What Is XMod and What Are Its Costs

M ost states within the US have made it compulsory under state law to offer workers’ compensation insurance. It becomes applicable as soon as the first employee is hired, and there are multiple bodies governing the implementation. 

For many businesses, it’s an additional cost that the company must bear. 

Considering the financial pressure on companies, the Workers Compensation Insurance Rating Bureau (WCIRB) in California designed an experience modification rate to protect the financial well-being of all parties. 

So, what is XMod, and how can companies keep themselves protected from insurance penalties whilst also protecting the employees? 

Let’s find out. 

What is XMod?

Workers’ Experience Modification Rate (EMR), also known as XMod, EMod, or Modifier, is a merit rating system that gives employers’ an added motivation to promote a healthier working environment.

It’s an extension of workers’ compensation insurance experience and takes into account compensation claims made during a specific period. 

The rating represents a number upon which the insurance providers further offer discounts, or increases in premium value, against the insurance policy. 

XMod reflects claims from the recent three years and determines whether the company will receive a discount on their insurance policy, or pay more in premium.

To put it simply, if a company has had too many workers’ compensation claims, the company will bear a higher premium charge.

The goal for businesses is to keep their EMR/XMod scores on the lower end to avoid paying additional premiums on the policy. 

How is Xmod Calculated?

EMR or XMod is calculated on total actual losses incurred during the period by the respective business, divided by the expected losses that other companies of the same size may have incurred in the same duration. 

It’s a formula that considers the relevant company, and similar companies of its size. To calculate XMod, the insurer considers three recent years’ claim data, except the current year. 

The details of the calculation can be a daunting task for individuals not familiar with the specifications. 

To find out what is your company’s XMod rate, The Workers' Compensation Insurance Rating Bureau of California (WCIRB) has published a detailed guide on the subject.

WCRIB formulated the mathematical calculator to help facilitate corporations within their financial well-being. 

Is Every Company Eligible for XMod?

No, not all companies are eligible for XMod. Multiple factors determine what makes a company eligible. 

In calculating eligible, the total payroll value of the fiscal year is calculated against the classification code and the expected loss rate for each classification. 

An EMR/XMod rate of 1.0 is considered an industry average. A higher than 1.0 rate represents a negative loss history and will be penalized. 

The rate varies annually and depends on the actual workers’ compensation claim activities during the fiscal year. 

The eligibility criteria can be viewed on WCRIB’s website and will help you to gauge if your company is eligible. 

How to Reduce XMod Costs?

To answer this, let’s first establish whether or not XMod be controlled? 

If workers’ comp experience can be managed with adequate risk management measures in place, XMod can be controlled. 

By putting policies, protocols, and training in place, companies can control the potential risk of injuries and illnesses for their employees. 

A company can achieve so by following these some management measures:

• Promote a culture of responsibility and safety within the company. 
• Create a manual that guidelines efficient and effective timelines as late compensation claims cost more than those made on time. 
• Hire employees who understand a sense of self-discipline and personal responsibility. 
• Develop a thorough accident investigation protocol.
• Appoint a POC whose primary responsibility is to ensure risk management in the workplace. 
• Reward employees who demonstrate and promote safe behavior. 
• Conduct training that talks about health and safety at the workplace. 
• Categorize first-aid care injuries from those needing medical attention. 
• Create a system to pay clinics/hospitals directly without filing a claim report with the workers’ comp.

To actualize and promote a better risk management system, companies must take into account what is XMod?

It’s an experience management rate that is calculated on the company’s actual losses divided by the projected losses. 

A good place to start is to take into account the associated risk factors with the nature of your company’s work. 

When you know what will drive your workers’ comp costs, a solution to control it will follow through too.