In 2018 Arizona workers' compensation premiums were determined by the state's Experience Rating system, with base rates set by the Arizona Industrial Commission and adjusted for each employer's loss history, payroll size, and classification code. The most notable change from 2017 was a modest 1.2% increase in the overall base rate for most classifications, while high‑risk categories such as construction and manufacturing saw slightly larger adjustments. Employers also faced new reporting deadlines for payroll data, which could affect the final experience modification factor applied to their premiums.
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How Rates Are Calculated
Arizona uses a three‑part formula: (1) the state‑approved base rate for the employee's classification, (2) the employer's payroll for that classification, and (3) the experience modification factor (e‑mod) that reflects the employer's claims history relative to the industry average.
2018 Base Rate Adjustments by Major Classifications
| Classification | 2017 Base Rate (per $100 payroll) | 2018 Base Rate (per $100 payroll) |
|---|---|---|
| General Office (Code 8810) | 0.95 | 0.96 |
| Construction – Carpentry (Code 5400) | 2.40 | 2.55 |
| Manufacturing – Food Processing (Code 5600) | 1.85 | 1.92 |
| Healthcare – Nursing (Code 8600) | 1.30 | 1.32 |
These rates are expressed per $100 of payroll and are applied before the e‑mod factor.
Experience Modification Factor (e‑mod)
The e‑mod is calculated by the Arizona Department of Insurance using each employer's claim frequency, severity, and total payroll. An e‑mod above 1.00 increases premiums, while a factor below 1.00 reduces them. For 2018, the state introduced a slightly refined weighting for medical costs, which tended to lower e‑mods for employers with well‑managed injury programs.
Payroll Reporting Requirements
Employers were required to submit quarterly payroll reports by the 15th of the month following each quarter. Late submissions incurred a 2% penalty on the affected premium portion. Accurate reporting was critical because the payroll figure directly influences the premium amount before the e‑mod is applied.
Impact on Small vs. Large Employers
Small businesses (payroll under $500,000) often benefited from the state's small‑employer discount, which capped the maximum e‑mod at 1.30. Larger firms with higher payrolls saw the full effect of their e‑mod, making loss‑prevention programs more financially significant.
Key Takeaways for 2018
- Base rates rose modestly overall, with higher increases in construction and manufacturing.
- Accurate quarterly payroll reporting was essential to avoid penalties.
- The refined e‑mod calculation favored employers with proactive safety and claims management.
- Small employers could rely on a capped e‑mod, reducing premium volatility.