Nebraska Just Changed the Rules on Workers’ Comp Deductibles. Here’s What It Means for You.

A big change is coming to Nebraska workers’ compensation policies in 2027, and if you aren’t adjusting your insurance program, your Experience Modification Rate (EMR) may suffer.

Starting January 1, 2027, Nebraska will allow “net reporting” for workers’ compensation deductible policies. In plain terms: when your company reimburses your insurance carrier for a claim under a deductible arrangement, that reimbursed amount can now be credited against the loss value used in your EMR calculation.

In other words, each claim counts for less. Your mod reflects reality — your actual out-of-pocket risk — instead of the gross reported number.

For the right company, this is a meaningful shift. It’s not a loophole or a workaround — it’s a structural change that rewards employers who take on more direct financial accountability for their claims. And in an environment where large construction projects, data center builds, and government contracts are increasingly using EMR as a hard qualifier, the ability to manage your mod more precisely isn’t just a finance conversation. It’s a business development conversation.

However, not every company is eligible to switch to a net reporting structure. Let’s hit on the qualifications, calculation considerations and a few real-world examples.

What exactly changed in Nebraska’s workers’ compensation law?

Nebraska passed updates to its workers’ compensation insurance statute that include two significant provisions. First, it formalized the deductible options insurers must offer employers — including a mandatory medical-only deductible option ($500–$2,500 per claim) and a larger, optional deductible structure that can cover all claim payments up to a defined cap.

Second — and this is the big one — beginning January 1, 2027, losses that an employer reimburses under a deductible arrangement will be credited against the employer’s experience modification calculation. That’s the net reporting change. Instead of the full gross claim amount feeding your EMR, only the net amount (after your reimbursement) counts.

There’s one exception worth noting: employers who elect a “gross reportable deductible policy” specifically opt out of this credit. That’s a choice — and one that may make sense in certain situations — but the default path under the new law moves toward net reporting.

Why is Nebraska moving to a net reporting structure for workers’ compensation?

The short answer is competitiveness. Nebraska businesses — particularly contractors and manufacturers — have been operating at a structural disadvantage compared to peers in the 15 states that already use net reporting (which include neighboring states Iowa, South Dakota, Kansas, Missouri and Colorado).

When two companies with identical safety records compete for the same project, the one in a net reporting state can report lower losses against their EMR simply because of where they’re incorporated. That’s not a reflection of who runs a safer operation. It’s a reflection of which state’s insurance framework gives them a better tool.

Nebraska recognized that. Net reporting states have been quietly given their employers a competitive edge in bid qualification — particularly as large general contractors increasingly use EMR as a hard prequalification threshold. A Nebraska contractor going head-to-head with a counterpart from Iowa has been fighting with one hand tied behind its back on the mod calculation, even if its actual claims experience is comparable or slightly better.

This change is Nebraska’s way of leveling that playing field. It aligns the state’s experience rating framework with the reality of how modern commercial and industrial projects are awarded, and it gives well-run Nebraska businesses the same structural advantage their out-of-state competitors have had for years. It’s a pro-business move — and a recognition that insurance policy design has real consequences for economic competitiveness.

What’s an Experience Modification Rate, and why does it matter?

Your EMR — also called your “experience mod” or just “mod” — is a multiplier applied to your workers’ compensation premium based on your company’s actual claims history compared to other businesses in your industry. We’ve covered this at length in the past if you want to dive deeper, but at a basic level you need to understand that a 1.0 is average. Below 1.0 means your claims history is better than average and your premium is discounted. Above 1.0 means the opposite.

The mod calculation matters for two reasons. The obvious one is cost — a 1.2 mod adds 20% to your workers’ compensation premium. The less obvious one is that your EMR is increasingly used as a prequalification threshold for project bids. A general contractor with a 1.2 mod may be disqualified from bidding on certain government jobs, data centers, large commercial projects, or any work for general contractors who set a hard mod ceiling — typically 1.0 or 1.1.

Anything that affects your mod impact your ability to pursue those opportunities.

Can you show me a concrete example of how net reporting changes the math?

Let’s start with the NCCI, which sets expected losses based on payroll and industry. Your workers’ compensation premium is based on those expected losses, multiplied by your mod rate. So, if you can lower the mod rate, you lower your premium.

Here’s a straightforward example:

Here’s a more real-world illustration of why that delta matters — especially for contractors:

Does this apply to my business? Who does this benefit most?

This is the most important question — and the answer is... it depends on your premium size.

The larger deductible structure (the one where net reporting has the most impact) comes with a legal minimum of $50,000 per deductible and a maximum of 40% of your annual workers’ comp premium. That math creates a floor for participation at $125,000 of total workers’ compensation premium.

If your annual workers’ comp premium is below roughly $125,000, the 40% cap puts the maximum deductible below the $50,000 floor — which means this particular structure isn’t available to you.

The mandatory medical-only deductible ($500–$2,500 per claim) is still available to all employers, but the net reporting benefit in those cases is smaller in scale.

