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SAFETY CORNER
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Workers’ compensation has existed in Alaska since 1915, but it was not until 1946 that it became compulsory in the state. Workers’ compensation insurance generally gives employers immunity from lawsuits in exchange for covering their employees’ medical costs, missed work, and other expenses related to on-the-job injuries. The employee is not required to prove fault to collect. These no-fault social contracts made the employer liable for work-related injuries and disease regardless of fault.
Part of determining how much premium an insurance carrier will require for a workers’ comp policy is the Experience Rating Modification Factor, or Ex-Mod. Insurance carriers use ExMod to describe both past injuries and future risk, which allows carriers to calculate premiums based not only on industry average experience but on each business' unique operations. This mathematical equation is complicated and often misunderstood but can be
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The sense of trust between an employee and their employer is a key factor in the outcome of a workers’ comp claim, and this trust is affected if an injury is not addressed promptly. Workers can feel left out, have a morale drop, and worry about the claim process if handled improperly.
best described using this formula: experience modification equals actual losses divided by expected losses.
Since 1947, Alaska has been a member of the National Council of Compensation Insurance (NCCI), which gathers data, analyzes industry trends, and prepares objective insurance rate and loss cost recommendations to insurance carriers. NCCI also creates individual Ex-Mods based on several factors including the payroll of the business, a loss analysis over the last three years, and the class codes for the work being performed. So how can employers reduce these costs?
Ex-Mod Factors
The simple answer is by controlling exposures that pose a danger to workers. The fewer workers’ compensation claims a business has, the better the Ex-Mod is going to be. Any task that employees are instructed to do on behalf of the business should have a safety plan, hazard analysis, and formal training to protect those employees from hazards they may encounter. While this might sound simplistic, safety is often much more complicated than just hiring a skilled, competent person and giving that person personal protective equipment. Humans are inherently error-prone, and unexpected consequences can strike even the best, most safetyconscious companies. Diligence is key for this approach.
Another strategy to reduce the frequency of injuries is to team up with the insurance carrier to assess loss trends and then specifically target the leading causes of loss. Insurance carriers often have loss control professionals that can create a risk treatment plan customized to a business’s needs. Often these services are free. The business and the insurance carrier (along with the insurance broker) are all partners in risk, after all, and the insurance carrier wants to help the business improve the overall safety of their insured’s operations. This shared goal often reduces risks and improves the safety culture the fastest.
One more option is to train management on the effects of the ExMod on a business’ bottom line. This is helpful in larger companies where owners and managers are ready to work closely together to understand how incident rates drive the Ex-Mod up or down—and how best to implement changes that will drive (or keep) rates down. This is especially useful when a business has a profit-sharing program, where direct savings have tangible results. The Ex-Mod directly affects the premium credit or premium debit assessment that, in turn, affects the cost of insurance. And since the loss experience stays with business for three years, or what is known as the “experience rating period,” it is paramount that officers and managers comprehend how this factor can greatly change how much is paid that year for workers’ comp insurance—and how important it is to work as a team to reduce incidents.
How the Ex-Mod Affects Workers’ Comp Premiums
Premium Ex Mod Modified Premium
$100,000 0.5 $50,000
$100,000 0.75 $75,000
$100,000 1.0
(industry average) $100,000
$100,000 1.25 $125,000
Another time-tested and true tool is claims management. This is a multiple-step approach that starts with reporting the claim as soon as it happens. The longer the claim goes unreported, the higher the probability is that it will cost more. This is due to any number of reasons, but the ones that stand out most are the safety factor and the trust factor. A claim that is reported and properly investigated for root cause(s) in the first three days can often correct the hazard and reduce the future risks to other workers. In addition, the sense of trust between an employee and their employer is a
key factor in the outcome of a workers’ comp claim, and this trust is affected if an injury is not addressed promptly. Workers can feel left out, have a morale drop, and worry about the claim process if handled improperly. Statistics show that early reporting of injuries decreases claims costs and helps prevent injury exacerbation, and the worker receives better medical care. It can also reduce the chances of an injured worker “lawyering-up.” By law in Alaska, businesses are required to report injuries within ten days.
