How Kickstand Reduced a Home Health Care’s Workers’ Comp Costs By $2,200

The Challenge: High Premium Costs

Many business owners assume that if they buy a business, their workers’ compensation costs (and many other things) reset. In some instances, that’s the case.

However, your ExMod may roll over to the new owner, raising costs and causing problems. That’s exactly the situation faced by a venture capitalist who purchased a Missouri-based home health agency. 

By all accounts, the business was thriving and had workers’ compensation in full force. A handful of employees worked in the office, and almost 100 employees provided medical care in client homes. 

The venture capitalist decided to purchase the business, created a new EIN, and even gave the business a new name. However, they decided to keep most of the employees in place, as well as the existing business structure.

The problem was that the original business had an ExMod of 1.14, signaling a higher-than-average claims history. The new owner had expected to start fresh. However, that didn’t seem possible. 

What exactly is an ExMod?

The Experience Modification Rate, or ExMod, is a factor used by insurance companies to adjust your workers’ compensation premiums based on your business’s claims history in comparison to companies in the same industry.

The average ExMod is 1. If your ExMod is higher than 1, it’s called a debit mod, indicating a higher-than-average claims history, which results in higher premiums. 

On the other hand, an ExMod lower than 1 is known as a credit mod, which reflects fewer claims and, consequently, lower premiums.

In this case, the original business had an ExMod of 1.14, meaning the company had experienced more claims than average, leading to higher workers’ compensation costs. This ExMod followed the business despite the change in ownership. This is because the ExMod (whether debit or credit) is a reflection of the business’s operations.

If those operations remain relatively intact, the insurance company will consider it the old company and ask to see loss runs from the previous operation. The only alternative would have been to remove the entire staff and start from scratch. 

However, since the new owner was keeping the core of business operations intact, the insurance company wanted to keep the old ExMod.

The Solution: Advocacy and Action

The solution to this challenge was creative action on the part of Kickstand’s agent. The new owner was obsessed with risk management and creating a safer working environment. Knowing this, our agent worked with the new owner and also reached out to the insurance company 

The agent was able to advocate for the owner by highlighting that his other businesses show a low claims history, so that should apply to the new one, too. He explained that to show a commitment to reducing claims, the new owner is creating a return-to-work program, as well as hiring a risk manager. 

The Results: Significant Savings

Ultimately, our agent was able to get the insurance company to apply a 10% credit, which removed the debit mod, despite a poor loss history for the original business.