Why 10 Small Claims Hurt Your EMR More Than One Big One

A roofing contractor in Tennessee had a great year on paper. One serious injury, $80,000 in workers' comp costs, but only that one claim. His safety record looked spotless. His broker said the mod next year would barely move.

It barely did. He renewed at a 1.04 mod.

A different roofing contractor, same size and same payroll, had ten smaller injuries that same year. Nothing serious. Sprains, lacerations, a few stitches each. Total cost: $80,000. Same as the first contractor. But this one renewed at a 1.18.

Two contractors, identical total losses, fourteen-point gap in the mod. That's a real number, and it costs the second contractor roughly $14,000 a year on every renewal until the claims age out. The formula did exactly what NCCI designed it to do.

The split point

The mod formula calculated by NCCI (the National Council on Compensation Insurance) doesn't treat every dollar of claim equally. Every claim gets cut in two pieces at a state-specific dollar threshold called the split point. In most NCCI states, the split point currently sits at $26,000 (the figure after the schedule of increases that began in 2013).

The portion of a claim below the split point is called the primary loss. The portion above is called the excess loss. The primary portion enters your mod calculation at full weight. The excess portion enters at a heavily discounted weight, with the discount growing as claim size increases.

The reasoning is statistical, not punitive. NCCI's actuaries determined that primary losses are a better predictor of future losses than excess losses, because frequent small claims correlate more strongly with workplace conditions while occasional catastrophic claims are partly random. So the formula weights what predicts future cost.

The arithmetic consequence is straightforward: claim frequency carries more weight than claim severity, dollar for dollar.

Working the example

Consider those two contractors again.

The first contractor's one $80,000 claim. The first $26,000 is primary loss, counted at full weight. The remaining $54,000 sits in the excess bucket at a fraction of the weight. Total contribution to the mod calculation lands somewhere in the $35,000 to $45,000 range, depending on the exact weighting factors for the state and policy year.

The second contractor's ten claims, each $8,000. All ten are entirely below the $26,000 split point. Every single dollar enters at full weight as primary loss. Total contribution: $80,000 in formula-weighted losses, the full amount.

Same $80,000 total payout. Roughly twice the impact on the mod.

Why the formula is built this way

The design isn't an accident. NCCI's experience rating plan exists to predict an employer's future loss costs and price the policy accordingly. Decades of actuarial data show that claim frequency is the better leading indicator. An employer with ten claims this year is more likely to have nine or eleven next year. An employer with one catastrophic claim this year may have zero or two next year; the variance is huge.

Frequency reflects underlying conditions: training, supervision, equipment, pace, fatigue. Severity reflects what happened on a given day, which is partly chance. Building the formula around the metric that holds steady year over year produces a more useful prediction. That's why the split point exists.

What this means for your mod

A few things follow from understanding the split point.

Small claims add up faster than most contractors expect. Every claim below the split point hits at full primary weight. There isn't a "too small to bother with" threshold in the formula; a $3,500 claim and a $25,000 claim both land entirely in the primary bucket.

Medical-only coding becomes especially valuable. A claim coded as medical-only receives an additional discount in the formula, separate from the split point math. The combination of medical-only treatment and primary-loss positioning is where the most significant mod relief tends to come from on the smaller-claim end. An audit can identify which claims should already qualify and aren't being coded that way.

Return-to-work programs have outsized value too. They convert what would otherwise be a lost-time claim (which enters the formula at full weight even if small) into a medical-only claim (which enters at a heavily discounted weight). The dollar impact per converted claim is meaningful for contractors with consistent low-severity claim activity.

What this means for worksheet errors

If small claims have outsized formula weight, then small-claim coding errors have outsized formula impact. Misclassifying a $4,000 medical-only treatment as a lost-time claim moves more weighted dollars onto the mod than misclassifying an $80,000 claim, because the primary-loss portion is a much larger share of the smaller claim's total.

The practical consequence is that the cheap-looking claims on your worksheet are often where the biggest correctable errors sit. The carrier's adjuster doesn't see them as important. The data reporter codes them by default convention. Nobody re-examines them at the end of the policy period. They quietly inflate the mod by mechanics most contractors never see.

What an audit would check

An audit reads the worksheet with the split-point math in mind. It traces each claim's coding (medical-only versus lost-time, return-to-work timing, indemnity activity) against the underlying claim facts, confirms classification codes for the work performed when the injury occurred, and checks that subrogation and other credits have been applied where they belong. The small claims often produce the biggest corrections because they sit in the highest-weight bucket. In our reviews of Southeast contractor worksheets, the cluster of small-claim coding errors typically accounts for a larger total mod impact than the one or two large claims everyone focuses on.

A mod built on accurate claim coding doesn't change your safety record. It does change the number that multiplies your premium. Send us your NCCI worksheet and we'll review it for free.