Experience mod rating by state: how it is calculated

What the mod rating does

The experience modification rating, also called the mod, EMR, e-mod, or x-mod in California, is a number that adjusts your workers comp premium up or down based on your own claims. It compares the losses your business actually had with the losses expected for a business with the same payroll in the same job classes.

A mod of 1.00 means you are average. A mod of 0.80 means 20% less premium. A mod of 1.25 means 25% more. The mod applies to your premium in that state, so a high mod costs money every year until better years replace the bad ones.

• Base premium for each class code = (payroll ÷ 100) × rate.
• Modified premium = total base premium × your mod.
• Other credits, debits, fees, and taxes are applied after that.

Who gets a mod

You do not choose to have a mod. Once your business pays enough premium, the rating bureau must calculate one and your insurer must use it. Smaller businesses below the threshold have no mod, which works the same as a 1.00.

In NCCI states, you qualify by meeting the state's premium threshold in one of two ways: enough premium in the most recent 24 months of the experience period, or enough average yearly premium over the whole period. Each state sets its own amounts, and many states raise them over time. Some examples from official sources:

• Pennsylvania: $5,000 in audited premium over the 3-year qualifying period, for policies starting April 1, 2024 or later (PCRB).
• Massachusetts: $11,000 of premium in the last year or two of the experience period, or $5,500 a year on average when the period is longer than two years (WCRIBMA).
• Oregon: $5,500 in the most recent 24 months, or $2,750 a year on average, for ratings from July 1, 2018. NCCI may raise these each July 1 with the state's average weekly wage (SAIF).
• California: the test uses expected losses, not premium. Your payroll in each class is multiplied by the class's expected loss rate, and the total must reach a threshold the WCIRB sets each year in its Experience Rating Plan.

Which years count

The experience period is usually three years of payroll and claims. The policy year that just ended is left out because its claims are still too new to value, and the current policy is left out because the mod is figured during its term.

NCCI gives this example: for a mod that starts January 1, 2026, the policies used are generally the ones that started January 1, 2022, 2023, and 2024. NCCI says the period can be shorter than 12 months or as long as 45 months, depending on your policy dates. That is why an injury this year can affect your premium for about three years, starting a year or more from now.

How the formula works

Every claim in the experience period is split into two parts at a dollar amount called the split point. The part up to the split point is the primary loss. It reflects how often you have claims. The part above it is the excess loss. It reflects how costly they were. Primary losses count in full. Excess losses are only partly counted, which keeps one bad accident from swinging the mod too far.

NCCI's formula, in plain words, is: (actual primary losses + weight × actual excess losses + a stabilizing value) ÷ (expected primary losses + weight × expected excess losses + the same stabilizing value). The stabilizing value is built from a number called ballast.

• Weight: bigger employers get a higher weight, so more of their own excess losses count. Small employers get a low weight.
• Ballast: a cushion added to both the top and bottom of the formula. It keeps small employers' mods closer to 1.00 so a single claim cannot push them too high.
• State accident limit: each claim is capped at a state amount before it enters the formula. NCCI's guide uses $200,000 as an example, so a $500,000 claim would count as $200,000.
• Medical-only claims: in states that use NCCI's Experience Rating Adjustment, only 30% of a claim with no lost-time wage benefits is counted.

Why claim count matters more than claim size

Because primary losses count in full, several small claims usually hurt your mod more than one big claim with the same total cost. Here is a simple example with a split point of $20,000. Real split points are set by state and change over time, so this only shows the idea.

• Business A has one claim for $60,000. Primary loss is $20,000. Excess loss is $40,000, and only part of that counts.
• Business B has six claims of $10,000 each. Primary loss is the full $60,000, all counted.
• Both had $60,000 in claims, but Business B will have the higher mod.

Recent changes to the NCCI split point

For years NCCI used one split point for every state. NCCI's filing for item E-1409 says that amount was $18,500. Under E-1409, each NCCI state now gets its own split point, updated with the state's yearly rate or loss cost filing. The same filing lowered the per-claim accident limits and changed the weight and ballast values. It took effect state by state with each state's rate filing, no earlier than November 1, 2023. In Texas, for example, the filing proposed a $16,500 split point starting July 1, 2024.

