Workers’ compensation is regulated at the state level, which means everything is standardized and everyone pays the same rate as everyone else. Right? 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.
Initially, the amount you pay and your ability to obtain workers’ compensation coverage is determined by factors such as your industry classification, whether it is a new or established business. Depending on the state you are in and the number of employees you have, there is also the determination of whether or not you should have this form 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 better established platform. This generally helps reduce coverage costs.
All of this, though, and we haven’t gotten to the point in this guide, that modified workers’ compensation rates are one of the most important variables in determining how much you pay for your coverage. A new business generally receives a 1.0 modification fee. 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 lowered in subsequent years. A modification fee of 95, for example, means that you only have to pay 95% of the industry standard. The state and the industry you are in will once again affect how, when and to what extent your modification rate can change.
Workers’ compensation rates can also go up, of course, to the chagrin of business owners. A mod fee of 1.15 implies that you have to pay 115% of the standard fee. Typically, such an increase is based on the number and severity or variety of reported incidents from the previous year or the reported time period.
If your rate goes up high enough, 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 could help ensure you’re covered, but you’ll have to prepare for the additional cost.
Understanding the modified rates on your workers’ compensation is one more way to understand how much you are paying and for what reasons. Be sure to check with a licensed insurance agent or broker in your state if you have any questions about getting a new policy or looking for a better deal.