The Impact of Your Business’ Location on Workers' Comp Rates

The Impact of Your Business’ Location on Workers' Comp Rates | Property & Casualty

Experience modification rating (EMR) is a report card for employers, indicating their effectiveness in protecting workers. This number measures workplace safety and how effectively workers’ compensation claims are handled. It plays a key role in determining the cost of your workers' compensation insurance. Therefore, a high-quality EMR can result in reduced insurance costs and enhanced workplace safety.

How Experience Modification Rating is Calculated

Two distinct methods for calculating EMR, intrastate and interstate, are dependent on the scope of your company’s operations. These estimates are based on the geographical scope of your business activities and location plays a significant role in determining EMR. Intrastate EMR is applicable for businesses operating exclusively within a single state while those conducting business across multiple states must utilize interstate EMR.

An EMR worksheet is a valuable tool that summarizes the distinction between interstate and intrastate operations. This comprehensive document outlines the key components and calculations used to determine an employer’s experience modification factor (EMF). Employers rely on EMR worksheets as a critical source of information to understand the costs associated with workers' compensation insurance and strategies to improve workplace safety, consequently mitigating claims and positively influencing insurance premiums.

Overview of Experience Modification Rating

The EMR evaluates an employer’s historical record regarding workplace safety and claims management. It compares this performance to similar-sized companies within the same industry, measuring against expected claims rates. An EMR above 1.0 indicates a below-average claims experience, leading to higher insurance premiums. Alternatively, an EMR below 1.00 signifies a better-than-average performance, resulting in reduced premiums. This system incentivizes employers to prioritize safety, establish robust safety programs and effectively manage claims.

Intrastate Experience Rating Explained

An intrastate experience rating refers to the EMR imposed on employers who operate their business within a single state. Employers should have a clear understanding of the following key details about intrastate experience ratings:

Single-State Operations

Intrastate employers limit their operations and workforce within a single state. Activities aren’t conducted across state lines.

Streamlined Calculations

Evaluating EMR for intrastate employers is relatively simpler as these employers are only subject to the workers’ compensation laws and regulations of a single state. The calculation of EMR can vary as some states adhere to the National Council on Compensation Insurance (NCCI) ratings while others rely on independent rating bureaus. The specific rating methodologies employed are determined by each state's statutes.

Emphasis on State-Specific Laws

Employers are obligated to adhere to the workers’ compensation laws and regulations of the state they operate in. This includes compliance with state-specific safety mandates, reporting and claims management standards.

Coordination With State Agencies

Intrastate employers navigate the distinctive demands and processes of their jurisdiction by collaborating with the state workers’ compensation agency and insurance provider. These agencies are responsible for overseeing workers’ compensation programs and upholding relevant laws and regulations.

State-Specific Adjustments

While the fundamental principles of EMR calculation remain consistent for both intrastate and interstate employers, the specific methods and factors utilized may vary. Each state typically has unique rules and formulas for evaluating and determining the EMR.

Appeals & Review

Intrastate employers can request a review or modification of their EMR when they suspect inaccurate calculations or they’ve implemented significant safety enhancements that should be reflected in their rating. This normally involves collaboration with their insurance provider and the state’s workers’ compensation agency.

An Overview of Interstate Experience Ratings

Interstate experience rating refers to the utilization of an EMR for employers engaged in business operations across multiple states. This specialized approach is used to determine an employer’s EMR when operations extend beyond state lines. Key elements of interstate experience rating include:

Multistate Operations

Employers classified as “interstate” operate and employ personnel in multiple states. These employers engage in business activities that span across state lines and are obligated to comply with the workers’ compensation laws and regulations of multiple states.

Complex Calculations

Determining the EMR for a multi-state employer can be more complex compared to those operating solely within one state. The complexity arises from variations in workers’ compensation regulations, rates and rules across different states.

Adjustments for Interstate Operations

The interstate experience rating process usually involves adjusting to accommodate the employer’s business operations across multiple states. These modifications account for the unique regulatory landscapes and claims experience in each state where the employer operates.

Multiple State Laws Compliance

Employers that operate across state lines are obligated to comply with the workers’ compensation laws and regulations in each state where they operate. This could include fulfilling reporting requirements, obtaining appropriate coverage in each state, and adhering to state-specific safety and claims management standards.

Coordination With Insurance Providers

Companies that operate in multiple states often collaborate closely with their insurance providers to effectively navigate the complexities of interstate workers’ compensation. Insurance companies well-versed in interstate operations possess the necessary expertise to ensure compliance and offer invaluable advice on managing claims across state lines.

Adjustment & Review

Identical to intrastate EMRs, interstate employers can request a review or modification of their EMR if they suspect any inaccuracies in its calculation or if significant safety enhancements have been implemented that warrant an EMR rating reconsideration.

We’re Here to Help Employers Understand Workers’ Comp

Interstate and intrastate experience rating systems are both essential components of workers' compensation insurance as they consider the geographical extent of an employer's activities. Employers must comprehend the differences between these rating systems, as their objective is to enhance workplace safety, ensure equitable insurance pricing and comply with state-specific laws regarding workers' compensation. Connect with a member of our team for information on your experience modification or other workers’ compensation concerns. 

The Impact of Your Business’ Location on Workers' Comp Rates | Property & Casualtyhttps://www.cbiz.com/Portals/0/Images/GettyImages-1387867008-1.jpg?ver=HOY5hdzMB9NC4O8AaUDc4A%3d%3dYour business operation's location is a significant factor in workers' compensation rates. Learn its effect on the cost of workers' compensation insurance.2023-10-16T17:00:00-05:00Your business operation's location is a significant factor in workers' compensation rates. Learn its effect on the cost of workers' compensation insurance. Risk MitigationProperty & Casualty InsuranceYes