E-Mod Or Ex-Mod Calculations

The experience modification is determined by comparing actual losses to expected losses for the experience period based upon the employer’s industry. In other words, clerical employees are compared only to other clerical employees; a restaurant is compared only to other restaurants.

The number of man-hours worked is used to indicate the employer’s audited premium dollars, since an employer with 200 employees would be expected to have more claims than an employer with two employees. For example, a restaurant is only compared to other restaurants with approximately the same gross premium amount.

The formula adjusts the actual losses used so that frequency is given greater weight than the severity of an injury or illness. For example, six claims that occur over a three-year period totaling $20,000 have a greater impact against the experience mod than one claim in three years totaling $20,000. Again, both industry and business size are considered. Claims with zero costs are not included in the experience modification calculation.

Bottom Line - why does this sound so hard? The harder it is, the less you can check behind the insurer to make sure there were no mistakes in your policy or premium/payroll audit.

More on the E-Mod/X-Mod next time