Experience Modification Rate (EMR): What 1.0 Means and How the Mod Is Calculated

NCCI's guide lists the situations in which a policy carries a unity factor of 1.00. The business does not meet the state's eligibility requirements, does not meet the minimum data requirements, is new with no data, lost data through an ownership change, or qualified and calculated to exactly 1.00 (NCCI, ABCs of Experience Rating).

So a 1.00 on your policy does not always mean "average claims record." It can also mean "not rated." Ask your insurer which applies before you give the number to a client.

NCCI illustrates the effect with a premium of $100,000 before the mod is applied (NCCI, Exhibit E):

Source: NCCI, ABCs of Experience Rating, Exhibit E.

The mod multiplies the premium that comes from rates and payroll; it does not replace them. To see what an issued mod does to your own premium subtotal, enter your payroll, rate and mod in the workers' comp and EMR calculator.

NCCI's plan builds the mod from the employer's own unit statistical reports, which insurers file for every policy (NCCI, ABCs of Experience Rating). The components are:

• Experience period. Usually the latest three years of payroll and losses. A policy counts if it took effect between 21 and 57 months before the rating effective date, so the current policy is never used. A January 1, 2026 mod generally uses policies that began on January 1 of 2022, 2023 and 2024.
• Expected losses. For each classification, the expected loss rate (ELR) times payroll divided by 100. This is what an average employer in that classification would be expected to lose on the same payroll.
• D-ratio. The share of expected losses that is expected to be primary. Expected losses times the D-ratio gives expected primary losses; the rest is expected excess.
• Actual losses, capped and split. Each claim is first capped at the state's per-claim accident limitation. The capped amount up to a state-approved split point is primary loss, which measures frequency. Anything above is excess loss, which measures severity. NCCI's examples use a split point of $18,500 (NCCI).
• Medical-only claims. In most states the Experience Rating Adjustment counts only 30% of a medical-only claim (NCCI).
• Weighting value (W). The weight given to excess losses. It is small for small employers and grows with employer size.
• Ballast. A stabilizing amount added to both sides so that one claim cannot swing the mod too far. It rises as expected losses rise.

Put together, the arithmetic in NCCI's worked example is:

Mod = (actual primary + W × actual excess + stabilizing value) ÷ (expected primary + W × expected excess + stabilizing value)

where the stabilizing value = (1 − W) × expected excess + ballast.

NCCI's own illustration for a January 1, 2026 rating (NCCI, Exhibit H):

Source: NCCI, ABCs of Experience Rating, Exhibit H.

These are NCCI's illustrative values, not current figures for any state. Your worksheet shows the split point, W and ballast that apply to you.

Why many small claims hurt more than one large claim

Because primary losses carry more weight, frequency drives the mod. NCCI compares ten claims of $5,000 each with one $50,000 claim. All $50,000 of the ten small claims is primary, while only $18,500 of the single claim is. The employer with ten injuries receives a much higher mod even though total losses are equal (NCCI, ABCs of Experience Rating).

Not every state uses NCCI's plan. NCCI's guide lists California, Delaware, Michigan, New Jersey, New York and Pennsylvania as states where its plan does not apply. North Dakota, Ohio, Washington and Wyoming, the four monopolistic states, administer their own plans and rates (NCCI, ABCs of Experience Rating). Our EMR letter guide has a state-by-state table of who issues the mod.

California. Since January 1, 2017, the WCIRB formula places full weight on primary losses and no weight on excess losses. The primary amount varies with employer size, across more than 90 values from $4,500 to $75,000. Starting with 2019 modifications, the first $250 of each claim is removed (WCIRB, Experience Modification).

California eligibility depends on payroll by classification multiplied by expected loss rates. The total must reach a threshold that the WCIRB adjusts annually (WCIRB, Determining Eligibility).

Washington. The Department of Labor & Industries (L&I) uses no premium threshold. Any firm that reported worker hours during the three-year experience period is experience rated (Washington L&I, Experience rating). L&I's employer guide says a factor above 1.0 raises rates above the base rates, and a factor below 1.0 lowers them. The factor appears on the Workers' Compensation Rate Notice and at Lni.wa.gov/Verify (Washington L&I, Employers' Guide).

The worksheet, also called a ratesheet, shows the inputs above for your business. NCCI's worksheet lists the employer, state, risk ID, calculation date and rating effective date. It shows payroll, class codes, ELRs, expected losses and D-ratios by policy, then each claim with an open or final indicator. Claims of $2,000 or less may be grouped (NCCI, Exhibit G).

In California, the issue date (when the WCIRB released the worksheet) can differ from the effective date. Payroll is grouped by the year the policy began, not the year it was paid (WCIRB, Experience Rating Form).

A difference is a question to raise, not proof of an error. A loss run printed today can show different values from the valuation used on the worksheet.

Revisions are limited. The WCIRB cannot revise a California modification simply because a claim's value changed. It can revise when a claim is declared non-compensable, a claim is subrogated after reimbursement, ownership changes materially, or an inspection leads to reclassification (WCIRB, Experience Modification).

Under NCCI's plan, an employer must notify its insurer in writing within 90 days of an ownership change, using Form ERM-14 or a signed narrative. NCCI may then issue, retract or revise the current mod and up to two prior mods. Businesses with more than 50% common majority ownership are combined into one mod (NCCI, ABCs of Experience Rating).

If your mod rose without a new injury, our guide on why an EMR can increase with no new claims lists the records to compare.