While some employers simply write their premium checks to cover the costs of workers’ compensation programs, others realize they can reduce these premium costs. Some employers use a piecemeal approach. Others realize that real success is the result of creating and managing an integrated and holistic workers’ compensation management program.
Workers’ compensation is an insurance program that provides limited benefits to injured workers in the form of medical treatment (doctor bills, hospital costs, medicines, tests, etc.); compensation for lost wages if the employee is out of work as a result of a workplace injury; and compensation for the loss of body parts or the use of them. It is a no-fault system. Coverage does not depend on either the employer or employee admitting fault related to the accident and subsequent injury.
Everest National Insurance Co. estimates that workers’ compensation costs account for about 40 percent of an employer’s total insurance-related costs. Here are several things you can do to begin to rein in these costs.
When selecting a carrier or other insurance/claims provider, don’t just go with lowest price. Ask prospective providers about their philosophies, their ways of doing business, their success rates, the level of support they provide clients, etc. A well-managed claim can save you thousands of dollars more than the few dollars’ worth of premium you might save by doing business with the least expensive insurance provider.
According to Federated Insurance, it is important to select an insurance adviser who understands your industry and business and takes the time to properly design your program. Look for an insurance company with a history of commitment to your industry and that is in it for the long haul. In addition, it is important to select a carrier with a financial rating of “A” or better. Many general contractors do not allow subs (such as electrical contractors) to work for them if their insurance companies are rated poorer than “A.” While price is a component, other features, such as coverages, safety assistance and claims service, can help contribute to significant savings over time.
Statutory requirements and administrative rules related to workers’ compensation vary by state. Employers are not expected to research this information and should instead rely on their insurance carrier or broker to provide the information and then assume responsibility for knowing it.
State programs generally differ in five areas:
• Claims reporting requirements (e.g., how soon a claim must be filed)
• Waiting periods (e.g., the period of time between an injury and when an employee can receive indemnity benefits)
• Medical direction (whether an employer can require an employee to see a specific medical provider for a workplace injury or whether the employee is free to select his or her own provider)
• Medical cost reimbursement (whether medical providers can receive standard/customary fees or whether there is a special workers’ compensation injury treatment fee structure in the state)
• Impairment ratings (e.g., the different rates of indemnity benefits that employees receive based on injury severity)
Work with your insurance provider to ensure employee jobs are properly classified for workers’ compensation purposes. An improperly classified job can unnecessarily increase your premiums.
Understand your carrier’s experience rating plan, since it determines the experience modification factor that then determines your premiums and other elements of your workers’ compensation program. The experience rating plan is a tool designed to tailor the cost of insurance to the individual characteristics of each employer and the jobs that employer has. Part of setting up the plan involves analyzing the employer’s payroll and loss data typically for a period of the past three years. Employers with favorable ratings usually will see rebates going forward. Employers with unfavorable ratings usually will see debits. Ask your broker or carrier to explain their plan and what you can do to improve your own rating.
Ask your provider for information on accident prevention and other workers’ compensation cost-reduction strategies, whether it is literature they can send you or seminars for employers in your region.
“One important thing we learned from our insurance company was the idea of creating a return-to-work program,” said Jay Sempsrott, director of safety and purchasing, for Giles Electric Co. Inc., South Daytona, Fla. (See box on page 82 for information on return-to-work strategies.)
Create a relationship with your insurance provider. Get to know the people, so you can get personalized service if and when you need to discuss your workers’ compensation program, either in general or when related to a specific claim.
Get a list of qualified medical providers from your insurance provider. These providers should specifically understand workers’ compensation claims, the importance of helping workers recover and get back to work in a timely manner, how return-to-work programs work, and the importance of accommodating the needs of workers in the program. These providers also should have a history of working closely with insurance providers and employers on workers’ compensation cases. Post this list of medical providers somewhere employees can see it.
It should go without saying that the fewer accidents and injuries you have in your workplace and the less severe any injuries are, the lower your workers’ compensation premiums will be. For this reason, it is extremely important to create, implement, publicize and manage a workplace safety program, complete with safe working procedures.
Part of this program, according to Federated Insurance, should be the implementation of a drug-free workplace initiative, which uses pre-employment, random and post-incident drug testing. One of the many benefits of such a program is that, as of April 2013, more than a dozen states offer workers’ compensation discounts of 2.0 to 7.5 percent for a certified drug-free workplace program. In addition, insurance carriers in other states may have discretionary underwriting credits available to recognize the value of these programs.
Giles Electric, which had only one recordable injury in 2013, and whose last lost-time injury was March 2009, is strongly committed to a comprehensive workplace safety program.
“One key to success for us is ownership from the field people,” Sempsrott said. “We are also very proactive, rather than reactive. We focus on eliminating problems before they occur.”
Another contractor with a strong commitment to safety is Pieper Electric Inc., Milwaukee.
Pieper Electric workers also have the right and responsibility to request any type of personal protective equipment (PPE) they think they need, and they receive training on how to use it. Supervisors also have the responsibility to ensure workers follow safety procedures and wear the proper PPE.
