Nebraska employers with workers’ compensation coverage will see an important change beginning January 1, 2027. For new and renewal policies effective on or after that date, deductible reimbursements can be credited against the losses used to calculate an employer’s experience modification factor, commonly called an e-mod.
This change introduces a new consideration when evaluating deductible options at upcoming renewals.
Understanding what is changing, how it may affect an e-mod and what factors to evaluate can help employers prepare for future workers’ compensation renewal conversations.
What Is Changing in Nebraska?
Historically, Nebraska has used a gross reporting approach for workers’ compensation experience rating. That means the full value of a claim was generally included in the experience rating calculation, even when an employer reimbursed its insurance carrier for a portion of the claim through a deductible.
Here’s a simple example. An employer has a $2,500 deductible and a workers’ compensation claim totaling $10,000. The carrier pays and administers the claim, and the employer reimburses the carrier $2,500.
Under gross reporting, the full $10,000 could still be included in the employer’s loss history for experience rating, even though the employer reimbursed $2,500.
Under net reporting, that $2,500 reimbursement would be deducted. In this example, $7,500 rather than $10,000 would be reflected in the loss information used for experience rating.
One claim may not seem like a significant difference. Across multiple claims and multiple years, however, those deductible reimbursements can add up.
Why Does Net Reporting Matter for an Employer’s E-Mod?
An e-mod compares an employer’s workers’ compensation loss experience with the losses expected for similar businesses. That calculation can affect future workers’ compensation premiums.
With net reporting, the portion of a claim funded by the employer through an applicable deductible may no longer remain in the experience rating calculation. Over time, this could affect the loss information used to calculate the employer’s e-mod.
But a deductible does not automatically mean a lower e-mod or lower overall workers’ compensation costs. Several factors need to be considered, including:
-
Historical claim frequency and severity
-
The amount of the deductible
-
The carrier’s premium credit for accepting the deductible
-
Expected deductible reimbursements and cash flow
-
The employer’s current and projected e-mod
-
Applicable experience rating rules
-
Financial or collateral requirements
Employers should consider their total cost of risk rather than looking only at the initial premium credit or a potential change in the e-mod. A deductible means taking on more direct financial responsibility for claims, including reimbursement obligations that could be higher in a year with more significant losses.
What Does This Mean for Construction Companies?
The change applies to Nebraska employers across industries, but e-mods can carry additional significance in construction.
In addition to affecting workers’ compensation premiums, an e-mod may be reviewed by general contractors, project owners and other business partners when evaluating contractors for projects. For some construction companies, managing workers’ compensation losses and understanding the factors that influence the e-mod can therefore have implications beyond insurance costs.
For example, a construction company that regularly experiences smaller claims may want to look more closely at how a deductible program, premium credit and net reporting could work together. The decision still needs to account for the company’s overall claims experience, its ability to fund deductible reimbursements and the potential for larger claims.
What Deductible Options Are Available in Nebraska?
Net reporting may change how employers evaluate deductible options, but a deductible needs to fit the organization’s workers’ compensation program and financial position.
-
Medical only deductible: Nebraska workers’ compensation policies must offer an optional medical benefits deductible from $500 to $2,500 per claim, in $500 increments.
-
Large deductible: An insurer and employer may agree to a deductible covering all amounts paid, provided it is no more than 40% of the otherwise applicable annual workers’ compensation premium and is at least $50,000.
-
Carrier responsibility continues: The insurer remains responsible for paying and administering covered claims, and the employer reimburses the insurer up to the deductible amount.
-
Financial qualification applies: An insurer may decline to offer a deductible when it determines that the employer does not have the financial ability to reimburse deductible amounts.
Net reporting does not necessarily make a deductible a good fit for every employer, and employers may still choose a gross reporting deductible policy. Premium credits, expected reimbursements, cash flow and loss history all remain part of the decision.
When Will This Change Affect Your Business?
The new reporting rules apply to new and renewal workers’ compensation policies effective on or after January 1, 2027.
That means the change will not necessarily affect every Nebraska employer on January 1. The employer’s policy effective date determines when the new rules apply.
For example, an employer with a workers’ compensation policy that renews July 1, 2027, would generally remain under the existing gross reporting rules until that July renewal. A deductible added to a policy effective before January 1, 2027, remains subject to the prior gross reporting rules for that policy term.
What Should Employers Do Now?
For most employers, the first step is simply to understand the change and be prepared to discuss it at the appropriate renewal.
As 2027 renewals approach, employers can work with their insurance agent to review their current deductible structure, claims experience and available options. That discussion may include comparing carrier premium credits, estimating potential deductible reimbursements and considering how different approaches could affect future experience rating.
Nebraska’s move to net reporting adds another consideration to that conversation. For employers that are financially positioned to assume deductible risk, it may create an opportunity to better align the losses reflected in experience rating with the claim costs the employer actually retains.
There is no single deductible or reporting approach that will make sense for every employer. As 2027 renewals approach, FNIC can help clients evaluate the options in the context of their own claims experience, premium, financial position and overall workers’ compensation program.
We’re here for you. Contact your FNIC agent with questions about Nebraska’s move to net reporting or to discuss what it could mean for your next workers’ compensation renewal.