The last strategy to reduce the ExMod is implement a return-to-work program. These programs can help an employee stay at work while recovering from their illness or injury. The benefits for the employee include maintaining full earnings, an expedited return to pre-injury work, maintaining of skills, and the contribution to the positive social aspects that working with others brings. For employers, return-to-work increases productivity, reduces administrative costs for substituting workers or paying overtime, and better controls claims costs, to name a few advantages. And since claims costs drive part of the Ex-Mod, this important tool should be part of any employer’s policies. It is best to work with the insurance carrier to formulate and implement these programs.
Giant-Sized Improvement
It is important to note that in many NCCI states—Alaska included—the Experience Rating Adjustment plan is in place, which allows for a 70 percent reduction in the reportable amount of medical-only claims. These are claims where there has been no payment to the worker for lost time, only for medical expenses. This gives employers an incentive to report all claims to their insurance carrier rather than trying to pay for medical-only claims out of pocket. Discounting medical-only claims in the experience modifier calculation greatly reduces the impact of medical-only claims on the modifier. In contrast, Loss Time Incidents have no adjustment in place.
For years Alaska had the highest workers’ comp costs in the nation. That is changing due to an increase in safety and claims management, and as of 2020 Alaska has moved to 10th in the United States. “Reports of injury and occupational illness continue to decrease from a high in 2015,” Alaska Division of Workers’ Compensation Director Charles Collins said in a January 2021 press release. “This is good for workers, good for employers, and good for the economy.”
This really is the bottom line: enhancing worker safety and decreasing risk for all Alaskans. And it saves everyone money, as well.
Sean Dewalt is a Senior Loss Control Consultant for Umialik Insurance Company in Anchorage. Dewalt has been working in safety and risk management in Alaska since 2000. The author wishes to acknowledge the State of Alaska Divisions of Insurance and Workers’ Compensation for providing historical dates and information for this article.
Standout Advertising in an Outstanding Magazine
The Annual Top 49ers Edition of Alaska Business
By Janis Plume, Senior Account Manager
Time magazine has the "Person of the Year," Fortune has the "Fortune 500," and People magazine has "The Sexiest Man Alive." These famous magazines roll out their versions of the "Best" each year. In 1985 Alaska Business featured the first cohort of the Top 49ers, the top forty-nine Alaska-operated businesses based on reported (gross) revenue.
Almost thirty-seven years later, Alaska's premier business magazine consistently draws interest from readers month after month, but like any living entity, the publishing year has an ebb and flow. As we transition from a frantic period of summer activity to regroup in autumn, our readers’ interest seems to reach a zenith with our October issue. The Top 49ers issue is our biggest and most widely read edition of the year. Our advertisers can count on exceptional reach with their print ads in October. It's not uncommon for our readership to exceed 50,000+ with the October issue. Further, the Top 49ers issue gets bonus distribution at business and industry events like the Alaska Miners Association convention, the RDC fall conference, and the AGC of Alaska annual convention. Your advertising stands out firmly in this outstanding issue with significant reach and added distribution.
The Top 49ers is more than a glorified list of factoids. It is a collection of company-submitted data about the state's biggest home-grown businesses. Being a member of the Top 49ers is a fiscal feather in the business cap since the rankings are based on gross revenue. A smart marketing strategy is to align your advertising with solid content devoted to these awardwinning businesses.
The dog days of an Alaska summer in August is the perfect time to plan your ad efforts in this October's Top 49ers issue of Alaska Business. Get in contact with your account manager and discuss placement options. The October issue's deadline for reserving ad space is August 22, and the ad copy is due August 29. Don't miss the opportunity for your business to share a page with some of Alaska’s largest industry leaders.
JANIS PLUME 907-257-2917 janis@akbizmag.com
