How to lower your MOD rate…

Your MOD rate for your workers compensation is definitely something that can have a major impact on your bottom line profits. Your MOD rate stands for modification rate or essentially your experience modification rate. Every business starts with a 1.0 mode rate. Which means if you pay $10k per year in premium, you would multiply that rate by your 1.0 mod rate and $10k would be your yearly amount. But depending on how your experience goes, your mod rate may go up or down. If you have a lot of claims/injuries, your mod rate will go up and could stay up for 3 years. If you have no claims/injuries your mod rate goes down and you save money. I’ve seen mod rates as high as 3.05 and as low as .63. But let’s use the $10k example again and use the mod rate of 3.05. Instead of paying 10k a year, you are now paying $30.5k per year. That takes away from your bottom line profit. You have to sell a lot of your product to net an additional $20.5k, which is the difference in premium from a 1.0 mod to a 3.05 mod. Conversely, that same $10k, with a mod rate of .63. You are now paying $6.3k per year. You can see, it can add up quickly in either a positive or negative direction.  

What can you do to help lower your mod rate or maintain a mod rate you’re happy with?  

1. Make sure you have an Injury Illness Prevention Program (IIPP) safety program.  IIPP programs are required for all businesses in California. Having an actively managed safety program can help you educate your employees on what they can do on a daily basis to be more safety conscious.  Many workers compensation carriers will provide discounts when they can confirm their clients have put in safety procedures and policies that can mitigate future risk.  
2. Make sure you are conducting regular trainings and ensure your employees are implementing and utilizing the skills they learned during those trainings. Having someone do mock audits and random checks periodically will confirm employee compliance. 
3. When you do have claims be an active participant in those claims. How are they being handled and managed by your carrier? What can you do to move the claim along?  Helping the employee get back to health and back to work will benefit both of you.  
4. Check regularly with your broker and the WCIRB (Workers Compensation Insurance Rating Bureau) to get feedback on where you stand with your mod rate. You can have your broker contact them on your behalf if you have a dispute.  

Your workers compensation modification rate is an important component of your business and should be managed and regularly checked. Not all injuries can be prevented but if you let your workers know you are conscious about their safety and make a concerted effort to provide a safe environment, day by day improvements can be made.  

Written by Glen Drouin, founder and owner of Harbor HR, LLC.  Glen has 13 years experience working with his Father’s business and 20 years experience as an HR and business consultant. You can reach Glen at 916-293-2116 or e-mail at glen@harborhr.com .