A focused review of payroll classification and open claims — without changing staffing, claims behavior, or operations.
This Maryland home care agency provides in-home health aide services to seniors across the region. With 50–100 employees — a mix of caregivers, nurses, and office staff — the agency had been profitable and growing steadily.
Workers' comp was treated as a fixed cost. The owner reviewed the premium at renewal, paid the bill, and moved on. No one had ever audited the underlying data — the class codes, payroll allocations, or open claim reserves — that determined what the agency actually paid.
There was no crisis. No red flag. Just a premium that felt high but was never questioned, because the math behind it was invisible.
Our review examined three years of NCCI Experience Rating Worksheets, loss runs, and audited payroll data. We identified two errors — both common in senior care agencies — that were quietly increasing the agency's workers' comp costs.
Office-only roles were being priced under the home care field staff code (8835, at $4.10 per $100 of payroll) instead of the clerical code (8810, at $0.24 per $100). On $300,000 of affected office payroll, the rate difference of $3.86 per $100 adds approximately $11,580 per year in excess premium — even though these employees never perform caregiving work.
A past caregiver injury claim was reserved at $45,000 in the carrier's system, even though it's expected to settle closer to $17,500. The $27,500 excess reserve is still being used to calculate the agency's experience rating. Until formally updated or closed, this inflated reserve continues to push the X-Mod higher, adding an estimated $5K–$8K per year to the premium.
Workers' comp premiums are calculated per $100 of payroll, with rates tied to each job classification. When office employees are coded under caregiving classifications, the rate multiplier jumps dramatically.
| Role Type | NCCI Code | Rate (per $100 payroll) |
|---|---|---|
| Home Care Field Staff | 8835 | $4.10 |
| Clerical Office Staff | 8810 | $0.24 |
| Affected Payroll | Incorrect Code (Rate) | Correct Code (Rate) | Added Annual Cost |
|---|---|---|---|
| $300,000 | 8835 ($4.10) | 8810 ($0.24) | $11,580 |
$300,000 × ($4.10 − $0.24) ÷ 100 ≈ $11,580 per year
During initial policy setup, carriers often default to the primary business classification — in home care, that's a caregiving code. Administrative roles get swept into that default unless someone specifically identifies and separates them. Once set, the classification carries forward automatically at every renewal. It's not a mistake anyone made intentionally — it's a default that was never corrected.
These costs persist not because of mistakes — but because of how workers' compensation pricing is structured.
Insurance carriers calculate premiums using what's reported in the system, not real-time operational reality. Once an error enters, it persists until someone resolves it.
Lower premiums reduce commissions, which limits the incentive to proactively challenge classifications or reserves. It's not malicious — it's just how the structure works.
Overstated risk increases costs, but employers are the only party directly harmed when pricing remains inflated. Everyone else's incentives point elsewhere.
These issues are not mistakes — they are defaults in how workers' compensation pricing is structured. They persist until someone with the right expertise actively reviews the data and initiates corrections.
The agency's X-Mod was above 1.00, meaning they were already paying more than the industry baseline. Both errors were contributing to this elevated modifier — and the effects compound.
Higher payroll in expensive class codes inflates the expected loss calculation. Open claim reserves inflate the actual loss calculation. Together, they push the X-Mod up from both sides of the equation, creating a premium that's higher than the agency's actual risk warrants.
Because the X-Mod is recalculated annually using a rolling three-year window of data, errors from two or three policy years ago are still baked into today's premium. Correcting them doesn't just save money this year — it improves the trajectory for future renewals.
The claim is reserved at $45,000 in the carrier's system, even though it's expected to settle closer to $17,500. The $27,500 difference continues to be used in the experience rating calculation, pushing the premium higher each year.
The $27,500 excess reserve is still being used for pricing, increasing workers' comp costs by an estimated $5K–$8K annually until corrected.
Here's a simplified view of how these two errors affected the agency's annual workers' comp premium. The red portion represents costs that were avoidable — driven by misclassified payroll and an open claim reserve, not by actual risk.
The premium formula is: (Payroll ÷ 100) × Rate × X-Mod. When payroll is assigned to the wrong class code, the "Rate" input is inflated. When old claims stay open, the "X-Mod" input is inflated. Both errors multiply together, so the combined overpayment is larger than either error alone.
For a home care agency operating on tight margins, $15K–$20K in avoidable workers' comp cost isn't just a line item — it has a real operational impact. Here's what that money represents in terms an agency owner actually thinks about.
That's billable care you're paying for in premiums instead of revenue. Hours your caregivers delivered that effectively went to cover a pricing error.
The annual avoidable cost equals the salary of multiple full-time caregiver hires — staff that could be delivering care instead of subsidizing a data error.
For most home care agencies, $15K–$20K represents a significant portion of annual profit. This isn't a rounding error — it's margin you're losing to a system default.
Workers' comp is typically a top 2–3 operating expense for home care agencies. Most owners review the total premium at renewal and accept it. But the math behind that number — the class codes, the payroll allocations, the open reserves — is where the actual pricing happens. And that math almost never gets audited.
The entire process required approximately 15 minutes of the agency owner's time, plus a 30-minute walkthrough of findings.
15-minute call to explain the review scope and gather basic context about the agency's staffing structure and broker relationship.
We contacted the broker (with the owner's permission) to request the NCCI Experience Rating Worksheet and loss runs. The owner provided audited payroll data.
Our review team cross-referenced payroll data with class code assignments, examined open claim reserves, and verified employee roles against NCCI classification guidelines.
30-minute presentation to the owner with documentation of both findings, estimated annual impact, and clear next steps for correction through their existing broker.
Corrections are handled through the agency's existing broker and carrier — OsiraOps provides the documentation and analysis, but the broker manages the actual changes. For this agency, the correction path involves two actions:
First, reclassifying the office employees to the correct clerical code (8810) on the current and future policies. This requires the broker to submit a class code correction to the carrier, supported by job descriptions and payroll documentation that OsiraOps helped prepare.
Second, requesting that the carrier review and close the resolved medical claim reserve. Once closed, it stops counting against the X-Mod in the next annual recalculation.
Neither correction requires changes to staffing, operations, or claims behavior. They're data corrections — fixing what was already wrong in the system.
These are conservative estimates based on carrier-reported data. Actual savings depend on carrier response, timing relative to the policy cycle, and the specific rate factors in effect. OsiraOps provides analytical review — not insurance or legal advice.
We'll review your X-Mod, payroll classifications, and open claims — for free. If we find errors, we'll show you exactly what to correct. If everything's clean, we'll confirm that.
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