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XMod Formula Simplified(?) By California’s WCIRB


California’s New XMod Formula Looks Simple – But Is It Really?

A new XMod formula was recently introduced by California’s Workers Compensation Rating Bureau (WCIRB).  By the way, why is this important?  As I have often mentioned in my articles, what happens in California may be coming to a Workers Compensation policy or claim near you.   For instance, take the adoption of the 7219 Class Code by the NCCI – more on that next week.

Below is the new simplified formula.  This formula was introduced in an upcoming 2019 Changes Module by the WCIRB.

New, Simplified Formula

XMod Formula Graphic
Copyright WCIRB

The first $250 of every claim is excluded  Reporting the cost of minor workplace injuries helps everybody.

I will cover the $250 loss exclusions in an upcoming article.

So let us look at what is missing in the new XMod formula.  Expected primary losses are long gone.   What happened to this very important part of the XMod or EMod equation?  Why is it no longer in place?

The old very simple formula that is being used in most of the states besides California  is basically:

Actual Primary Losses + Actual Excess Losses / Expected Primary Losses + Expected Excess Losses 

The Expected Primary Loss now in California depends on the size of the company’s payroll.  The Expected Primary Loss was eliminated to make it more of a floating number that is not set at any level.   Most of the NCCI states set the level at $15,000.

As I have mentioned before on this change, we will have to wait and see how it affects smaller employers.   One of my concerns is that when you float the Primary and Expected loss figures and base it on company size the small employers end up purchasing Workers Compensation per unit at a higher cost than a larger company.

However, all the rating bureaus have said for a long time that a larger amount of payroll spreads risks more efficiently.   One wonders what further small tweaks the WCIRB will make to the XMod formula calculation.

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11 Responses

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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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