Colorado wants to stop employers from overpaying on workers' comp premiums through experience modification factor reform.
Senate Bill 26-175, introduced during the Second Regular Session of Colorado's Seventy-fifth General Assembly, takes aim at a long-standing irritant in workers' compensation pricing: experience modification factors that remain inflated even after claims close at lower amounts. The bill, sponsored by Senators Marc Snyder and Marc Catlin alongside Representatives Tisha Mauro and Chris Richardson, was referred to the Senate Committee on Business, Labor, and Technology. If enacted, it would take effect on January 1, 2027.
The problem the bill addresses is familiar to anyone who has worked with experience modification factors, or e-mods. When an insurance carrier reports an open claim to a rating bureau, that reported figure typically includes both the actual dollars paid out and reserves set aside for anticipated future costs. If the claim eventually closes for less than the reserved amount, the e-mod may still reflect the higher figure – leaving employers stuck paying premiums based on costs that never materialized.
SB 26-175 would change that by adding Section 8-44-109.5 to the Colorado Revised Statutes. The bill would require every insurance carrier authorized to do business in the state, including Pinnacol Assurance, to notify the employer's authorized rating organization to revise the e-mod so that it reflects the actual dollar amount paid on a closed claim rather than the pre-closure estimate that included reserves.
The process is not automatic, though. Employers or their licensed insurance producers would need to initiate the request. They would have a defined window to do so – between the time the claim is reported to the rating bureau and thirty-one days after the employer's rating effective date.
The bill also sets thresholds for when the adjustment process can be triggered. An employer can only request a revision when the open claim was reported at a higher amount than the eventual closed amount, and when the corrected figure would either reduce the e-mod by at least .05 compared to the previously released factor or bring it down from above 1.0 to 1.0 or below.
Once a carrier receives a valid notification, the authorized rating organization would have thirty days to adjust the e-mod. The carrier would then be required to credit the employer for any premium change calculated as a result of the updated experience modification factor within the employer's policy period.
The legislation would apply only to claims closed on or after its effective date, so there would be no retroactive reach into claims already settled before January 1, 2027. The bill is also subject to a referendum provision – if a petition is filed within ninety days of the general assembly's final adjournment, the act would not take effect unless approved by voters at the general election to be held in November 2026, in which case it would take effect on January 1, 2027, or on the date of the official declaration of the vote by the governor, whichever is later.
SB 26-175 has been referred to the Senate Committee on Business, Labor, and Technology. For carriers and producers operating in Colorado, it is one worth keeping an eye on.
