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SB 175

Adjust Experience Modification Factor in Workers' Compensation

2026 Regular Session

SB 175 allows adjusting an employer’s workers’ comp experience modification factor (EMF) if reopened/updated claims reduce the EMF by a meaningful amount, lowering premiums.

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Bill Summary · SB 175

Summary of SB 175 (Session 2026A) – Colorado

Title

Adjust Experience Modification Factor in Workers' Compensation

Purpose and intent

SB 175 creates a formal process for adjusting an employer’s experience modification factor (EMF) when a workers’ compensation claim that was previously closed is reopened or reported with a higher open claim amount, and such adjustment would lower the EMF. The bill aims to ensure the EMF accurately reflects the actual dollars paid on closed claims and the revised claim amounts, thereby aligning premiums more closely with experienced costs.

Key provisions

  • New statute added: 8-44-109.5 (Experience modification factor – adjustment).
  • Notification and timing:
    • An employer or a licensed insurance producer may trigger an EMF adjustment by notifying the insurance carrier after a claim is reported to the rating organization and within 31 days after the employer’s rating effective date.
  • Conditions for EMF adjustment:
    • The adjustment can be made only when:
    • An open claim is reported to the rating bureau with an open claim amount higher than the amount paid after the claim closed; and
    • The lower claim amount would reduce the EMF by:
      • At least 0.05 from the previously released EMF; or
      • From above 1.0 to 1.0 or from 1.0 to below (i.e., a meaningful move in the EMF).
  • Adjustment mechanism and timing:
    • The authorized rating organization must adjust the EMF within 30 days after notification.
    • The insurance carrier must apply the premium change resulting from the updated EMF within the employer’s policy period.
  • Who is involved:
    • Employers.
    • Licensed insurance producers.
    • Insurance carriers authorized to transact business in Colorado (including Pinnacol Assurance).
    • The rating organization (the employer’s authorized rating organization).
  • Effective date and applicability:
    • The act becomes effective January 1, 2027.
    • Applies to claims closed on or after the applicable effective date.
    • If a referendum petition is filed and successful, the act would take effect only after approval by voters in the November 2026 general election (still effective January 1, 2027 or later, as determined).

Affected parties

  • Employers insured against workers’ compensation in Colorado.
  • Licensed insurance producers representing those employers.
  • Insurance carriers (including state-regulated entities such as Pinnacol Assurance).
  • Rating organizations that determine EMFs used for workers’ compensation premiums.

Procedural/timeline aspects

  • Notification window: 31 days after the employer’s rating effective date, following claim reporting to the rating bureau.
  • Adjustment window: Rating organization must adjust within 30 days of notification.
  • Premium impact: Employers receive a calculated premium credit or adjustment within their current policy period due to the revised EMF.
  • Effective date: January 1, 2027, subject to potential referendum delay (see above).

Potential impact

  • The bill provides a mechanism to correct EMFs when misalignment between claimed costs and reported claims is identified, potentially lowering premiums for employers when the EMF is reduced by the specified thresholds.
  • It increases the responsiveness of EMFs to actual claim outcomes, promoting more accurate risk-based pricing in Colorado’s workers’ compensation system.
  • Larger or previously underestimated claim costs could be adjusted downward if the lower claim amount reduces the EMF as specified.

If you’d like, I can provide a plain-language example showing how an EMF adjustment might affect premiums under a hypothetical scenario.

Compiled from official sources — confirm details with the bill’s official record.

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