Be extremely careful and thorough in your hiring practices. Some workers have a personal commitment to safety and will bring these philosophies and behaviors to the workplace. Such workers rarely get injured. Conversely, other workers have natural risk-taking personalities. They may drive without seatbelts or while intoxicated, take illegal drugs or engage in dangerous stunts. You don’t want these people working for you because there is a good chance they will get injured on the job. These injuries will likely be their fault, but since workers’ compensation is a “no-fault system,” you will still have to pay.
To get a sense of a new worker’s safety philosophy, ask about personal safety philosophies and behaviors at home. Go further by conducting additional investigations. For example, according to a study by American DataBank, 45 percent of potential employees have a criminal record, bad driving record, workers’ compensation claim history or bad credit.
Provide safety training to keep safety front and center in the minds of employees. Training should occur when workers are first hired, prior to each new large work project and annually.
“We conduct a three- to four-hour new employee safety orientation, where we go through our key areas of safety,” Sempsrott said. “We also do annual training.”
Conduct work site safety inspections regularly to look for potential risks that could cause subsequent injuries, which would also be teachable moments.
“Besides new employee safety orientation and annual safety training, we also conduct job-specific training, with a kick-off session for each new job, discussing the potential hazards on that site,” Sempsrott said.
Immediately following an accident
Make it clear to all employees that they must immediately report any injury, regardless of how seemingly insignificant. Seemingly minor injuries can end up becoming extremely serious, costly and even life-threatening (e.g., a rusty nail puncture wound that becomes infected).
If an injury requires more than minor first aid, get the injured worker to one of your qualified medical providers immediately. Certainly, if the injury is serious enough to require a trip to the emergency room, go there. However, the hospital shouldn’t always be the first choice. For example, if a worker suffers a minor laceration, it can usually be cleaned and stitched up at a local walk-in clinic or doctor’s office.
If you are in a state where you, as the employer, have the right to direct injured employees to one of your designated medical providers, do it. However, if employees have the right to select their own providers, you can still encourage (but not require) injured employees to visit one of the medical providers you recommend.
After medical treatment
Report the claim to your insurance provider. According to Federated Insurance, statistics show that, for each week that a claim report is delayed, the total cost of the claim may increase substantially.
Conduct an accident investigation to identify the cause or causes of the accident, ensuring you interview all witnesses (employees and others who might have seen it).
Federated Insurance suggests that, after an accident, take photos of the scene, the existing conditions, any damage to property prior to the site being disturbed or any property or vehicles being removed, and/or any temporary or permanent repairs being completed. If practical, do not disturb the scene until you have spoken to a claims representative. Control and retain any damaged property or machinery/equipment that may have caused an injury. Save and secure any video surveillance of the area.
Pieper Electric considers accident investigations, which it calls “injury review meetings,” to be an extremely important part of its commitment to safety.
“We try to hold this meeting at the job site where the injury occurred if possible,” Cook said.
The number of people who show up to these meetings makes it clear just how important they are. Participants include Pieper’s president, vice president, branch manager, project manager, department supervisor, field supervisor, a representative from human resources, three safety representatives, the injured worker, and, in some cases, the CEO.
“We try to figure out what happened, why it happened and how we can prevent it from happening again,” Cook said.
Ensure the injured employee follows through with healthcare provider instructions, follow-up doctor visits, prescriptions, etc.
Maintain communication with the employee throughout the recovery process. It is important that employees know their employers care about them and want them to return to work. Injured employees may welcome personal visits to the hospital and/or their home, but ask first, especially when planning a home visit. When employees sit around at home with no contact from their employers, they begin to build resentment for they perceive as a lack of caring. This may cause them to disengage from their jobs, decide that they don’t want to go back to work at all, or contact an attorney.
Maintain communication with your managed care provider and insurance carrier throughout the life of the claim. While medical providers and insurance companies are set up to manage claims, you should stay involved. After all, you have more of a vested interest in your injured employees than the medical and insurance providers do.
Workers’ compensation fraud
According to the National Insurance Crime Bureau, workers’ compensation fraud is a significant contributor to the nation’s $30 billion insurance scam price tag. According to Federated Insurance, workers’ compensation fraud costs American businesses billions of dollars per year. It is important to work with your insurance company to prevent, detect and eliminate false insurance claims, while actively pursuing suspected perpetrators of insurance fraud.
Such fraud can occur in a number of ways:
• Workers who report injuries as having occurred on the job that actually occurred off the job
• Workers (especially new workers) who purposely injure themselves (or claim to injure themselves) on the job so they can file workers’ compensation claims
• Workers who are injured and then remain off work longer than is medically necessary, which is called “malingering.”
To identify potential fraud, pay special attention to employees who report accidents that occur soon after they begin working for you. Look for disgruntled employees, those involved in recent disciplinary or attendance issues, and employees who report injuries long after they occurred.
Following the report of injuries, look for employees who take longer to return to work than would be considered normal (especially if they are seeing medical providers that are not on your approved list), and pay attention to rumors you hear about supposedly injured employees working elsewhere while still collecting workers’ compensation payments.
As you gain more control of your workers’ compensation program and as accident frequency and severity decrease, don’t expect your premiums to decrease overnight. Because of the way workers’ compensation computation systems are set up, there is sometimes a three- to five-year cycle before you will begin to see real savings.
As you take more control of your program, your premiums will eventually decline. More important, your workers will have fewer injuries.