rate that shows how a company’s Workers compensation loss history compares to its industry peers. This is based on how much payroll the company has in specific employee classifications, then compares those losses to what is expected for that payroll level against the peer group. If your EMOD is a 1.00, your losses are average. A credit EMOD, or anything under 1.00, has (less/fewer losses) better than average experience. A debit EMOD, or anything over 1.00, is performing worse (more losses) than average.

The Change: The EMOD calculation was previously based on national averages and now will be based on state specific averages.

For those in Colorado: Colorado has better loss experience than the national average so the average just got better.

The two most impactful changes that will take effect in the new year are: 

  1. Expected Loss Rate (ELR) changes- the expected losses have historically been estimated based on industry specific peer groups across the country. Going forward, expected losses will be measured against your industry specific peer group in the states in which you operate. In the vast majority of cases, the expected losses will be decreasing in Colorado (based on the industry) because Colorado performs better than our national peers according to the data. For most Colorado employers, this change will not be favorable because actual losses incurred have not changed. However, expected losses have decreased. Therefore, your actual losses will compare worse to the new, lower, average expected losses.
  2. Split Points are also changing from a national to state based model. States will now have their own Split Point based on state specific loss experience. For Colorado employers, this is good news because the Split Point is reducing from $18,500 to $14,500.

Split Point is the loss level at which, NCCI has determined, a loss goes from a “Primary” loss to an “Excess” loss. Excess losses are discounted (weighted) when calculating the EMOD because that portion of the loss over the Split Point are discounted. Primary losses, losses under the Split Point, are not discounted. For Colorado employers, a greater portion of claims will be discounted and considered Excess losses.

These changes will take effect retroactively and will apply to loss history for all years contemplated in the EMOD calculation. Rest assured we are working diligently to stay ahead of these changes and mitigate the impact as much as possible. There are strategies we can deploy to help maintain and improve your EMOD.

It is important to note that all of these changes apply to all Colorado employers regardless of the broker and insurance carrier they partner with. They are rule changes adopted by NCCI and states Insurance Commission.

While we can’t directly change the EMOD, we are here to help. Using all available tools, we are able to project anticipated EMOD changes, review claims history for accuracy and advocate for updates when necessary, advocate for premium relief when applicable, conduct a deducible analysis to ensure you are maximizing the deductible strategy to the fullest and develop and implement a risk mitigation strategy to help minimize and control claims.

To learn more about the resources available through CRS, please contact Lori Ashley at lashley@crsdenver.com or 303.996.7863.