What Is an Experience Modification Rate (EMR)? How the Mod Is Calculated

On this page (11)

1. TL;DR
2. Worked example: same losses, different mods
3. How is an experience mod calculated?
4. Why is 1.00 the average?
5. How does the mod change premium?
6. Who calculates the experience mod in each state?
7. Who qualifies for experience rating?
8. How do you read an experience rating worksheet?
9. When does the mod change?
10. How can an employer lower its experience mod?
11. FAQs

TL;DR

• An experience modification rate (EMR), or experience mod, is a factor that adjusts an employer's workers compensation premium by comparing its own payroll and loss history, usually the latest three years, with the expected losses of an average employer in the same classifications.
• 1.00 is average. A mod below 1.00 is a credit and lowers premium; a mod above 1.00 is a debit and raises it. NCCI's example: $100,000 of premium becomes $75,000 at a 0.75 mod and $125,000 at 1.25.
• NCCI's formula splits each claim into primary loss (up to a split point) and excess loss, and gives primary loss more weight, so ten small claims hurt a mod more than one large claim of the same total.
• NCCI calculates mods in most states. California (WCIRB), New York (NYCIRB), Pennsylvania (PCRB), Delaware, New Jersey and Michigan use their own plans, and the four monopolistic states (North Dakota, Ohio, Washington, Wyoming) run their own.
• Under NCCI's plan and in California, experience rating is mandatory once an employer meets the state's premium eligibility threshold, and the mod applies whichever insurer writes the policy.

An experience modification rate (EMR) is the number a rating bureau calculates to adjust one employer’s workers compensation premium for its own claims history. The bureau compares the losses the employer had, usually over the last three years, with the losses an average employer with the same payroll in the same classifications would be expected to have. NCCI describes the result as a credit, a debit or no change: a mod of 1.20 is a prediction that the employer’s future losses will be 20% worse than average (NCCI Item E-1409).

Worked example: same losses, different mods

Example, with made-up round numbers: two employers in the same class each have $120,000 of expected losses over the experience period, a D-ratio of 0.40, a weighting value of 0.14 and a ballast of $40,000. Each had $100,000 of claims. Employer A had ten claims of $10,000; Employer B had one claim of $100,000. With a split point of $20,000:

	Employer A (10 claims of $10,000)	Employer B (1 claim of $100,000)
Actual primary losses (Ap)	$100,000	$20,000
Actual excess losses (Ae)	$0	$80,000
Expected primary (E × 0.40)	$48,000	$48,000
Expected excess (Ee)	$72,000	$72,000
Numerator	$100,000 + $0 + $61,920 + $40,000 = $201,920	$20,000 + $11,200 + $61,920 + $40,000 = $133,120
Denominator (E + B)	$160,000	$160,000
Mod	1.26	0.83
Effect on $200,000 of manual premium	$252,000	$166,000

The totals match, but the employer with ten claims pays about half again what the employer with one claim pays. NCCI makes the same point in its own guide: the plan gives “greater weight to accident frequency than to accident severity,” because a pattern of small injuries predicts future cost better than one large one (NCCI). If both employers had come in exactly at expected ($48,000 primary and $72,000 excess), the formula would return 1.00.

Try your own figures below. W, B and the D-ratio come from the bureau’s tables for your state and size, so copy them from your experience rating worksheet.

CalculatorExperience mod (NCCI formula)

Copy the figures from your experience rating worksheet. Example values are for illustration only.

Actual primary losses (A_p) Actual excess losses (A_e) Expected losses (E) D-ratio Weighting value (W) Ballast value (B)

Expected primary (E_p)–E × D-ratio

Expected excess (E_e)–E − E_p

Experience mod– 

Mod = (A_p + W·A_e + (1 − W)·E_e + B) ÷ (E + B)

How is an experience mod calculated?

Under NCCI’s Experience Rating Plan the calculation runs in four steps.

1. Expected losses. Each classification has an expected loss rate (ELR) per $100 of payroll. The bureau multiplies the ELR by payroll ÷ 100 for each class and policy, then adds them up. NCCI’s sample worksheet line: 1.413 × ($3,125,350 ÷ 100) = $44,161.
2. Expected primary and excess. The D-ratio (discount ratio) is the share of expected losses expected to fall below the split point. Expected losses × D-ratio gives expected primary losses; the rest is expected excess.
3. Actual primary and excess. Each claim is capped at the state per-claim accident limitation, then split. The amount up to the split point is primary; anything above it is excess.
4. The mod. The formula above weights actual excess losses by W, fills the rest of the excess with expected losses (1 − W), and adds the ballast B to both the top and bottom.

W and B are the credibility controls. NCCI says W “is a small percentage for small employers and increases with the size of the employer,” and the ballast “increases as expected losses increase.” A small employer’s mod therefore moves less for the same claim, because one bad year says less about a 10-person shop than about a 1,000-person one. In NCCI’s sample worksheet, W is 0.16 and B is $45,900.

