Florida Mods—A Closer Look

5 Ways to Lower Your Mod
Claim Cost—Minor Injury
Claim Cost—Surgery Required
Frequently Asked Questions About Mods

Experience modification factors (mods) are numeric values used in combination with state-mandated rates to determine your workers’ compensation premium—and they’re complicated only if you’re the one who has to do the math! Thankfully, the reasoning behind them is fairly simple. Understanding how you can impact your mod may help you lower it—and, therefore, your workers’ comp premium.

Your mod is based on a carefully measured, comparative safety analysis.

Each year, the National Council on Compensation Insurance (NCCI) calculates your mod by considering (1) your audited payroll by job classification, (2) your loss history (both medical and lost-time claims) and (3) NCCI’s expected loss rates and discount ratios for your state. Complicated formulas combine all this information, but, simply put, your mod compares your claims record to that of all other businesses in your classification, statewide.

To level the playing field, NCCI says that new businesses start with a factor of 1.00 (average) and build two to three years of data before a mod can be produced.

Mods work in your favor if your claim experience is lower than average, because your mod could drop—along with your premium. Conversely, a higher-than-average claim record could push your mod up. So believe it—safety can mean money!

5 Ways to Lower Your Mod…
One of the surest ways to have the lowest possible premium is to lower your mod. Here are five ways to do that.

1. Use a return-to-work program. Back2Work™, Summit’s free return-to-work program, is designed to help control the cost of a claim. Getting your injured worker back on the job sooner limits wage reimbursement costs, which dramatically lowers the cost of claims (and over time, could lower your mod). Check out the example on pages 4 and 5 to see how effective Back2Work can be.
2. Safety, safety, safety. Summit loss control consultants are trained to spot potential safety hazards. Call them anytime—and use their assistance to help make your business safer.
3. Classify correctly. It sounds elementary, but employee classifications are really important. Your mod is based on the claims you are expected to have. If you misclassify a carpenter (who occasionally answers the phone) as a secretary, your expected claim potential is very low. The state doesn’t expect secretaries to have many accidents. Carpenters, on the other hand, are expected to have an occasional injury. If this carpenter has an accident while misclassified, your mod could take a much more significant hit compared to the same accident for a carpenter who is correctly classified. (Besides, intentionally misclassifying an employee to get a better workers’ comp premium is considered fraud.)
4. Don’t use uninsured subcontractors. If a subcontractor is injured on your jobsite, but doesn’t carry workers’ comp insurance, your policy will cover the injury. Not only will this increase the premium you owe at your year-end audit, it could also affect your mod for the next 3 years. Maintaining documentation of your subcontractors’ insurance is worth the effort.
5. Compare your current loss runs to your mod worksheet. Think of it as checking your credit report to make sure there are no errors. If you have newer, more accurate information about your business than NCCI has, you may request a mod revision. Ask your insurance agent.

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Claim Cost—Minor Injury
In this example, the injury was minor and did not require surgery. The doctor released the worker to light duty, but the employer did not have a return-to-work (RTW) program. So, the employer waited until the employee reached maximum medical improvement before allowing him to return. Without a RTW program in place, the claim had additional lost-time expense. The cost difference was significant when compared with an effective RTW program.

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Claim Cost—Surgery Required
In this example, the injury required surgery. Again, the employer did not have a return-to-work (RTW) program and therefore had no guidelines in place for returning the employee to work, even at transitional duty. As a result, the claim accumulated an additional 27 weeks of lost time, increasing the total cost by more than $20,000.

*Indemnity costs primarily consist of lost wages, but in some cases may include other expenses, such as child care.

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Frequently Asked Questions About Mods

Why don’t I have a mod?
Every state is different, but in Florida, only businesses that pay workers’ comp premiums of $10,000 the first year, an average of $10,000 the first two years or an average of at least $5,000 over a 3-year period are eligible for a mod rating.

We had our first workers’ comp claim this year. How could that affect my mod?
Mod calculations usually follow you for 3 policy years, but your mod calculation does not include the most recent 12-month period. This means that although the accident won’t affect your mod right away, you could see its impact for up to 4 years after the claim is filed.

Our employee got hurt 3½ years ago. Why didn’t this claim drop out of my mod calculation?
Usually a mod covers three 12-month policy periods, but for those who have a policy that covers a period of less than 1 year, that policy period could be included along with the 3-year history. However, a mod is never calculated on more than a 45-month history.

What happens to my mod if I sell my business?
An experience mod (think of it as a safety record) goes with the business and transfers to the new owner. (Remember that NCCI requires an ERM-14 anytime ownership changes.)

What happens to my mod if I sell off part of my business?
If you keep any part of your business, you also keep your mod (again, think of it as a safety record). If the buyer has a mod, he or she could keep it; otherwise, the new owner could start new with a 1.00 factor.

I am affiliated with a Professional Employment Organization (PEO). Do I have a mod?
You either use the mod assigned to your business or the mod that belongs to the PEO. That choice depends on the nature of your agreement with the PEO—specifically, which mod you are linked to by Federal Employer Identification Number (FEIN).

Employers often try to avoid a high mod by joining a PEO. They believe that by using the PEO’s mod, they could reduce their high workers’ comp premiums. But, this doesn’t always work.

To begin with, employers are often surprised to find that some PEOs actually have poor mods themselves. In addition, if the employer stays with the PEO for less than 3 years, their mod could be waiting for them when they withdraw from the PEO.

How low can my mod really go?
Your mod can go only as low as the mod calculation formula allows it to go. This is based on your claim history and the NCCI expected loss rates and discount ratios per job classification.

Is there a limit to how high my mod can become?
There is a cap formula that could limit how high an individual mod can become, but it varies based on premium size. Check with your agent for details.

My mod increased even though we didn’t have any new accidents. Why?
Increases can happen for several reasons. Often, the latest mod calculation picked up a claim that was not included in previous mods. (Remember that your mod does not include data from the 12-month period before your current policy effective date, so a claim that occurred over a year ago may have only recently been included in the calculation.) Or, a claim already included in the calculation may have actually increased in value. Mod changes also occur when the state makes an adjustment to the factors used in the mod calculation. Your best bet is to stay ahead of the curve with Summit’s safety and return-to-work programs.

If you have further questions about your mod or the information presented in this publication, please contact your independent insurance agent.

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