The threshold for employers to qualify for receiving an X-Mod has increased by nearly 100% in the last four years, meaning that fewer employers are qualifying and those that may have had one once, don’t qualify any longer.
Additionally, many employers since the recession have been reducing their payroll, which also reduces the workers’ compensation premium level below the X-Mod threshold.
These two trends have resulted in many employers that once had low X-Mods (below 100) having seen their rates go up.
We’ve received calls from some of our customers about this issue, so we want to explain what’s going on.
How an X-Mod works
When an employer receives an X-Mod, it is a numerical value that explains how your claims experience measures up against others in your industry and the premium you pay. An X-Mod of 100 is the average, meaning that your claims come out to be average for your class code.
If you have a better safety record than your peers and your claims costs are lower than average, you would typically have an X-Mod below 100.
The inverse is also true. If your claims are more costly, then your X-Mod will be more than 100.
X-Mod threshold
The X-Mod threshold has been climbing over the last several years at an increasing rate. The new annual premium threshold for being eligible for an experience modifier was raised at the start of this year to $33,300, up 98% from the $16,700 threshold that was set in 2011.
Once an employer no longer qualifies for an X-Mod, their X-Mod is essentially set back to 100, regardless of their claims history. The insurer will still look at the overall cost of your claims, but your X-Mod no longer matters at that point.
In other words, scheduled credits and debits will still apply, depending on your claims costs and claims experience.
For non-X-Mod employers, all companies are grouped according to their business operation or classification code. So if you have a printing shop, your claims costs will be bundled up with all other printing shops in the state for calculation purposes.
The estimated losses of the group are added together and an average cost is obtained, which is then applied to the entire class. The rates determined are averages reflecting the normal conditions found in each classification.
An employer is assigned to a classification to ensure that the rates reflect the costs of all employers with similar characteristics. Although each classification contains “similar” risks, each individual risk in a class is different to some extent (the X-Mod is designed to reflect these individual differences in loss potential).
So if you had an X-Mod higher than 100, you may see a slight downtick in the amount of workers’ comp premium you pay, but for those employers whose last X-Mod was below 100, the opposite could happen.
The takeaway
The best course of action if you no longer qualify for an X-Mod is to continue focusing on workplace safety and keeping your employees from getting injured on the job and filing claims.
And if you do have claims, you should work with us and the insurance company to manage those claims so that you can get the worker back on the job as soon as is feasible and safe for them.
If you have questions about your workers’ comp policy, contact VMA Insurance Services.