Why Reporting Small Claims Pays Off in ERA States

When it comes to workers’ compensation, small claims might seem harmless. Many employers wonder:

“Why report a $1,000 medical bill to the insurance carrier if we can just pay it ourselves and keep our experience mod low?”

At first glance, it feels like a smart move. After all, fewer claims mean fewer red flags on your insurance history—right?

Not always. Especially in ERA states, choosing not to report those small claims could end up costing far more in the long run.

Let’s unpack why.

What Is the Experience Rating Adjustment (ERA)?

The Experience Rating Adjustment (ERA) is one of the best-kept secrets in workers’ comp cost control. ERA rules apply in about 35 states and were designed to encourage employers to report medical-only claims rather than quietly paying them out-of-pocket.

Here’s how it works:

• When you report a medical-only claim (a claim without any lost time or indemnity payments), 70% of the cost is excluded from your experience modification factor (mod).

• That means only 30% of the claim’s cost actually counts toward your mod calculation.

So, a $10,000 medical-only claim? Only $3,000 would affect your mod in an ERA state.

This discount exists to remove the fear that reporting small claims automatically increases your mod and your premiums.

Why Small Claims Can Have a Big Impact

If your business operates in an ERA state, the financial logic changes completely.

Here’s an example:

• Scenario 1: You Report the Claim

  • Medical-only claim cost: $10,000

  • 70% ERA discount: $7,000

  • Amount counting toward your mod: $3,000

• Scenario 2: You Pay It Yourself

  • Out-of-pocket cost: $10,000

  • Zero ERA discount

  • No impact on your mod… but the money is gone.

In Scenario 1, your carrier pays the bill, and your mod only reflects a fraction of the cost. In Scenario 2, you save your mod, but you pay the entire cost yourself—and you lose out on the potential to let your insurance policy work as intended.

Many employers fear reporting will lead to higher premiums. But in ERA states, the math is often the opposite.

The Risk of Unreported Injuries

Even more dangerous than the direct cost is the risk lurking behind unreported injuries.

Imagine this:

• An employee strains a muscle at work.

• The company decides to pay $800 for a few doctor visits out of pocket.

• Months later, symptoms worsen. Surgery is required, costing $25,000.

Because the claim was never reported initially, there’s no documentation, no claim number, and no medical history filed with your carrier. The insurer might resist covering it—or even deny the claim—leaving the employer exposed.

Unreported injuries can:

• Become expensive later.

• Create legal complications.

• Undermine trust with employees if benefits are denied.

When you report claims properly, you preserve your legal protections, ensure proper care for your employees, and reduce the risk of financial surprises.

How Indemnity Payments Affect the ERA

Another critical nuance: ERA discounts only apply to medical-only claims.

If an injured worker:

• Misses work and receives lost-time wages (indemnity), or

• Has any payment beyond medical care…

…the entire claim loses the 70% discount.

Even $100 of lost wages can transform a $10,000 medical-only claim into a $10,100 claim that fully counts against your mod.

That’s why prompt return-to-work programs are essential. Keeping injuries medical-only can mean substantial savings.

Best Practices for Managing Small Claims

So, what should employers in ERA states do?

Report all injuries promptly
Even small injuries should go through your carrier. The ERA discount is there for a reason.

Implement injury triage services
Many companies use nurse triage hotlines. Nurses can help determine if care is necessary or if self-care at home is sufficient—often preventing unnecessary claims altogether.

Focus on rapid return-to-work
Avoid lost-time claims whenever possible. Even a single day of indemnity can eliminate the ERA discount.

Know your state’s rules
Not every state is an ERA state. Confirm your location’s rules with your broker or carrier.

Educate managers and supervisors
Frontline leaders should understand the risks of paying small claims “under the table” and know when to escalate issues.

Bottom Line: Reporting Small Claims is Often Cheaper

If you’re in an ERA state, the smart financial move is clear: report those small claims.

Not only does the ERA discount dramatically lower the impact on your mod, but reporting:

• Keeps your legal protections intact.

• Ensures employees get proper care.

• Helps you avoid catastrophic surprises from seemingly minor injuries.

The next time you’re tempted to quietly pay a small claim out-of-pocket, remember this simple truth:

In workers’ compensation, small claims can carry big hidden costs. Don’t let a short-term “savings” turn into a long-term financial hit.

Michael Stack, CEO of Amaxx LLC, is an expert in 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 employers and ties results to a Critical Metrics Dashboard.

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Injury Management Results (IMR) Software: https://imrsoftware.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.