How does my EMR affect insurance costs?

The experience modification rate is the single most impactful variable in your workers' compensation premium calculation. The formula is straightforward: your manual premium (determined by class code rate multiplied by payroll per $100) is multiplied by your EMR to produce your modified premium. For tree service companies classified under NCCI code 0106 — which carries one of the highest workers' comp rates in any industry — the dollar impact of EMR changes is amplified significantly.

Consider a concrete example. A tree service with $500,000 in annual payroll at a workers' comp rate of $20 per $100 of payroll has a manual premium of $100,000. With an EMR of 1.0 (industry average), the modified premium is $100,000. If that company's EMR rises to 1.25 due to claims, the modified premium jumps to $125,000 — an additional $25,000 per year. Because EMR is calculated using a three-year experience period, that elevated rate persists for at least three years, resulting in $75,000 in excess premium. Conversely, driving the EMR down to 0.80 saves $20,000 per year, or $60,000 over three years.

EMR affects more than just premium. Many general contractors, utility companies, and municipal clients use EMR as a prequalification criterion. An EMR threshold of 1.0 is common in commercial contracts — meaning a tree service with an EMR above 1.0 is automatically disqualified from bidding. Some stringent clients set the threshold at 0.90 or even 0.85. TCIA accreditation evaluators also consider safety record and EMR as part of the accreditation process. Losing access to commercial contracts due to a high EMR can cost far more in lost revenue than the premium increase itself.

The EMR formula, administered by NCCI (or independent state bureaus in monopolistic states), weighs claim frequency more heavily than severity. Five small claims impact your EMR more than one large claim of equal total value. This is because frequency indicates systemic safety problems, while a single severe claim may be an anomaly. The formula also splits losses into 'primary' (the first $5,000 to $18,500 of each claim, depending on the state) and 'excess' components, with primary losses receiving full weight and excess losses receiving reduced weight.

Strategies for reducing your EMR include implementing a comprehensive safety program compliant with ANSI Z133 and OSHA standards, conducting regular safety training and toolbox talks, establishing a return-to-work program that minimizes lost-time claims, managing open claims aggressively with your carrier to ensure prompt and fair closure, and reviewing your NCCI experience modification worksheet annually with your broker to catch and dispute errors in reported losses or payroll data.

One often-overlooked tactic: report claims immediately and participate actively in the claims management process. A claim that is reported late and poorly managed often settles for more than one that is reported promptly with full documentation. Every dollar in claim payments affects your EMR for three years.