In one of our previous articles on the Experience Modification Rating Factor (EMR), we briefly mentioned Aggravated Inequity as an available recourse for alleviating pain related to workers’ compensation premiums. In basic terms, Aggravated Inequity is the process of revising an EMR inflated by high claim reserves if/when said claims close at a lower amount.
Generally speaking, your state’s Workers Compensation bureau or NCCI (depending on which is applicable) will calculate your EMR roughly six months prior to the effective date of the policy to which it applies. The date your insurance carrier reports payroll and claim information to your state’s WC bureau is known as the Unit Statistical Date. If you have any open claims on the Unit Statistical Date, the claim reserves will be factored into the calculation of the EMR. If the aforementioned claim closes between the Unit Statistical Date and effective date of the EMR, at a lower amount than the reserved value, the EMR can be corrected through the process of Aggravated Inequity. In order for an EMR to be revised via Aggravated Inequity, the following conditions must be met:
- The claim(s) in question had not closed when the EMR was calculated;
- The claim(s) have closed between the Unit Statistical Date and the policy effective date;
- The claim(s) closed for less than the reserved amounts.
According to the Massachusetts WC Manual, “requests from employers and agents or corrections from the carrier must be received by the Bureau within 30 days of the rating effective date or rating issue date (whichever is later), or within a reasonable time thereafter with good cause shown.” This underscores the importance of proactive claims management: your agent should be monitoring claim reserves so that a potentially inappropriately high reserve does not skew the calculation of your EMR, and ensure that claims are closed promptly so that a painful EMR can be corrected before it is too late to do so.
For more information on Aggravated Inequity, please visit: