In Ohio, all employers with one or more employees must, by law, maintain workers’ compensation insurance coverage for its employees. The Ohio’s workers’ compensation system is both nebulous and unique, which can make navigating the system challenging for employers. In fact, Ohio is one of only four states that operate a monopolistic workers’ compensation insurance system where an employer must either self-insure their workers’ compensation program or purchase workers’ compensation insurance directly from the state. This is quite unlike the remaining 46 states that allow private insurance companies to provide workers’ compensation insurance.
Ohio employers that secure their workers’ compensation coverage directly through the Ohio Bureau of Workers’ Compensation (BWC) know all too well that a single workplace injury can impact business finances for years to come. Workplace injuries not only impact productivity, but they also can come with costly expenses related to payment of medical bills and lost time compensation. However, many Ohio businesses in the construction, manufacturing, and logistics industries must also be mindful of how workers’ compensation claims can impact their EMR rating and their ability to bid on and secure future work and contracts.
What is EMR?
In Ohio, an employer’s Experience Modifier Rate, or “EMR”, is a key metric that is used to determine how much an employer will pay in workers’ compensation premiums. The Ohio BWC calculates an employer’s EMR by comparing the employer’s expected losses to that of the industry average. If an employer’s workers’ compensation claim costs are below average, the employer will have an EMR below 1.00 and the employer is considered “credit rated”. Operating a safe workplace with an EMR below 1.00 can result in many benefits for an employer, including lower BWC premiums and eligibility for higher discounts and rebates on BWC premiums through group rating programs.
However, one bad workers’ compensation claim can change the landscape of an employer’s workers’ compensation program and expenses for up to four years. Even a single workers’ compensation claim can come with significant medical and lost time expenses. If an employer’s claims losses are worse than average, they are considered to be penalty rated with an EMR in excess of 1.00. This means that the company can expect not only higher BWC premiums, but the company may also be prevented from bidding on, much less obtaining, certain projects and contracts that require disclosure of the company’s EMR.
What if my EMR is over 1.00?
The best and most obvious way for an employer to achieve a lower EMR is to reduce risk and claims as a whole. Employers who invest in safety programs and reduce jobsite risks typically experience less workers’ compensation claims and have lower costs. The Ohio BWC Division of Safety & Hygiene offers countless free safety services and programs to Ohio employers as part of their workers’ compensation premiums. A complete copy of the 2023-2024 BWC free safety services offerings can be found here.
While proactive measures can be helpful, employers with existing claims can work to reduce their EMR by containing costs on existing claims. One of the best ways to reduce claim costs is to limit costs associated with lost time. Employers who commit to return to work strategies can greatly reduce lost time costs. Employers can achieve this by offering light-duty work to injured employees, or if light-duty work is not available, employers can partner with local non-profit organizations to allow the injured worker to do light-duty work off-site. This not only reduces lost time costs, but keeps the injured worker engaged in the workforce.
Unfortunately, workers’ compensation claims will continue to impact an employer’s workers’ compensation program for up to four years, and reducing your EMR rating does not occur overnight. Employers who are currently facing challenges bidding on work or obtaining work due to a high EMR may benefit from transitioning their workers’ compensation program to be administered through a Professional Employer Organization, or PEO. A PEO acts as a “co-employer”, and it allows a company to outsource the management of some functions, such as human resources, employee benefits, payroll, and most importantly, workers’ compensation programs.
A PEO arrangement can be a unique tool for employers who need to lower both their workers’ compensation premiums and their EMR for project and contract bidding purposes. A PEO relationship involves the contractual allocation and sharing of responsibilities between the PEO and the employer in a relationship known as “co-employment”. As part of this arrangement, the employer pays premiums to the PEO to manage its workers’ compensation programs and costs while the employer retains control over its employees and continues to manage the day to day functions of the employee. In return, the PEO contractually assumes the risks and responsibilities associated with payment and reporting of payroll and maintaining and operating the employer’s workers’ compensation program.
Employers who use PEO’s oftentimes see a savings in their workers’ compensation premiums, and as an added benefit, an employer using a PEO also assumes and uses the EMR of the PEO when submitting bids for projects and contracts. Typically, a PEO has a low EMR because it pools the risk of employers across several industries to achieve a lower average EMR for the group in the aggregate.
As they say, Rome was not built in a day. Building, maintaining, or rehabilitating a struggling workers’ compensation program likewise takes commitment, time, and expertise.
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