The split point now varies by state. Until 2023 NCCI used one countrywide split point, $18,500. Item E-1409 replaced it with state-specific split points aimed at an average D-ratio of about 40%, set each state’s per-claim accident limitation at the 95th percentile of lost-time claims, recalibrated W and B, and moved D-ratios from class level to hazard group. NCCI stated that “the formulas and general structure of the Plan remain unchanged.” The change took effect with each state’s 2023-2024 loss cost filing; Texas, for example, adopted a split point of $16,500 for mods effective on or after July 1, 2024 (TDI Order 2023-7897), and NCCI proposed $25,000 for North Carolina. Texas updates its split point each year from state data, so read your state’s current value off the worksheet.

Medical-only claims count at 30%. Most NCCI states have approved the Experience Rating Adjustment, which includes only 30% of a medical-only claim’s primary and excess losses. A $30,000 medical-only claim enters the mod as $5,550 primary and $3,450 excess.

Why is 1.00 the average?

Expected losses are built from the average experience of employers in the same classifications, scaled to this employer’s payroll. When actual primary and excess losses equal expected, the numerator and denominator of the formula are identical and the mod is exactly 1.00. NCCI also issues a 1.00 “unity” mod when an employer doesn’t meet eligibility, lacks the minimum data, is a new business with no history, or lost its data in an ownership change.

How does the mod change premium?

The mod multiplies the premium built from manual rates. NCCI’s own example is a roofing company with $70,000 of clerical payroll at $0.75 per $100 and $200,000 of roofer payroll at $63.171 per $100: $126,867 of premium, which a 1.25 mod raises to $158,584.

The mod belongs to the employer, so changing insurers doesn’t reset it. For California the WCIRB says that regardless of which insurer provides the policy, an experience-rated employer’s mod “must be applied to their policy” (WCIRB). NCCI’s plan is mandatory for employers that meet a state’s eligibility threshold, and the WCIRB says the same for California.

Who calculates the experience mod in each state?

NCCI’s plan is approved in 39 jurisdictions, according to its 2025 guide. Several states run their own bureau or their own plan.

State	Calculated by	Plan used
Most NCCI states, including Texas and Florida	NCCI	NCCI Experience Rating Plan
Indiana, Massachusetts, North Carolina	ICRB, WCRIBMA, NCRB for intrastate mods	NCCI plan
Minnesota, Wisconsin	MWCIA, WCRB; NCCI for interstate mods	State plan; NCCI interstate plan when the employer has exposure in two or more participating states
California	WCIRB	California Workers’ Compensation Experience Rating Plan, 1995
New York	NYCIRB	New York plan (rebuilt October 1, 2022)
Pennsylvania, Delaware	PCRB, DCRB	Each state’s own plan
New Jersey, Michigan	NJCRIB, CAOM	Each state’s own plan
North Dakota, Ohio, Washington, Wyoming	State fund (monopolistic states)	Own plans and rates

The independent plans differ from NCCI’s in ways that matter when you read a worksheet:

• California. The WCIRB expresses the mod as a percentage. Since 2017 the primary loss value varies with employer size, across more than 90 values from $4,500 to $75,000, and the formula gives full weight to primary losses and none to excess. Since 2019 the first $250 of each claim is removed. An employer qualifies if its experience-period payroll times the expected loss rates reaches the threshold, $11,700 for mods effective September 1, 2026. The WCIRB says more than 130,000 California businesses are experience rated, about 80% of the state’s workers comp premium (WCIRB eligibility, WCIRB formula notes).
• New York. For ratings on or after October 1, 2022, the NYCIRB dropped its merit rating plan and applies experience rating to every risk with New York exposure. It uses a variable split point (from $1,000 for the smallest risks to $170,000 for the largest), counts only actual primary losses, and rates New York experience alone after leaving NCCI’s interstate plan.
• Pennsylvania. Since April 1, 2024, the PCRB’s eligibility threshold is $5,000 of premium (down from $10,000), split points vary from $10,000 to $300,000 by expected losses, and a maximum-mod formula starting at 1.10 plus a cap of 40% above the prior mod limit large jumps.

Who qualifies for experience rating?

Eligibility is set state by state as a premium threshold. Under NCCI’s plan an employer qualifies by meeting the threshold in its most recent 24 months of subject premium, or on average across the whole experience period. NCCI’s guide illustrates this with a hypothetical state requiring $14,000 over two years or a $7,000 average; the real figures are in each state’s section of the plan. California and Pennsylvania figures are above, and New York rates every employer with New York exposure.

How do you read an experience rating worksheet?

An NCCI worksheet has two pages. The detail page lists each policy in the experience period with:

• Payroll by class code, the ELR, expected losses, the D-ratio and expected primary losses.
• Claim data. Claims over $2,000 appear individually by claim number; smaller claims can be grouped by injury type, with the count shown as “NO.” Each claim is marked open (O) or final (F), with the incurred amount, indemnity and medical combined.
• Medical-only claims at full value in the detail; the 70% reduction appears only in the summary.

