What is An EMR Rating & Why Is It Important?

Updated: 11/24

‍

Do you know what your experience modification rate (EMR) is? If you don't, you could miss out on an opportunity to reduce your workers' compensation insurance premium. Understanding how EMR works and what it affects can help you save money and increase employee satisfaction.

While you aren't responsible for calculating the EMR rating, you can take steps to decrease it. Let's examine how this rating works and how it impacts your business in Colorado.

What is an EMR Rating? 

An Experience Modification Rate (EMR) is a numeric value that insurance companies use to evaluate the risk associated with a business when determining workers' compensation premiums. This rating is based on your company's workplace safety record and claims history.

The key reason why the EMR rating is critical is that it influences the cost of your workers' comp insurance. A lower EMR allows you to save on premiums, while a higher rating could increase insurance costs.  

Beyond its financial implications, an EMR rating also reflects the effectiveness of your workplace safety programs. A good EMR rating shows that you prioritize employee well-being. This can boost morale, attract top talent, and improve the satisfaction rates of existing employees. As a result, you can achieve a lower turnover rate, which also leads to savings.

Overall, maintaining a good EMR is about more than saving money—it's about creating a safe and productive workplace.

How Is an Experience Modification Rating Calculated for Worker's Comp?

The EMR rating calculation is a complex process. For most states, including Colorado, the National Council on Compensation Insurance (NCCI) handles such calculations. While as a business owner, you don't have to calculate the EMR rating directly, understanding the process can help you see how to improve it.

Here is how it's done:

• Data Collection: EMR calculations use your company's workers' compensation claims history over a three-year period, excluding the most recent policy year.
• Losses Calculation: Insurance bureaus calculate expected losses for your industry based on its classification codes and payroll size.
• Weighting Claims: Claims are divided into primary losses and excess losses. Primary losses, which reflect frequent smaller claims, carry more weight because they usually indicate safety issues. Excess losses from larger claims have less impact on the EMR.
• Credibility Factor: Your company's size also influences the calculation. Larger companies tend to have a higher credibility factor, which means that their EMR relies more heavily on their own claims history than on industry averages.

Once the council combines all the factors, they divide actual losses by expected losses to get the final figure. Adjustments for industry norms or specific state regulations may also be possible.

Recent EMR Rating Calculation Update

The NCCI recently updated its experience modification factor (e-mod) algorithm, which went into effect in November 2023. These changes started affecting workers' compensation premiums in 2024.

Key updates include state-specific split points and adjustments to how large claims are handled through State Accident Limitations (SAL). While this update aims to achieve greater fairness, it places greater weight on smaller, frequent claims.

What Is a Good EMR Score, and Why Choose Horizon Glass?

The average EMR rating is 1.0, which represents a standard level of risk. A rating below 1.0 indicates better-than-average safety performance, while a rating above 1.0 suggests a higher level of risk. So if your EMR is lower than 1.0, you can count on lower premiums.

At Horizon Glass, we emphasize safety. Working with our team can improve workplace safety and decrease your EMR rating. Please contact us at any time to learn more or get a quick quote.

‍

‍

‍