The Experience Rating Adjustment in the Workers’ Comp Experience Mod

 

Experience rating adjustment is I think one of the more brilliant laws that lawmakers came up with in the workers’ comp system. Hello, my name is Michael Stack and I’m the CEO of Amaxx. And today we want to talk about this experience rating adjustment, the ERA as it’s known what it is, Why it’s important in how to use it.To your advantage.So to my knowledge, there are currently 34 states. That have this law Of the experience rating adjustment. It is such in why I say it’s one of the more brilliant as such a brilliant law that came through is that it has a lot of incentive built into it to do things right, to do things the right way, as far as work comp management. And we know when we do things the right way, it’s just a great win-win scenario. It’s good for the injured workers and it’s good for our financial bottom lines. So lawmakers came up with this, I don’t know if this is the reason why they come up with it, but that’s the ultimate impact is it encourages from a financial standpoint, from a reporting standpoint to do things right, to do things properly. So let me tell you what this means.

So the reason they came up with it really was they went to encourage people, organisations, employers, to report small claims. So we know that the more claims we report, the worse it looks for our experience rating. So employers came up with they’re like, well, I’m not going to report that claim. I’m just going to pay a thousand bucks or 2000 or 3000 bucks out of pocket and not report that work comp claim. So it’s just not great practice. It’s that great risk management practice in order to do that. So they said, we want to make sure come up with an incentive for people to root for, for employers to report these small medical only claims. So if there’s zero in indemnity, so indemnity, mooning, wage loss. So if there’s zero wage loss, your time out of work, your time lost out of work, that would require a wage loss payment and indemnity payment. After the waiting period, then we’re going to give them a 70% reduction for medical only claims.

So a 70% reduction for the cost of that claim for how it impacts their experience model. So basically it’s just a bunch less claims costs that’s counting against you. So a bunch, a bunch less claim costs. That’s Connie against you for medical only medical only claims. So let’s talk about how this works and the importance of this. So let’s say that you have one medical only claim, you know, that’s a $15,000 claim. So it’s a $15,000 medical only claim that individual is, you know, was within the waiting period from the time that they were out of work. And you were able to get them back on a transitional duty period, you get a70% reduction in this claim. So that’s a $4,500 Charge, which is 30% of the claim costs as opposed to a $15,000 charge. So at $11,500 difference in costs, huge difference in costs by keeping it a medical only by not having them happening indefinitely. Now let’s look at this, let’s say the individual comes back to work for like a half a day. You know, there’s a half a day of identity loss and it’s only really a hundred bucks. So you’re like, oh, we only had a hundred dollars total in indemnity costs. And this extreme, even if this just was just $1, let’s say $100. Cause that’s a little bit more realistic, even from a very low amount. If there was a hundred dollars of a demo, you would not get this discount, this $11,500 discount you would not get in your car. Total claim costs would be $15,100 as opposed to $4,500.

The era adjustment in the 34 states that have this law in place, as I said is one of the more brilliant laws that came into passed because it’s an encouraging good risk management. It’s encouraging claims to be reported. It’s encouraging employers to get their employees back to work in a timely fashion, which also drives down the cost of claims. And it just encourages overall

Best practices. If you are in an era state, if you don’t know if you’re an inner yard, it’s a state. If you’re a search provider or a broker, and you’re servicing employees in our era state, look it up, look it up, bring this to your attention to your employer clients. If you’re an insurance broker, let them know that this little example that I just walked through with you here, it’s a massive difference in the claim cost that counts against your experience rating. Make sure you do these things right. Encourage them to then get a worker’s comp. We turned to work program in place and then reap the benefits that come with that. Again, my name is Michael Stack, then the CEO of Amaxx. And remember your work today in workers’ compensation can have a dramatic impact on your company’s bottom line, but it will have a dramatic impact on someone’s life. So it’d be great.

Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is the founder & lead trainer of Amaxx Workers’ Comp Training Center, which offers the Certified Master of Workers’ Compensation national designation.

Contact: mstack@reduceyourworkerscomp.com.

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.