The summary page shows total actual, primary and excess losses, the split point, W, B, the stabilizing value and the mod, and sometimes assigned risk surcharge factors such as ARAP. Check the status as well. A preliminary mod uses the prior approved rating values because NCCI doesn’t yet have the state’s final ones; a contingent mod is missing audited payroll or loss data, and NCCI revises it when the data arrives.

Most of the numbers on the worksheet start as data the insurer reports to the bureau. The open reserves come from the same claim files shown on a carrier’s loss run report, so comparing the two is a quick way to find a reserve that has since dropped or a claim that has closed. Agencies that already pull loss runs into structured data with loss run parsing software can line them up against the worksheet’s claim list; prompt 9 in our policy summary prompt library pulls the mod and class codes off a workers comp policy for the same check.

When does the mod change?

The rating effective date sets the experience period. NCCI uses policies that took effect between 57 and 21 months before that date, so the current policy is excluded. For a January 1, 2026 mod that means policies effective from April 1, 2021 to April 1, 2024. NCCI calculates the mod about 60 to 90 days before the rating effective date, and it usually applies for one year. Each year the oldest policy drops out and a newer one comes in. California uses the same window, described as four years and nine months to one year and nine months before the rating effective date (WCIRB).

Ownership changes also move the mod. NCCI requires written notice to the insurer within 90 days of a change (Form ERM-14 or a signed letter), combines the experience of entities with more than 50% common majority ownership, and may revise the current mod and up to two before it.

How can an employer lower its experience mod?

• Cut claim frequency first. Primary losses carry the most weight, and the worked example above shows why ten $10,000 claims do more damage than one $100,000 claim.
• Bring injured workers back early. NCCI’s guide credits the plan with an incentive for return to work, because employer involvement can reduce the severity of claims after they happen.
• Report claims rather than paying them privately. The 70% medical-only reduction exists to remove the reason to self-pay.
• Audit the worksheet. Wrong class codes, stale reserves, missing payroll and unrecorded ownership changes all show up on it. The WCIRB notes a California mod can exclude unaudited payroll, and that a mod can be revised after a claim is ruled non-compensable or reimbursed through subrogation.
• Expect a lag. A good year enters the mod about two years later and stays in it for three.

Insurers price workers comp with more than the mod. Carriers and MGAs also run their own submission scoring; Gradient AI, for example, sells risk scoring for workers comp underwriting. Our guide to AI underwriting covers where those tools fit next to bureau rating.

FAQs

What is a good experience modification rate?

Any mod below 1.00 is a credit, meaning the employer's losses were better than expected for its size and classifications, and it lowers premium. A mod of exactly 1.00 is average. In a 2023 Texas filing review, Texas Mutual told the regulator that a debit mod often keeps small employers from bidding on contracts with large clients, which is why contractors watch the number.

Is EMR the same as experience mod, X-mod or e-mod?

Yes. NCCI calls it the experience rating modification or mod, the WCIRB in California uses X-Mod, and the Texas Department of Insurance writes e-mod. California expresses it as a percentage (95% rather than 0.95), but it means the same thing.

How many years does an experience mod cover?

Usually three years of payroll and losses. Under NCCI's plan, policies that started between 57 and 21 months before the rating effective date are used, so the current policy and the most recent expired one are left out. California's window runs from four years and nine months to one year and nine months before the rating effective date.

Who calculates my experience mod?

The rating bureau for your state, not your insurer. NCCI calculates mods in most states. In California, New York, Pennsylvania, Delaware, New Jersey and Michigan the state's own bureau does it under its own plan. Indiana, Massachusetts and North Carolina use NCCI's plan, but their own bureaus produce intrastate mods.

Can my insurer change my experience mod?

No. The bureau calculates the mod, and the WCIRB states that a California employer's mod must be applied whichever insurer writes the policy. Revisions go through the bureau: NCCI may revise the current mod and up to two before it after an ownership change, and the WCIRB allows revisions for reasons such as a claim ruled non-compensable, a subrogation recovery, an ownership change or a reclassification.

Do medical-only claims affect the experience mod?

Less than lost-time claims in most NCCI states. Under the Experience Rating Adjustment (ERA), only 30% of a medical-only claim's primary and excess losses count, so a $30,000 medical-only claim enters the mod as $9,000. NCCI says the rule exists so employers have less reason to pay small claims themselves instead of reporting them.

How can an employer lower its experience mod?

Reduce how often injuries happen, since primary losses carry the most weight, and get injured workers back to work quickly to hold down the cost of claims that do happen. Report every claim, check that open reserves on the worksheet are current, and make sure payroll audits and ownership changes reach the bureau on time. Because the mod uses three years of history, improvement shows up gradually.