While claims on worker’s compensation policies are recorded and tracked regardless of the size of the company’s Workers Comp policy, in many states, such as our state of Pennsylvania, the presence of an E-Mod is reserved to companies with a policy premium that exceeds a specific threshold. However, companies with smaller premiums, say under $10,000, may still receive a rating factor. In the cases of smaller companies, this may be applied as a Merit Rating and can be either a fixed debit (surcharge), a credit (discount) amount, or simply flat (neither surcharged or discounted).
New start-up companies will have neither an E-Mod nor a Merit Rating at their inception because they do not have any experience in which to use to calculate the rating factor. In the case of E-Mods, once a Worker’s Compensation Policy is maintained for a few years, an E-Mod can be calculated based on factors which include the frequency and severity of claims, relative to the size of the policy premium.
Each industry will have varying maximums for the E-Mod that can be applied to the policy. For some industries, the lowest E-Mod may be .9 while best-in-class businesses in other industries may be able to capitalize on E-Mods of .8, or lower. How high E-Mods can go is also variable. Some “high-risk” industries may have a maximum E-Mod factor of over 2.0.