EMR and Rate Setting

Looking for lower rates on workers’ comp insurance in Washington state? As you may already know, there’s no shopping around here — all workers’ comp insurance is provided by the Washington State Department of Labor and Industries (L&I). The rate they set is the rate you’ll pay. That’s the bad news.

Check your 2021 rates at our Nov 17 webinar

The good news is that Washington state workers’ comp rates are not-for-profit. Plus, the process is completely transparent – each employer gets a form showing exactly how the rates were calculated. And the most important figure on this sheet is a little number called the EMR, or your Experience Modification Rate. We’re going to dive into the EMR to show how it works. As you’re about to see, you actually have a lot of control over the rates you pay.

 

What does EMR stand for in Washington workers’ comp?

EMR gets that name because it is the rate assigned to your company is based on experience, which is the cost of your

Thumbnail of Approach Experience Modification Rate infographic
Download the Approach EMR infographic

company’s claims during the past few years. The modification, or the thing that the EMR changes, is your company’s rate compared to others in your industry.

In short, safer companies get a lower EMR and pay less for workers’ comp. Companies with more accidents or expensive claims have a higher EMR and pay more.

 

Example of average Washington workers’ comp rates

Here’s a quick example of how the EMR is used to calculate your Washington workers’ comp rate:

Let’s say you own a furniture store. In Washington state, the 2020 base rate for workers’ comp for furniture store employees is about 80 cents per hour, per employee.

If your furniture store has had average claims costs for workers’ comp, you’ll get an EMR of 1.0.

$.80 x 1.0 = $.80

Your worker’s comp rate will be 80 cents/hour. That’s the base rate of 80 cents multiplied by your EMR of 1.0. You’ll pay the same as other “average” furniture stores in the state.

The actual rates and calculations are more complicated, but that’s essentially how it works. Over time, if you keep your workers safe and on-the-job, this can be rated as good experience. You’ll earn an EMR below 1.0, which actually lowers your rates.

 

Example of lower Washington workers’ comp rates

Imagine your furniture store has had below average costs for workers’ comp and earned an EMR of 0.86.

$.80 x 0.86 = $.69

Great! Instead of 80 cents per hour, you’re only paying 69 cents. This saves you about 14 percent on every hour and every employee compared to the “average” competition above.

But, if you’ve had some expensive claims related to on-the-job injuries, your EMR might go the other way.

 

Example of higher workers’ comp rates

In this last example, claims costs from earlier years have raised the EMR for this furniture store to 1.25.

$.80 x 1.25 = $1.00

Hmm. In this example, your imaginary furniture store is paying $1.00 per hour just for workers’ comp. That’s 25% more, every hour, for every employee, than the average competition. And your rates are 45% higher than the “good” furniture store that earned a lower EMR of 0.86.

Those are just rough examples, but they’re very similar to the real world. Many companies really do pay 40 percent below average each year for Washington workers’ comp. Others are paying double the average cost, or more, due to poor experience. It’s just like car insurance – an accident this year will probably raise your rates in the future; being safe keeps your rate the same or even earns you a lower rate.

 

Washington workers’ comp rate increases

What’s more, just one expensive claim can cause your rates to nearly double over a three-year period. Here’s how:

  • Year 0: EMR of 1.0 (before increase)
  • Year 1: EMR of 1.25 (25% increase)
  • Year 2: EMR of 1.56 (25% increase)
  • Year 3: EMR of 1.95 (25% increase)

Claims impact your EMR for three years. And, while rate increases are capped at 25% per year, the compounding nature over three years means you may be paying 95% more for workers’ comp before rates start to drop again. Could your business absorb that kind of increase?

 

When are Washington workers’ comp rates set?

Rates are set for the upcoming calendar year based on a snapshot that’s taken in early June. Any steps you can take to get claims closed, and case reserves removed, before the snapshot will help to lower the costs in your experience period.

The good news is that Washington state workers’ comp rates are not-for-profit.

Preliminary rates are then released in September and finalized in December. You’ll receive a detailed Experience Rating Calculation sheet from L&I, just like the one below. Your EMR for the upcoming year is in the box labelled Experience Factor, which can be found in the middle of the page. In this example, the EMR for next year will be the “Final” number of .8511.

 

How to find your Washington workers’ comp EMR rate (Experience Modification Rate)

You can also find EMRs for current and past years at https://secure.lni.wa.gov/verify/ (or just search for L&I Verify). There are several options for looking up your company:

Once you find your company, look for the Workers’ Comp section:

You’ll then find a little link that says “Workers’ comp rates”

And finally, you’ll find the EMR, or experience factor, along with a link to see the past (years’) EMRs. We can see that this employer, with an EMR of .75, is saving 25% compared to its industry average. Well done!

To recap, if your EMR is below 1, you’re saving money up-front on every hour that your employees work. If it is above a 1, it’s time to get your claims costs as low as possible, primarily through accident reduction and then by closely managing any claims that are filed. That’s easier said than done, which is why more than 1,000 employers turn to Approach for help in managing their safety and claims programs. We help our clients save 15 percent, on average, on their workers’ comp rates.

Want to learn more about Washington workers’ comp rates? Download our EMR infographic and sign up for our EMR Brain Trust webinar on November 17 (webinars available to Approach clients and invited guests only).