What is the NCCI experience rating adjustment (ERA)?

The ERA is a credibility-weighting mechanism that modifies the experience rating formula for accounts with smaller premium. It reduces the weight that the account's own claims carry in the mod calculation, pulling the mod closer to 1.00. The rationale is that small accounts have too few claims to produce statistically reliable mod values, so the formula tempers the volatility by blending the account's experience with an industry-average expectation.

At what premium level does the ERA stop affecting the mod?

The ERA threshold varies by state and plan year. In most NCCI states for the current plan, the ERA applies to accounts with annual standard premium below approximately $5,000 to $10,000 per risk. Above that threshold, the credibility weight approaches full value and the ERA either phases out or drops away entirely. Exact thresholds are set by each state's rating bureau filing and can shift year to year.

Does the ERA help or hurt a contractor's mod?

Both. For a contractor with worse-than-average claims experience, the ERA pulls the mod lower than the raw formula would produce, reducing the premium penalty. For a contractor with better-than-average experience, the ERA keeps the mod higher than a full credibility calculation would allow, reducing the potential mod discount. The directional effect depends on whether the contractor's actual experience is better or worse than expected.

Can a contractor's prequalification scorecard be misleading because of the ERA?

Yes. A sub whose mod is 0.95 with ERA applied may not have a better loss history than a sub whose mod is 1.00 without ERA. The difference may be entirely driven by the credibility weighting of the premium base. GCs who use mod thresholds for sub selection without checking whether the ERA is in effect can make comparisons that don't reflect the underlying claim experience.

Field ReportMay 16, 2026 · 4 min read

The Experience Rating Adjustment: What It Does to Your Mod and When It Kicks In

NCCI's experience rating adjustment modifies how the formula treats smaller accounts. Many contractors don't know the ERA exists, and it can cap the mod movement in ways that are both a surprise and an opportunity.

By TraciThe Orson Group

Field Report

0.07

Maximum mod contribution from one claim under the ERA for a $250K premium account

NCCI ERA formula, 2026

At a glance

The experience rating adjustment (ERA) modifies how the NCCI formula treats actual and expected losses for smaller accounts. It applies a credibility weighting that reduces the impact of an employer's actual claims when the premium is below a threshold set by NCCI. The result is a mod that sits closer to 1.00. For very small premium accounts, the ERA can almost entirely neutralize the difference between good and bad experience.

Most contractors know the basic structure of the experience rating formula. Actual losses divided by expected losses, modified by a weighting formula that controls how much each year counts. What fewer know is that the formula does not apply equally to every account. NCCI applies an experience rating adjustment, or ERA, that modifies the formula's output for smaller accounts.

The ERA is written into the plan, not as a footnote but as a structural feature of how experience rating works. The rationale is actuarial. For an account with a small premium base, the claim data is not statistically credible enough to set a rate with confidence. A single claim or a single bad year can push the mod dramatically in either direction without the ERA, and that volatility would produce premium swings that don't track the account's actual risk profile.

The ERA addresses this by applying a credibility factor based on the account's premium. The smaller the premium, the less weight the account's own experience receives, and the closer the mod stays to 1.00.

Where the threshold sits

NCCI sets the ERA threshold by state and updates it periodically. In most NCCI states for the current plan year, the ERA applies to accounts with an annual standard premium below approximately $5,000 to $10,000 per risk. Above that threshold, the ERA either phases out or, depending on the state, does not apply at all.

The threshold matters because it determines whether a contractor's mod is being held artificially toward 1.00 by the ERA or whether it reflects their full actual-to-expected ratio. A $3 million payroll roofing contractor in Florida might have a standard premium of roughly $35,000 to $45,000, assuming the relevant class code rate and the loss cost on file. That premium is well above the ERA threshold in most NCCI states. The ERA does not cap their mod. Every claim they have counts at full weight.

A smaller framing contractor with $500,000 in payroll, paying approximately $6,000 to $8,000 in standard premium, falls near or under the ERA threshold. Their mod is credibility weighted. A claim that would shift a larger contractor's mod from 1.00 to 1.12 might only move their mod from 1.00 to 1.04.

The ERA's effect on mod movement

The ERA's cap is not a strict limit. It is a sliding scale. As premium increases, the credibility weight increases, and the ERA effect decreases. At very low premium levels, the mod behaves almost like a unit rating plan, where the formula assigns a mod close to 1.00 regardless of actual experience. At the threshold boundary, a small change in premium can produce a meaningful change in how much a new claim affects the mod.

For contractors operating near the threshold, the result is that a single severe claim may not move the mod as much as they fear. It also means that a pristine loss history may not lower the mod as much as they expect. The ERA cuts both directions.

What it means for competitive bidding

Prequalification scorecards at Southeast general contractors typically filter subcontractors based on mod thresholds: 1.05 or below, 1.10 cutoff, and so on. A sub whose mod is 0.95 because of the ERA is not actually safer than the formula suggests. Their actual loss ratio may be identical to a sub whose mod is 1.00 without the ERA. The difference is the credibility weight, not the underlying safety performance.

In our reviews of sub prequalification data, we see contractors whose mods hover just under threshold cutoffs and whose ERA effect is large enough that even removing all claims would barely move the number. The mod is not telling the GC what they think it is telling them. It is telling them how a small premium account looks through a credibility-weighted lens.

What an audit would check

An audit checks where your premium falls relative to the ERA threshold for your state and plan year. If your standard premium is near or below the threshold, your mod is not a pure measure of your claim history. The audit can recalculate what your mod would be without the ERA and compare it to what the formula shows. That comparison is useful for understanding whether the mod accurately reflects your risk or whether the credibility weight is smoothing out real safety differences.

If you want to know whether the ERA is holding your mod closer to 1.00 than your claims justify, send us your NCCI worksheet and we'll show you the unweighted vs. weighted comparison.