Things that we don’t understand can seem a lot more difficult than they actually are. Hello, my name is Michael Stack and I’m the CEO of Amaxx. And today I want to talk about the experience mod formula. Now, the experience mod can be an overwhelming formula when you’re looking often at your EMOD worksheet, and thereby can make us feel like it’s a whole lot more difficult to understand than it actually is. So I want to talk about, in this video a very simple concept, kind of step one, understanding actually what the experience mod is.
Bunch of Numbers on NCCI Worksheet
Now, when you’re looking at your NCCI experienced mod worksheet or many other states, follow a similar type format. Up here in your worksheet, there’s a bunch of numbers. You know, there’s a bunch of different numbers. You’ve got the numbers up here and here and here and here and here.
Actual vs Expected
All kinds of different numbers up here. And that’s the part that can often seem overwhelming. What I wanna talk about here is actually what we’re doing here, the experience mod is simply a very simple concept. What are your actual losses? Actual loss numbers versus expected loss numbers, actual versus expected, actual versus expected. Actual versus expected. That is a key fundamental understanding that you need to have concepts, you need to have to understand what the experience mind is.
All we’re doing is figuring out what were the actual costs of your losses. So when you look on your loss run and you look at it at the end of the year, you’re like, okay, my losses were a hundred thousand, 500,000 million, 10 million, you know, whatever the number actually is, that’s what your actual losses is. So that’s what goes here. This is comes right from your loss run.
This is the actual costs of the claims that were legitimate claims for workers’ compensation. Compare that to what was expected of you. So we’ve got all these class codes, you know, all this class codes up here, you know, 0815, you know, 6234, you know, whatever the numbers are, all kinds of different stuff. Depending on your industry, there are actuaries that calculate what is expected for, you know, loss code number 6251, whatever that number actually happens to be. What is expected in that type of industry.
Above or Below the Average
So based on everything that we’ve seen from all the different companies in the US over all the numbers of years, we expect for companies that are in this particular injury, to have this amount of losses, all you’re doing is comparing yourself to what you actually did versus what is expected in the actuary tables. And that’s where the number, you know, 1.0 and you’re either gonna be above that or you’re gonna be below that.
So you’re coming in at, you know, eight, uh, 0.86, or you coming at 0.41 or you coming at 1.62, you’re way above what was expected of you. If you can understand this simple concept of actual versus expected axial versus expected, actual versus expected, you will really now start to understand this entire philosophy of the experience mod formula. If you can’t get this step one action versus expected, then you’re, you know, it’s like my eyes are rolling over. This concept seems extraordinarily difficult to understand.
#1 Fundamental to Understand
This one concept is not what, what actually happened, what we were actual costs is versus what was expected for you to happen. That’s where the number comes into play. And you’re either better than what was expected, where your numbers are low or you’re worse, where your numbers are high in terms of your actual experience MO formula. We find things much more difficult if we don’t understand them. The experienced MO formula, while complex is very simple in what we’re trying to do with it. Understand this one step and you’ll understand the whole. Again, my name is Michael Stack, CEO of Amaxx. 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 be great.
Michael Stack, CEO of Amaxx LLC, is an expert workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employer and ties results to a Critical Metrics Dashboard.
Workers’ Comp Roundup Blog: https://blog.reduceyourworkerscomp.com/
©2023 Amaxx LLC. All rights reserved under International Copyright Law.
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.