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What You Should Know About – EMRs
Most prudent business owners know they have an "EMR", however, they may not know exactly where it comes from, how it is computed or how it can affect their insurance cost each year. The acronym, EMR is symbolic of the experience modification rating factor that is produced as a result of the Experience Rating Plan administered in each state.

In general, experience rating is the interaction of claims management and insurance pricing. An organization that controls its losses also controls it's EMR which translates to lower premiums as well as the potential for better business opportunities. This is one distinct area wherein an employer's efforts can significantly reduce their cost.

The EMR is an adjustment factor that is made to the Workers' Compensation insurance premium of companies that meet or exceed the required level of premium to qualify for the program. Typically, any company that has been paying $5,000 in manual premium for the past few years or has paid $10,000 or more in a single recent year should qualify to become experience rated.

There are a number of rating bureaus and/or advisory organizations that calculate these factors, but, most states use a private corporation known as the National Council on Compensation Insurance (NCCI) to provide these services. NCCI analyzes industry trends, prepares workers compensation insurance rate recommendations, determines the cost of proposed legislation, and provides a variety of services and tools to maintain a healthy workers compensation system. Your insurance carrier sends NCCI statistical rating data about your company such as payroll by class of employee and incurred losses for the experience period. The experience period consist of 3 years, usually ending 1 year prior to the effective date of the modifier. ( basically, the first three of the last four years of experience)

This data is used in conjunction with actuarial information that has been gathered on similar employers. The basic concept of the experience rating calculation is to compare the actual losses for the employer being rated with the expected losses for the average employer in the same industry, same state and with a comparable amount of payroll. An experience modifier of 1.00 represents an employer whose actual losses closely match the expected losses for their industry. When the actual losses are greater than expected, the EMR would be greater than 1.00; conversely a modifier that is less than 1.00 means that actual losses were less than expected.

Making sure the statistical data used in the calculation of your EMR is critical to ensuring that it has been calculated properly. In some cases, an elevated EMR could mean the loss of jobs thus making its management and accuracy vital to the survival of a company. Your insurance advisor should be able to check this for you each year when your new EMR is issued.

We welcome any questions you may have regarding the above information. You can contact me at 281.570.2000 or visit our website at

This article was provided for informational purposes only and should not be considered in any way as legal advice.
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