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Bid On Contracts With High X-Mod But To Smaller Market


Difficult to Bid On Contracts With A High X-Mod

Should we still bid on contracts with a high X-Mod?

I received this question two weeks ago and wanted to answer it. The rest of the question is – How do we reduce our X-Mod very quickly? We receive a large number of employer inquiries on reducing an E-Mod/X-Mod to 1.0 or below. In fact, I just received this question from a California employer yesterday.

Books And Gavel Bid On Contracts Concept
(c) 123rf.com

A few main contractors and governmental units will accept contracts from an employer with an E-Mod of higher than 1.0. The unofficial cut-off point is usually 1.2.

I am now seeing more contracting companies that will only accept a 1.0 or lower E-Mod. Some governmental units only require that you have Workers Comp insurance without an E-Mod requirement.

I had posted on the E-Mod/X-Mod being the same as a credit score, but much worse. One of the main concerns is that you can change a credit score much more quickly than an E-Mod. There are no overnight ways to change your E-Mod.

The Experience Modification system keeps an employer from feeling the direct brunt of a very large claim. The X-Mod system does not forgive a series of small lost-time accidents.

The reason is 10 smaller claims are much more likely to have 2 or more of those claims turn out to be larger claims. Repetitive injuries will cost a company in the long run.

There are a few legal methods to change your E-Mod/X-Mod more quickly:

Picture of Form with Calculator Pen and Stethoscope Bid On Contracts Concept
(c) 123rf.com
  • Some PEO’s will allow you to take on their E-Mod/X-Mod. Understanding the PEO’s rules and current E-Mod is very critical. Your company will also need to analyze the complicated rules of coming out of a PEO arrangement.
  • When the economy recovers, if your company adds on a large amount of lower risk payroll such as admin assistants and salespeople, your X-Mod may naturally lower.
  • Make sure your insurance carrier understands that you have a safe workplace and that you are receiving your proper Scheduled Credits. This can save your company up to 25% of your policy.
  • Become a self-insured insured organization. You will switch from an X-Mod system to calculating your own LDF’s.
  • Make sure you know how your X-Mod was calculated and what claims are affecting your X-Mod.
  • Enter into a captive arrangement. Unless your company is large, you will need to likely fund a rent-a-captive, usually offshore.
Picture Of US Dollars Bid On Contracts Cash

There are more ways to lessen your E-Mod/X-Mod. The ones I mentioned are in no way an attempt to game the X-Mod system. There are companies that will attempt to assist you in gaming the system.

Those methods may work in the short term. They will cost your company dearly in the long-term. The tortoise and the hare fable fits well. The Experience Mod system is a three-year corrective process.

The best way to reduce your X-Mod is to invest heavily in a safety program. The accident that never occurred will have a 0% effect on your X-Mod. There are many companies scaling back or eliminating their safety program. In the short term, the reduction looks great on paper. Three or four years from now, it will look like a disaster with your X-Mod.

Please note I used X-Mod and E-Mod interchangeably throughout this post. I have linked to any terms or articles that explain some of the ideas in this post. I did this to avoid a long boring article.  I wanted to point out how a High E-Mod or X-Mod made it difficult for companies to bid on contracts.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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