Thoughts on Controlling Workers' Comp Costs

by Ron Hall/editor-in-chief
7/1/2014

Workers' compensation insurance is a social contract of sorts. In exchange for your promise to take care of employees who get hurt, you, the employer, gain fairly broad immunity from workplace negligence lawsuits. Worker's compensation has been around for almost a century. Every state except Texas requires that employers carry workers' compensation insurance. It is optional for employers in Texas.

Most of you rely upon unskilled and semi-skilled laborers operating powerful machinery to deliver your services. This offers opportunities for employees to injure (perhaps even kill) themselves. Stir in long, hot summer days and you've got conditions just begging for the possibility of a serious mishap.

Obviously, the biggest tragedy of an on-the-job mishap is the pain suffered by an employee and his/her family. You share that pain, although not as intensely. Almost without exception, those of you that I know in this industry genuinely care about your employees' welfare.

And, as most of you are aware, on-the-job injuries have serious financial consequences, too. Everybody takes a hit, often a big hit.

The employee and his/her family lose income. You lose the employee's services, and often pay more for those services ongoing due to having to pay higher premiums for workers' compensation insurance. The cost of workers' comp, like just about every business expense, is only going one direction - up.

For these reasons it stands to reasons that you implement strategies to reduce the likelihood of on-the-job injury accidents. This makes sense from both a humane and a financial standpoint. 

While it's impractical to discuss worker safety in all of its ramifications in this short column,  it does offer the opportunity to share valuable tips on keeping your worker's comp costs under control

I "borrowed" much of the following from Safety Daily Advisory, a great source of worker safety information. It offers free daily pointers on worker safety via email. Check it out here.

To reduce upfront spending on workers' compensation:

. Implement an effective safety program. This reduces your workers' comp costs in at least two ways. First, it lessens the likelihood of a claim by reducing the chances that workers will be injured. Second, it makes you more attractive to insurers and third-party administrators, giving you the opportunity to shop around for the best price.

. Make sure your insurer is legit. Most employers focus tightly on claimant fraud (workers filing false workers' comp claims), but claimant fraud accounts for less than 2 percent of all fraud cases in the workers' compensation system. Far more common-and more costly-is insurer fraud.

Another type of insurer fraud is insider fraud, which occurs when claims managers, claims administrators, outside investigators, and agents manipulate policies and claims for personal gain. As a control against this type of fraud, you can check with the state to make sure that accurate data are being reported about your company.

Once a worker has an injury claim, take these steps to minimize costs:

. Provide prompt medical attention. Delayed medical attention for work-related injuries and illnesses can result in increased severity and complications, increasing the ultimate cost of a claim. For example, if a worker suffers a relatively minor back injury, it is better to treat that injury appropriately-sending the worker to the doctor and providing time off and restricted duty, if necessary, to ensure the worker's full recovery. If you instead ignore the injury, you delay treatment and could end up creating a more serious back injury requiring surgery, extended recovery time, and possibly permanent disability.

. Actively manage claims.The sooner a claim is closed, the better off you'll be. Maintain clear and frequent communication with your insurer, keeping on top of open claims and making sure the process does not stall. Look out for medical provider fraud-when providers submit claims for work they did not perform. Actively managing your open cases can help catch this kind of fraud.

As things get "back to normal," you need to tie up all loose ends:

. Get employees back to work. It can sometimes be difficult to find restricted or light-duty options for workers returning from an injury, but it's important to try. Getting workers back on the job reduces your wage-replacement and medical costs.

. Maintain contact. Keep in touch with workers who are out and their medical providers. And try to locate rehabilitation in the workplace. Employees who see themselves as productive and connected to their jobs, rather than as patients, are more likely to make a successful return to work.

. Correct the problem that caused the injury.To prevent future injuries-and future claims-address the hazard that caused the injury. Especially be aware of "smaller" claims, like slip, trip, and fall claims, which account for as many as one in five workers' comp claims. These claims may not seem significant individually, but if they continue to occur, they can add up quickly.