Your Mod Impacts How Much You Pay
Your company’s experience modification factor (or “mod”) has the biggest impact on how much you pay for work comp insurance, but is often the most misunderstood. Many mods are either mismanaged or just flat out wrong, often costing the employer thousands of dollars extra in insurance premium.
Mod mismanagement begins with the lack of understanding how Minnesota work comp laws work. Many employers have never heard of, or don’t fully understand how the 3 day waiting period works, costing them a 70% credit when employees are paid lost-time wages. Claims with lost-time wages paid are coded as 05 (“symbol 5)”on your mod and will cost you thousands of dollars in additional premium over the next 3 years.
Open reserves also contribute to overinflated mods and excessive premium. For employers that have not changed their renewal date, the rating agency (MWCIA or NCCI) takes a snapshot of your work comp claims history six months prior to your renewal, including all open and closed claims going back 3 years (not including the current year), and uses that information to calculate your mod; this is what’s known as “valuation” or “valuation date.” Open claims carry reserves, money set aside by the adjuster for future medical treatment. But most employers don’t realize that reserves tend to be an overestimate and can be negotiated. It’s crucial to know your valuation date – it’s not your carrier’s responsibility – and to lower reserves as much as possible before the rating agency takes that snapshot.
Contingent mods are another problem costing employers thousands in premium. The rating agency relies on the insurance carrier to provide updated claims information before it can calculate your mod, but that doesn’t always happen. When the carrier fails to provide updated information, the rating agency is obligated to issue your experience mod anyway, using whatever information they have on hand, typically old and outdated claims information that has likely changed dramatically since your last mod was issued. This can be another huge waste of money unless corrected immediately, and employers don’t realize that burden rests on them.
Click on the sample mods below to view several real-life examples of the little-known problems costing employers big money in work comp insurance.
Costly Symbol 5 Claims
Open Claims and Reserves