September 01, 2005

6 Ways To Reduce Your Worker's Comp Costs

1. Before you hire an employee, make sure that you initiate a background screening
   Reducing the frequency of your workers compensation claims begins with hiring people who are qualified for the job. Employment reference checks will assure that you are hiring an employee who is familiar with the requirements of the job, will improve the productivity and efficiency of your company and minimize the potential for injury. Employees who lack experience and relevant knowledge about safe work practices are more likely to be injured.
   
   
2. Keep safety top of mind through training and safety programs
   Contributing factors to occupational injuries may often be ill informed or untrained workers. Many employees involved in accidents cite their lack of knowledge or training as a contributing factor to their illness or injury. Improving safety in the workplace is incumbent upon managers who initially and periodically train employees on proper safety techniques and practices. They must constantly be made aware of hazards that exist in the workplace and the potential consequences if they are ignored. Your employee handbooks should require immediate notification of any injury and your Injury and Illness Prevention Plans (IIPP) should be updated regularly. Employers should hold safety-training meetings on a monthly basis (especially to avoid common injuries at your workplace) and conduct periodic inspections to identify hazards that can cause injury (document in your IIPP binder).
   
   
3. Give employees more benefits
   Offering medical insurance and retirement benefits provides employees with an avenue to health care coverage, improves their quality of life and reduces the need for those who are uninsured to use workers’ compensation insurance as an alternative. Poorly compensated employees tend to file fraudulent claims of injury rather than purchase health care out of pocket. Providing health insurance may afford companies special discounts of 5 percent to 10 percent off annual premiums which help offset the cost of employee benefits. Workers compensation insurers have a strong motivation to reward employers when their exposures to fraudulent and non-occupational claims significantly decrease.
   
   
4. Take care of your employees
   Employees injured on the job often feel apologetic and embarrassed. Some feel guilty for tarnishing the company’s safety record or reputation. Employees often feel alienated or rejected by managers or peers in the wake of an injury. Emotional separation from the employer commonly fuels employee decisions to hire an attorney or get legal advice regarding their claim. When employees litigate their workers’ comp claims the cost of the claim generally rises. Inflated costs can affect the loss experience of your company and lead to increases in loss reserves. Your experience modification rate may increase as a result. Take an interest in your employees by showing concern for their wellbeing, especially when a workplace injury occurs. Employees who have been treated fairly rarely sue their employer for benefits from workers’ compensation insurance claims.
   
   
5. Manage your claims to closure
   Claims that are not closed in a timely manner increase your experience modification factor and, thus, your workers’ compensation premiums. Stay in touch with medical providers (ideally an industrial medical clinic), employees and any other parties involved in the claim. Once a claim has been reported to your workers’ compensation insurance carrier, a loss-reserve is set-aside based upon anticipated future costs to return the employee to work. Such expenses may include medical costs, indemnity payments (lost wages due to injury), vocational rehabilitation, and temporary or permanent disability. Closely monitoring your claims can help close the claims quickly and keep expenses to a minimum.
   
   
6. Keep your “EX-MOD” low
   Be sure to request a copy of your experience modification (often referred to as your “ex-mod”) worksheet from your state workers’ compensation bureau. This document provides the calculation and factors involved in the development of your modification rate. Businesses are often overcharged on workers’ compensation insurance premiums due to inaccurately calculated experience modification factors or closed claims that have not been reported.

You should also request a copy of your loss run report from your carrier. This report provides you with an accounting of your paid-in premiums as well as your open and closed claims by policy year. Review any open claims and examine the loss reserves. Compare those reserves to the to the factors and treatment for each claim. Talk to your claims adjuster about the current status of the claim and discuss the reserves set for the claim. Over reserved claims can dramatically increase your experience modification rate.

Orion Risk Management will work with you to identify cost saving methods that can reduce the amount of your workers compensation claims. Above are just a few techniques that Orion assists with as a courtesy to our clients. Our skilled professionals will design a plan to help you educate your employees and reduce your claims exposure.