How Workers’ Compensation Rates Affect You and Your Business

Workers’ compensation is regulated at the state level, which means everything is standardized and everyone pays the same rate as everyone else. Good? Well, of course that is not the case. There are a number of factors that affect your own coverage, how much you pay, and even how easy or difficult it is for you to get your coverage.

At first, the amount you pay and your ability to get workers’ compensation coverage is determined by factors like your industry classification, whether you’re a new business or an established one. Depending on what state you’re in and how many employees you have also determines whether or not you should have this type of insurance to begin with.

Small businesses can also seek the assistance and services of employee leasing providers to become part of their coverage, usually a much larger and more established platform. This usually helps reduce coverage costs.

All of this, however, and we haven’t gotten to the point of this guide, which is workers’ compensation mod rates, one of the most important variables in determining how much you pay for your coverage. A new business usually receives a change rate of 1.0. All of this means that you pay 100% of the mandatory or regulated rate for your type of industry.

Of course, the term modifier implies that this number will not always be the same. Your rate may be reduced in subsequent years. The A.95 mod fee, for example, means you only have to pay 95% of the industry standard. The state and industry you are in will once again affect how, when, and to what extent you can change your mod rate.

Of course, mod workers’ comp rates may also increase, much to the chagrin of business owners. A mod fee of 1.15 means you must pay 115% of the standard fee. Such an increase is generally based on the number and severity or variety of incidents reported from the prior year or time period reported.

If your rate goes up enough, that’s when you may even have a hard time getting coverage. Different states have organizations or services that then specialize in high-risk or hard-to-obtain workers’ compensation policies. That might help ensure you’re covered, but you’ll have to prepare for the added cost.

Understanding the mod rates in your workers’ compensation is one more way to understand how much you are paying and for what reasons. Be sure to check with an insurance agent or broker licensed in your state if you have any questions about getting a new policy or looking for a better deal.