The good news for companies that don’t meet the minimum premium is that there are other ways to impact your E-Mod that are much easier to accomplish at a smaller company than a large one. Things like return-to-work programs, pre-employment screenings and customized safety training.

Why should we care that Nebraska is a net reporting state for Workers’ Compensation?

We covered the premium savings in previous questions, but beyond the insurance program, there is a significant shift happening in the market – and the new rules keep Nebraska companies competitive.

The construction and industrial landscape in Nebraska and across the Midwest is shifting. Mega projects — data centers, advanced manufacturing plants, government infrastructure, large-scale healthcare — are arriving at a pace we haven’t seen in decades. These projects are big, they’re complex, and the owners behind them are sophisticated about risk.

That sophistication shows up in their prequalification requirements. An EMR above a set threshold — commonly 1.0 or 1.1 — can disqualify a contractor from the conversation entirely, regardless of their track record, pricing, or relationships. The following types of work increasingly use EMR as a hard gate:

• Data center construction — Major hyperscale and colocation projects routinely require EMRs at or below 1.0 for general contractors and key subcontractors.
• Government and public contracts — Federal, state, and municipal bids often carry EMR thresholds baked into prequalification language.
• Large commercial and industrial projects — Owner-controlled insurance programs (OCIPs) and construction manager-led projects frequently set EMR floors.
• Healthcare and institutional construction — Owners managing liability exposure on occupied facilities are especially stringent.

If your mod is sitting at 1.15 and the project requires 1.0, you’re not in the running. Net reporting gives larger employers a legitimate, structural path to reduce the losses that drive that number.

The companies that are paying attention to this now — before the law takes effect — will have a head start. They’ll be able to structure their deductible policies correctly from the moment the net reporting credit becomes available, rather than rebuilding their approach mid-cycle or getting stuck in a policy that won’t renew until mid to late 2027.

Are there risks to taking on a larger deductible as part of Nebraska’s net reporting workers’ compensation change?

There are real considerations that doesn’t make this a no-brainer.

You’re taking on more direct financial risk. Under a deductible policy, the insurer still pays claims first and defends them — that doesn’t change. But you’re on the hook to reimburse up to your deductible amount. If you have a bad year with multiple significant claims, that reimbursement obligation adds up quickly. This is a tool for companies with financial stability and, ideally, a demonstrated track record of managing claims well.

The insurer can decline to offer the deductible option. If a credit investigation reveals you don’t have the financial capacity to cover the deductible obligations, the insurer isn’t required to offer this structure. Sound balance sheet health is a prerequisite.

The gross reportable deductible opt-out exists for a reason. Some companies, particularly those whose claims history is unpredictable or trending upward, may be better served by a gross policy. Net reporting benefits companies whose loss experience is better than average — it’s a reward for running a tight operation, not a patch for a struggling one.

The bottom line: if your safety program is solid, your financials are stable, and you’re paying meaningful workers’ comp premiums, this law change creates a real opportunity. If any of those conditions aren’t in place, we’d want to talk through the full picture before recommending it.

If you’re unsure of how it’d look for your company, you need to do an audit of your workers’ compensation program. We’ll look at your claims history, safety program, pre-employment practices and return-to-work policy and run them through some stress tests. We’ll show you how much you paid vs. the potential savings vs. the potential worst-case-scenarios.

What should I do to prepare before January 1, 2027?

The good news is there’s time. The bad news is that experience modification calculations look backward — typically at three years of loss history — so what you do now matters.

Start with a policy review. Understand your current deductible structure (if any), your current EMR, and where your mod is trending. That baseline tells you how much room there is to benefit from the change.

Run the premium math. If your annual workers’ comp premium is near or above $125,000, get an analysis of where your deductible ceiling sits and what your reimbursement exposure would look like under different loss scenarios.

Review your safety and claims management program. Net reporting benefits employers whose loss experience is better than what the gross number suggests. If your claims management process has gaps, that’s worth addressing independently — and it will compound the mod improvement over time.

Have the conversation early. This is a relatively technical policy structure. Insurers need to understand your financials and loss history before offering the large deductible option, and that evaluation takes time. Don’t wait until your renewal to bring it up.

The good news is, we understand this stuff inside and out. We can help you analyze each scenario and run through the pros and cons and total cost. You don’t even have to have your insurance through us. Schedule your audit – it’s 30 minutes that could be worth tens of thousands of dollars.

So, what's next?

Nebraska joining the net reporting category is a meaningful development for the right employers. It’s not a silver bullet — no single policy provision ever is — but it’s a structural alignment of financial incentives and risk management outcomes that we’ve long believed makes sense.

For contractors and manufacturers who are running tight operations, investing in safety, and chasing large project opportunities where an EMR can open or close a door, this is worth understanding deeply.

If you’re currently a client of Ellerbrock-Norris, we’ll be reaching out to you if we think it’d benefit you to consider. But if you’re at a national brokerage or only meet with your insurance agent once a year at renewal, you’ll need to be proactive to get ahead of this. We can help.