Nebraska took important step on workers’ comp deductibles but job remains unfinished
The state of Nebraska deserves credit for taking an important step forward with recently passed workers’ compensation legislation signed into law earlier this year.
This creates positive momentum in the right direction but stops short of delivering the full benefit to many employers. More importantly, the legislation creates a significant disparity between large and small businesses — one that can and should be addressed through relatively modest changes to the deductible program.
Effective January 1, 2027, the state approved changes to its deductible program that make Nebraska’s workers’ compensation system more business-friendly by better recognizing employers that choose to share in the financial risk of workplace injuries through deductible programs.This is meaningful progress.
The principle behind net reporting is straightforward.
When an employer assumes a portion of the financial risk through a workers’ compensation deductible, the employer should not be penalized in the Experience Modification Rate (EMR) calculation for losses ultimately reimbursed to the insurance carrier. Aligning the EMR formula with an employer’s actual financial responsibility creates a fairer outcome and encourages employers to take a more active role in managing workplace risk.
Nebraska’s adoption of net reporting recognizes this principle, but only partially.
The legislation continues to limit smaller deductible options to medical-only expenses with a maximum deductible of $2,500. As a result, employers selecting these deductibles receive only part of the intended benefit because indemnity payments continue to be reported in full for EMR purposes. In today’s environment of rising medical costs, the $2,500 limit is also increasingly outdated and compares unfavorably with deductible options available in many neighboring states.
Why does this matter?
The EMR formula places greater emphasis on claim frequency than claim severity. Even relatively modest claims can have a meaningful impact on an employer’s EMR and, ultimately, their workers’ compensation premium.
Consider an employer with a $2,500 medical-only deductible that experiences a $2,000 claim consisting of $1,000 in medical expenses and $1,000 in indemnity benefits. Under Nebraska’s new rules, only the medical portion of the claim receives the benefit of net reporting. The indemnity portion still impacts the employer’s EMR, even though the employer is sharing financial responsibility for the claim.
Contrast that with an employer utilizing a deductible that includes both medical and indemnity costs. In that scenario, the same claim could be excluded from the EMR calculation entirely, allowing the employer to realize the full benefit of assuming additional risk.
This distinction becomes even more significant for larger employers.
Companies with more than $125,000 in annual workers’ compensation premiums have access to deductible structures that apply to both medical and indemnity losses on claims up to $50,000. Those employers receive the full benefit of Nebraska’s move to net reporting, while smaller employers remain limited to medical-only deductible options.
The result is an uneven playing field. Employers of all sizes should have access to deductible programs that consistently recognize the financial risk they choose to assume.
Public policy should encourage responsible risk sharing — not reserve the greatest advantages for larger organizations.
Nebraska already acknowledged the value of net reporting. The next logical step is to extend that principle consistently across its deductible program by allowing both medical and indemnity costs to qualify for net reporting regardless of deductible size. The state should also consider expanding small deductible options to include $5,000 and $10,000 alternatives, providing employers with greater flexibility while better reflecting today’s claim costs.
The recent legislation represents meaningful progress, and Nebraska should be commended for the efforts. With a few additional refinements, the state can create a more equitable deductible program for employers of all sizes, make it more competitive with neighboring states, and more effectively reward businesses that actively share in the financial responsibility of workplace injuries.