Crush Your Experience Modification – Increase Your Money
I know that when we think of insurance our blood pressure may skyrocket. However, this article will lower your blood pressure as it relates to workers’ comp insurance. We all know the lower our blood pressure reading, the healthier we are. So think about your experience mod like your blood pressure. The lower your experience mod, the healthier your business is.
Do not settle for any experience modification factor except the lowest possible one for your business. Do you know your possible minimum? Etch that lowest possible number on your brain just as you do your blood pressure and cholesterol numbers. Your minimum mod factor number is an integral part of your financial health.
Driving your mod down to its minimum is the most profitable way to cut your workers’ comp costs. So, again, do you know what that number is? Figure a 1.00 is a “C” on your Mod Report Card; above a 1.00 is a “D” or an “F.” Are you willing to settle for any of those?
While 10 to 50 percent of experience mods are wrong, more than 80 percent of mods are mismanaged.
Why mismanaged?
- Rating bureaus use incorrect payrolls
- Costs for employee injuries are entered more than once
- Money recovered from incidents where a negligent third party was at fault (think getting hit by someone running a stop light) – non-at-fault incidents are never reported to the rate making authorities; remove them from your records
- Credits are not applied properly
- Other incorrect data is entered, such as insurance company expenses that should not be charged against your record
What can you do?
- Hire the right agent who knows the fine print and the rules of workers’ compensation
- Hire the right agent who can audit your experience modification worksheets to make sure they are correct
The preceding article was written by James Morgan, a Certified WorkComp Advisor and Master WorkComp Advisor with the Clement Companies in Greenville, N.C. He helps employers fight workers’ comp overcharges and lower their comp costs. You may reach him at 252.756.8300 ×304 or jmorgan@clementins.com. For continuous ways to prevent overcharges, subscribe to James’ monthly workers’ comp e-bulletin at www.clementins.com. You only register with your name and email address.
Don’t Disrupt Your Work Flow: Preparing for the Workers’ Comp Auditor
Posted: 08/01/2011
Workers’ compensation costs can be 30 to 50 percent of an employer’s insurance costs. When your insurance policy first goes into effect, your premium cost is based on assigned classifications, estimated payrolls (referred to as remuneration) and an experience modification factor. At the policy’s expiration, the insurance company conducts a payroll audit and converts estimated payrolls into actual payrolls. It then assigns those payrolls to a classification. Is that classification correct?
To simplify the audit process, it was designed so all mistakes or missing information default in favor of the insurance company. By preparing a complete and thorough audit package when your policy starts, you guarantee an accurate, mistake-free, time and money-saving audit. The tips below will help you prepare for the auditor’s visit.
Getting Ready for the Auditor:
1. Schedule the audit sometime after lunch – mid to late afternoon – preferably Friday.
2. Treat the auditor as a welcome guest and provide the auditor with a quiet, well-lit space to work.
3. Assign a knowledgeable, friendly staff member to work with the auditor and escort the auditor on a tour of your location if requested.
4. Answer the auditor’s specific questions but don’t offer additional information. A written “basic” description of your business or operations is a valuable tool for limiting the scope and number of questions asked.
5. Telling the auditor you will send additional info as needed is the proper response when you don’t know the answer. Do not guess at any answer!
Preparing Records for the Auditor:
1. Have a prepared summary showing the total payroll summarized by classification code.
2. Subtract excluded remuneration: officers’ exemptions; overtime; rewards for invention or discovery; severance; and 12 or 13 other excluded remuneration categories.
3. Verify your math is accurate and balance to payroll records and to your prepared summary sheet.
4. Review evidence (called certificates) of insurance from sub-contractors separating labor and hard costs of supplies. Hard costs are not to be included for workers’ compensation.
5. Copy and secure certificates of insurance for all sub-contractors, being sure their policy dates cover periods they worked for you.
6. Hand the completed package to the auditor with workers’ compensation on top, your actual payroll report/run next, then your quarterly payroll reports, sub and sub certificate information.
7. Ask the auditor to leave you a copy of his or her audit worksheet so you have it on hand to refer to if questions arise. This is an absolute – you need a copy!
8. Ask the auditor to explain his or her results/summary before they leave.
After the Audit:
1. Get a copy of the final audit billing.
2. Verify deposit premiums and applicable credits and discounts, and confirm correct experience mod factor.
3. If billing matches summary page, close case; if not, review auditor’s worksheet for discrepancies, negotiate to positive closure.
The preceding article was written by James Morgan, a Certified WorkComp Advisor and Master WorkComp Advisor with the Clement Companies, Greenville, N.C. He helps employers fight workers’ comp overcharges and lower their comp costs. You may reach him at 252.756.8300 ×304 or jmorgan@clementins.com. For continuous ways to prevent overcharges, Subscribe to James’ monthly workers’ comp e-bulletin at www.clementins.com. You only register with your name and email address.
