Michigan Nursing Home Administrator (NHA) Practice Exam

What is the compensation rate used to calculate a facility's premium?

1. Gross payroll / manual rate

2. Gross payroll + manual rate

3. Gross payroll x compensation rate

4. Gross payroll - experience modification

The correct answer is: Gross payroll x compensation rate

The compensation rate used to calculate a facility's premium is determined by taking the gross payroll and multiplying it by the applicable compensation rate. This approach provides a basis for estimating the total payroll-related risk in the workplace and establishes a fair premium reflective of the facility's actual payroll practices. In this context, the gross payroll represents the total earnings of all employees at the facility, while the compensation rate—often derived from industry standards or classifications—reflects the level of risk associated with the specific job functions performed by the employees. By multiplying these two figures, the facility can arrive at a calculated premium intended to cover worker's compensation insurance needs, contributing to the overall financial management of operational risks. Understanding this calculation is crucial for nursing home administrators as it aids in budgeting for insurance costs and managing financial resources effectively while ensuring compliance with state and federal regulations concerning worker's compensation.