How Do I Find My EMR?
DISCLOSURE: STATE INSURANCE AGENCIES ASSIGN THIS NUMBER TO YOU BASED ON STATE REQUIREMENTS. PLEASE UNDERSTAND THAT THIS A SOPHISTICATED APPROXIMATION METHOD THAT DOES NOT TAKE INTO ACCOUNT:
- STATE CODES AND REGULATIONS
- RATING ELIGIBILITY
- CAP RATES
Your Experience Modification Rate is a powerful figure – capable of raising your workman’s compensation premiums through the roof, or lowering them to a nearly insignificant amount.
So, it pays to understand exactly how your Experience Modification Rate is calculated, and how that affects your premium. This is the step-by-step, number-by-number breakdown, though; so if you’re looking for something a bit lighter in information, head over to our introductory article on Experience Modification Rate.
Now, let’s get to the formula used to calculate your Experience Modification Rate. The sections below will have corresponding variables for your formula in parentheses.
PAYROLL (A)
Your gross payroll figures must reflect your real wages ONLY. Please remove any figures from leased employees, contractors, vendors, and sub-contractors. Make sure to get Certificates of Insurance from all of these suppliers that name you as also insured.
JOB CLASSIFICATION RATE (B)
The NCCI has developed the codes used in most States, but your State may require different rates. States that hold independent codes include:
- California
- Wisconsin
- Michigan
- Indiana
- New York
- Pennsylvania
- North Carolina
- New Jersey
- Delaware
- Massachusetts
Look up your NCCI code, here.
Multiple jobs can be covered under one code, as codes tend to reflect the overall business. You now want to find the RATE of your job code. For example, a Masonry Worker code in North Carolina is 5022 with a basic rate of $5.79.
Look up your Basic Rate, here.
USER: 1408340
PASSWORD: safe2019
DISCOUNTS, PENALTIES, AND ASSESSMENTS (C)
You may receive a penalty for increased injuries within a given time frame, OSHA fines, and several other factors. You can also receive a discount. Things that may provide you with a discount include low-loss experience, substance abuse programs, and employer safety programs. This amount should be calculated as a percentage.
ACTUAL LOSS (D):
You’ll find your Actual Loss (D) by adding your Actual Primary Loss and Actual Excess Loss together. This factor (D) helps consolidate factors E and F by adding them together to get a more holistic view of where your company stands with claim amounts after all discounts have been applied.
ACTUAL PRIMARY LOSS (E) + ACTUAL EXCESS LOSS (F)
Your claim loss factors are designed to SPLIT at a current level ($17,000 for most States) and become two different types of loss: primary, and excess. Claims below $17,000 are written as primary losses and are weighed by their full amount. Claims that exceed $17,000 are written as excess losses and are weighed by a discounted amount. It is important to note that Medical Only claims are also discounted at a rate of 70%.
This is how the EMR formula places more penalties on businesses with frequent losses vs. less frequent, larger losses. In other words, a company with 20 claims in total losses of $70,000 will have a higher EMR than a company that had 1 accident that resulted in a total loss of $70,000.
EXPECTED PRIMARY LOSS (G) & EXPECTED EXCESS LOSS (H)
These are found by calculating your claims data against your bureau’s class code average to give an expected picture of what potential primary and excess loss can be.
Expected Primary Loss is found by multiplying the Expected Losses by the corresponding D-ratio.
Expected Excess Loss is found by subtracting your Actual Primary Loss from your Expected Loss.
ELR (I) & D-RATIO (J)
These numbers will be provided to you by your State bureau. ELR, or Expected Loss Rate is determined by your Class Code’s average of claims. The D-Ratio, or Discount Ratio, is the ratio of Primary Expected Losses plus a discounted value of Primary Losses divided by the total Expected Losses.
EXPECTED LOSS (K)
Your Expected Loss is found by multiplying Payroll by your ELR and then dividing by 100.
THE EXPERIENCE MODIFICATION FORMULA
This is where all the number crunching goes. We’ve broken it down into even simpler factor formulas, to better flow through the EMR calculations.
Ready?
FACTORS
A – Payroll (12 months of real wages only)
B – Job Classification Rate (Found at NCCI)
C – Discounts, Penalties & Assessments (Decided at the final stage for your premium)
D – Actual Loss (Total Actual Incurred Losses)
E – Actual Primary Loss (Actual Loss below the amount of $17,000)
F – Actual Excess Loss (D – E)
G – Expected Primary Loss (K x J)
H – Expected Excess Loss (K – G)
I – Expected Loss Rate (Found at NCCI)
J – Discounted Ratio (Found at NCCI)
K – Expected Loss (A x I) / 100)
L – Actual Rate (E+F(H))
M – Expected Rate (G+H(H))
FORMULA
ACTUAL RATE (L) = E + F x H
EXPECTED EXPECTED (M) = G + H x H
EXPERIENCE MODIFICATION RATE = L / M
Again, remember that this formula does not consider caps, so extremely large claims (around $300,000) will result in an inaccurate EMR. For your Employee Codes, Expected Loss Rate, and Discounted Ratio, you will need to go to [https://www.ncci.com/classlookup/#/home] and use the following information to log in and access your rates:
USER: 1408340
PASSWORD: safe2019
USE YOUR EMR TO ESTIMATE YOUR PREMIUM
Now that you have your EMR, you can plug in a few more numbers to estimate your premium.
PREMIUM = A + B x EMR (+/-) C
Finally, remember that these numbers and formulas are subject to alteration by State codes and regulations.
