One of the most confusing components of the Workers’ Compensation premium calculation is the experience modification factor, often simply called the “ex-mod” or “mod”. Employers intuitively suspect that if they have accidents, their mod goes up, and if they reduce or eliminate injuries, the mod goes down. At a basic level, this intuition is correct, but there is more to know and actually to do, to control Workers’ Compensation costs. Managing the mod starts with:
- Analyzing the types of losses in the mod
- Knowing the lowest possible mod for your facility
- Implementing changes to reduce your mod
Types of Losses
An employer’s perception of Workers’ Compensation changes when they grasp how specific types of losses impact their mod. Such an analysis enables employers to recognize quantifiably how they themselves ultimately pay for employee injuries. As a result, employers become motivated to drive down injury costs and thus paying less for the coverage. This shift in understanding must be driven through the facility’s entire organization. It’s critical that not only management but supervisors and employees are aware that it is the facility’s money that is being spent.
Knowing your Minimum Mod
Another mod analysis that employers need to know is the lowest possible, or “minimum mod.” When employers see their minimum mod compared to their actual mod, many are amazed to discover that their mod could be as much as 50 points lower than it is. The difference between costs generated by the actual mod and the minimum or “best possible” mod is a controllable cost or the controllable mod. Approaching or attaining the lowest possible mod is a solid business objective. When this controllable mod is exposed, it becomes apparent that “getting quotes” or “going out to bid” on Workers’ Compensation has little “real” impact on reducing the costs over the long term. Employers should instead look to the implementation of practical and proven loss prevention and loss reduction methods recommended by the Workers’ Compensation provider.
Reducing the Mod
The most obvious but often over-hyped solution is the prevention of injuries through a focus on safety. Certainly a safe workplace and safe work practices are essential to reducing injuries, but safety programs alone are far from sufficient in driving down injuries and their related costs. These important areas must also be addressed:
- Strong support by senior management of injury prevention programs
- Effective hiring practices and employer/employee relationships
- Active transitional duty and return to work programs
- Strong relationships with occupational medical professionals
Initiating and continuing as an active partner with ALPHA Fund in each of these areas has proven to be a catalyst for so many of our Participants’ successes in dramatically reducing their mods. Through the delivery of ALPHA Fund’s loss prevention, claims and education services, our Participants have access to a myriad of resources that can be employed to reduce injuries, reduce the mod and control Workers’ Compensation costs.