Construction companies in Ohio have plenty to think about. The industry as a whole has been growing steadily over the last few years, bringing new competition and worker shortages along with it. With constant Mergers and Acquisitions disrupting the construction landscape in Ohio, workers’ compensation claims may not be top-of-mind, but they can have a massive impact on your business.
In fact, Ohio construction companies should pay careful attention to each case. Unlike some other industries where achieving the lowest possible premiums may be the primary goal, the construction industry is often searching for something else — the lowest possible Experience Modifier (EM).
Understanding Why EM Rating Matters in Ohio
According to the BWC, the Experience Modifier (EM) that’s assigned to your business is a “relative measure of expected future claims cost.” In other words, your EM rating determines how “risky” your business is to the BWC. But, it’s not just the BWC. It also factors heavily into the decisions made by government agencies and private institutions when hiring for contract work. In some cases, a company must be below a certain EM to even be considered, with those having the lowest EM typically winning the contract. EM rating plays a pivotal role in client acquisition for many construction companies around Ohio.
EM ratings are determined based on three criteria.
- Your claims history (e.g., claim size, claim amount, number of claims, etc.)
- Your safety history (e.g., safety incidents, etc.)
- Your claims and safety history compared to other construction companies in Ohio.
Not only are your own claims and safety history factored into your rating, but your company is compared to every other Ohio construction business. The average EM rating is 1.0, with a higher rating considered below average and a lower rating considered above average. For most construction companies, keeping their EM rating below 1.0 is a top priority and is almost entirely dependent on how they handle their workers’ compensation program
Group Retro Programs vs. EM Management
There are two primary lines of thinking when it comes to handling construction workers’ compensation premiums:
- Group retro
- Aggressive EM rating reduction
The Ohio Bureau of Workers’ Compensation (BWC) Group Retrospective Rating Program allows businesses to receive rebates on their premiums based on the overall performance of the group they are in. This can get complicated, but the most important thing to note is that a good TPA can assist you in getting into a group with lower premiums. Here’s the catch – group retro programs typically don’t reduce your EM rating by much, so are not usually the best option for construction companies looking to aggressively manage their EM.
At Sheakley, we understand how important the EM rating is to construction companies that rely on it to acquire new clients and impress vendors. For these companies, we often recommend choosing programs and making decisions aimed at reducing your overall EM rating.
For example, group retro programs may result in the lowest possible premiums, but traditional group programs often have a bigger impact on your EM rating. Unique programs like the One Claim Program (OCP) and EM Capping may also be options depending upon your unique situation.
Should you look for lower premiums or better EM rating?
If your construction company works with vendors and partners that leverage EM to award jobs, you’re likely hyper-focused on keeping your EM rating as low as possible and lower premiums aren’t as important to you. If your EM rating is not integral to the function of your business, lower premiums may be your priority making a group retro program the right fit for you
It’s critical that you discuss these options with your TPA and decide which one makes sense for your business. Remember, each construction company in Ohio is a unique entity with different needs and goals. Your TPA should leverage those to make the right decision.
How Do You Lower Your EM Rating?
There are many strategies that will help you lower your EM rating. Here are a few that our clients have utilized over the years:
- Pay out-of-pocket expenses: Some companies choose to pay employees a portion of their workers’ compensation claims costs out-of-pocket — such as healthcare costs or missed time. Any cost reduction will factor into your EM rating — which takes into account both the frequency of claims and the overall cost of claims.
- Joining a 15k program: The 15k program has you pay the first $15,000 in medical expenses before the BWC takes over. This reduces your EM rating naturally due to the reduced medical costs.
- Salary continuation: Companies can continue to pay an injured worker their normal salary to reduce some of the claim costs.
- Other programs: As mentioned above, EM Capping, OCP, and other BWC programs can reduce your EM rating.
The easiest way to lower your EM rating is to partner with a knowledgeable TPA like Sheakley. Make sure that you discuss all of the following with your TPA:
- What are the potential risk factors affecting my EM rating, and how can I reduce them?
- What options exist to reduce my EM rating, and how will each of them impact my premiums?
- How can I find a low-cost solution to reducing my EM rating?
- What is making my current EM so high and what improvements can I make?
- My current EM rating is low. How can I ensure that I maintain this rating?
- What are my program options, and how will they impact my EM rating?
Ohio Construction EM Rating FAQs
How do I get my EM rating below 1.0?
This will depend on your unique situation. Reducing EM rating significantly can be a multi-year process that involves careful planning and strategy. You should contact your TPA to discuss your options.
Why did my EM rating increase when I didn’t process any new claims?
This gets a little tricky. Over the past few years, the BWC has, on average, reduced base rates for all businesses. This doesn’t necessarily mean that premiums are lower, but it does mean that average expected losses were reduced across the board. Even if you haven’t processed any new claims, if your company’s expected losses now trend above the new industry average, your EM rating will increase as a result. While reduced rates are great news for most businesses, the construction industry can actually be negatively impacted by these changes. As always, any questions or concerns you have with your EM rating should be discussed with your TPA.
Are You Ready to Reduce Your EM Rating?
Sheakley has helped hundreds of construction companies in Ohio reduce their EM rating. We understand that you have unique workers’ compensation needs, and what works for other businesses probably isn’t going to work for you. With years of experience in aggressive EM rating management, we can help you improve your EM rating so you can get back to doing what you do best — building a better future for your business and Ohio.
Contact us to learn more.