An ERA State?
A key feature with the experience MOD calculation as well as when employers and risk managers try to determine the cost benefit for return to work and light duty programs is weather or not the state in question has approved and Experienced Rating Adjustment (ERA). So what is an Experienced Rating Adjustment?
Quite simply, if a state has approved ERA Status, and a workers’ compensation claim is considered “medical-only”, when NCCI calculates your experience MOD, claims which are medical only recieve a 70% reduction when calculating the claim information. How do you know if a claim is medical only per your MOD Sheet? Check the IJ (Injury Code) number. An injury code 6 means the claim is medical only.
So why would NCCI give me a 70% discount on a claim just because it’s medical only? There are several reasons, but I’ll give you two of the biggest.
By giving a discount for smaller claims (typically those smaller claims are medical only), employers are encouraged to report small claims rather than pay them in house as many do. In order for the EMR to be as accurate as possible, NCCI has to receive as much claim data as possible. When claims are paid in house, all legalities aside, the factors used to determine the Discount Ratio (D-Ratio) and Expected Loss Rates (ELR), aren’t as accurate because they aren’t receiving all of the data. Don’t get me wrong, the actuaries understand not every claim gets turned in and they account for this, but by encouraging companies to submit even the small claims, it helps the accuracy of the calculations.
Why not reward the employers whose employees, when injured, are back to work and returned to full productivity without any indemnity payments or lost work time? It makes sense to reward those employers who put employee safety as a priority!
You understand what the ERA is, and how it can help your MOD rating, but which states DON”T give an Experience Rating Adjustment?
While I do check the regulatory authorities on the states below prior to posting, things can and do change. For several of the states that don’t currently allow ERA, many are reviewing, but have not yet adopted. If you regularily work in one of these states and discover a change before I do, please share so I can verify and update!
Alaska (Pending, but not yet approved)