NCCI expected most employers' mods to change by less than 5% in either direction. If your mod moved more than that around your 2024 renewal, ask your agent to compare the old and new worksheets.

Which rating bureau runs your state

NCCI calculates mods in most states. Several states have their own rating bureau, and some of those use their own experience rating plan with different rules and names. If your business is in one of these states, the bureau below issues or sets the rules for your mod:

• California: Workers' Compensation Insurance Rating Bureau of California (WCIRB). Uses the term x-mod and its own plan.
• Delaware: Delaware Compensation Rating Bureau (DCRB).
• Indiana: Indiana Compensation Rating Bureau (ICRB).
• Massachusetts: Workers' Compensation Rating and Inspection Bureau of Massachusetts (WCRIBMA).
• Michigan: Compensation Advisory Organization of Michigan (CAOM).
• Minnesota: Minnesota Workers' Compensation Insurers Association (MWCIA).
• New Jersey: New Jersey Compensation Rating and Inspection Bureau (NJCRIB).
• New York: New York Compensation Insurance Rating Board (NYCIRB).
• North Carolina: North Carolina Rate Bureau (NCRB).
• Pennsylvania: Pennsylvania Compensation Rating Bureau (PCRB).
• Wisconsin: Wisconsin Compensation Rating Bureau (WCRB).
• North Dakota, Ohio, Washington, and Wyoming: the state fund is the only insurer and uses its own rating system instead of a bureau mod.

Businesses in more than one state

If you have payroll in more than one NCCI state, NCCI can combine that experience into one interstate mod that applies in each of those states. Experience in states with their own plans, such as California, is rated by that state's bureau under its own rules. Ask your agent which mod applies in each state on your policy.

How to see your mod and worksheet

The rating worksheet lists the payroll by class code and every claim that went into your mod. NCCI sends each completed mod to your insurer and, in some states, to you. Your agent or insurer can give you a copy. Some bureaus also offer public lookups. In California, licensed agents and brokers can look up x-mods for free through the WCIRB's X-Mods and More service. WCRIBMA offers an experience rating history search for Massachusetts.

Check the worksheet every year, at least 60 to 90 days before renewal:

• Payroll matches your audits for each year and class code.
• Every claim is yours, not from another business with a similar name.
• Closed claims show their final cost, not an old reserve.
• Claims where the insurer was repaid by a third party (subrogation) show the lower net amount.
• Medical-only claims are marked as medical-only.

Fixing errors and disputing a mod

Most fixes start with your insurer. The bureau calculates the mod from the payroll and claim data insurers report, so if a number is wrong, the insurer has to send corrected data to the bureau. Ask your agent to request a revised mod once it is fixed.

If you and the insurer cannot settle it, each bureau has a dispute or appeal process, and the final appeal usually goes to the state insurance department. Rules limit what can change after the fact. The WCIRB, for example, can revise an x-mod when a claim is ruled not work related, when the insurer is repaid through subrogation, after a change in ownership, or after a reclassification. It cannot revise a mod just because a claim's value changed later.

Selling, buying, or changing your business

A mod follows the business, not the name on the policy. When ownership changes, NCCI's rules require you to tell your insurer in writing within 90 days, using the ERM-14 form or a signed letter on company letterhead. NCCI may then issue, withdraw, or revise the current mod and up to two earlier mods.

In general, a new owner keeps the old experience. Businesses with more than 50% of the same owners are combined into one mod. If you are buying a company, ask for its mod worksheets before you close.

How to lower your mod

There is no shortcut. A lower mod comes from fewer claims and smaller claims over the three years that count:

• Prevent the most common injuries first. A written safety program and OSHA's free on-site consultation help small businesses.
• Report every injury to your insurer the same day. Late reports tend to cost more.
• Offer light or modified work so a claim can stay medical-only. In ERA states only 30% of it counts.
• Ask your insurer to review open claims and reserves before the data is reported to the bureau.
• Check your worksheet every year and fix errors before renewal.

Your mod outside of insurance

Many general contractors and public agencies ask for your EMR on bids and safety forms, and some set a top mod they will accept. NCCI has warned that the mod was built for pricing insurance, not for judging safety, and that small businesses' mods can move a lot from one claim. Still, a high mod can cost you work, so keep a copy of your current rating worksheet or the bureau's mod letter ready when bidding.