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Can Experience Modification Cap Really Work?

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Experience Modification Cap – Effect on Workers Comp Costs

Does the Experience Modification Cap really help reduce employers’ Workers Comp premiums?

The Ohio Bureau of Workers’ Compensation’s board of directors recently approved a cap on premium increases aimed at preventing unforeseen spikes in workers’ comp costs.

GRaphic of Dollar Sign experience modification cap In Golden Color
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This is a case, once again, whether the government has launched an artificial modification to the E-Mod system that is in place in one form or another in every state. I am not sure that this will work as it would seem that the most safe employers would be subsidizing the least safe ones. The E-Mod system for Workers Comp is the system that has worked for many years. The NCCI has modified some of the rules, but not the way the E-Mod system works.

Someone will have to pay for the cap and it will be the safer employers. This may even cause a somewhat safe employer to be more lax in their safety. If my company was going to receive a cap and I could cut the safety budget, then would I not try to figure out how to have a minimally safe company? That may be an extreme example. Workers Compensation’s rating, audit, and premium system works well for the environment that it exists in for the most part. Why alter what actually works?

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I had read where some employers’ premiums had swung wildly, but the way the E-Mod system is built, that one bad accident or one bad year is spread over three years. I think where the main fault lies with the Ohio BWC is the way that the Classification Codes are set each year. I would not say that is the reason for sure, as I would have to look at the rates for each classification codes for years to see what the changes were overall.

The bottom line is that while the Experience Mod system is not perfect, it should not be altered as one group of employers will end up subsidizing another if the system is changed.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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