Workers’ Compensation Insurance is one of the most costly expenditures. Realizing this, company owners and managers are motivated to discover ways to reduce costs associated with the insurance while safeguarding the company’s assets and reducing risks. One of the most crucial factors to take into account in this aspect is the Experience Modification Rate, more popularly known as the X-mod.
Your state rating bureau issues an X-mod based on statistical information. Each firm’s payroll and loss statistics, such as accidents and claims, are used to create an industry standard. This standard is used to evaluate your losses to the average industry record of losses. If you run a business in California, your worker’s compensation coverage will likely be susceptible to an X-mod.
The premium you paid for your workers’ compensation policy determines your eligibility for X-mod. A high X-mod directly affects your premium, so if you can keep it under control, you will be able to save on premium costs. Today, we’ll explain how your X-mod is calculated and provide you with some tested tips to lower your X-mod in California.
How to Calculate an XMod?
X-mod is similar to a credit score. However, instead of deciding the interest rate a person will pay on a loan, it plays a role in determining the premium you will be paying to the insurance provider.
The Worker’s Compensation Insurance Rating Bureau of California (WCIRB) calculates the X-mod rating. In the calculation, the number of company’s injury claims is statistically compared to the average number of claims for smaller companies in that sector classification. The formula involves data from companies within California over a given frame, generally three years. It is adjusted considering a higher percentage of small claim values than large claims. To calculate your actual X-mod, the expected losses of your company are calculated against actual losses.
It’s simple to figure out your actual losses. Simply review your past workers’ compensation loss record and find the expenses of previous medical and penalty claims. The expected losses can be more complex to calculate; moreover, every state’s workers’ compensation rating bureau employs a different system.
The standard X-mod is fixed at 100, and it rises and falls depending on whether a firm’s workers’ comp claim is higher or lower than the industry average. If your company’s claim price is lower than the industry average, the rate would be below 100, resulting in lower premiums. On the other hand, if it is higher than the industry average, the level will be above 100, resulting in higher premiums.
For example, a company with an X-mod of 120 can expect to spend 20% more on insurance, whereas an X-mod of 80 would save 20%. With the cost of workers’ comp insurance rising, X-mod is an important metric to examine and control.
Ways to Lower your X-mod in CA
Now that you know how X-mod is calculated, let’s talk about how you can keep it under control. While you can lower your X-mod through certain strategies, it will take some time for them to work. With that clear, let’s now look at some ways to reduce your X-mod in California.
1. Create a Safety Culture
Every employee’s security should be a top concern for you, and to ensure that employees are protected against harm, you must establish a formal safety program. Integrate a disciplinary strategy and rewards within the program. Ensure that all staff members take it to heart and that duties and accountability are clearly defined and assigned. Implementing such safety mechanisms will help you keep your X-mod under control.
2. Define the Program’s Goals and Measure its Progress
Your safety program must be well-defined so that everyone knows what it entails. You should do this by aligning loss reduction goals with management and setting clear, actionable targets. You should clearly convey the departmental objectives of managers. Supervisors should be instructed per their safety action objectives.
Employees should also be rewarded as part of the safety program. Nothing should be left to chance. To gain the best results, teach staff proper behavior and consistently reinforce it. Goals and tactics should be practical, job-specific, documented appropriately, and simple to comprehend.
3. Evaluate Each Employee Carefully
It’s crucial to hire individuals who will help the company succeed and reduce your X-mod. When hiring, keep your safety culture in mind. Conduct thorough interviews with safety-oriented people, and run background checks to search for any signs of danger. Employees who give value to the company will help reduce all hazards and effectively lower X-mod.
4. Use the Medical Provider Network (MPN) of Your Insurance Carrier
Your insurance carrier will have a network of certain hospitals and clinical facilities, which will offer better rates. Therefore, make sure that all your employees are treated within the network of your insurance company’s medical providers.
The insurance company will have secured lower rates with some medical providers, so the claims will be less expensive than if the worker is treated outside of range. Before a claim occurs, prepare and understand the MPN to be utilized.
First aid charges in California can be paid upfront by employers and have no impact on the X-mod. A first aid claim can be described as a one-time intervention and any appointments scheduled later for scratches, bruises, splinters, blisters, or other small industrial injuries that do not normally require medical attention. Be in touch with the facility where the employee was treated to establish if the mishap fits the requirements for first-aid treatment. And, if it does, make a direct payment to them.
5. Investigate Accidents Vigilantly
Even if no employee has been injured, take corrective measures to remove any hazards. To assist in the planning and preventing any threats to employee lives and safety, fill out the Accident Investigation form. It is also crucial to follow up on safety inspections to guarantee that all hazards are under control and the company is operating efficiently.
6. Control Losses
The most crucial aspect of preventing losses is excellent communication with all parties involved. Supporting return-to-work programs is a smart tactic to use in this situation. Furthermore, adopting best practices to prevent fraud and abuse is critical.
Final Verdict
By now, you should see how your firm’s X-mod affects the price you pay for insurance premiums and how it can either work in your favor or backfire when it comes to cutting costs associated with worker’s compensation claims. If you are interested in learning more about workers’ compensation insurance and X-mod, visit Broadway Insurance Services.
Alternatively: How to Find Your Company’s Experience Modification Rate
Knowing your company’s XMod rate might be your first step in building an action process to minimize workers’ compensation rates and claims. Broadway Insurance Services can always check this for you, but you may also do it yourself by going to WCIRB.com/ratesheet on the WCIRB (Worker’s Compensation Insurance Rating Bureau) website.
