Control Losses Is Key to Control Worker’s Compensation Rates
By Sean Lahey
Date Posted: 2/7/2005
In the past 5 years the workers compensation class code rate predominately used in the pallet industry, 2759 (Pallet, Box manufacturing – wooden) has increased 40 percent. For organizations who for reasons of size or market access have been unable to break free of traditional workers compensation insurance (self insurance or captive programs), this increase has meant a sizable increase in cost to your bottom line. Your ability to control your rising insurance cost lies primarily in your ability to reduce your experience modification factor and attract markets willing to offer loss sensitive programs. The only way to accomplish both these objectives is to proactively work to reduce work place injuries as well as minimize the cost per incident.
A few methods for reducing work place accidents involve constructing a comprehensive set of workplace safety procedures, updating the procedures as new methods develop, and regularly reviewing procedures with new and seasoned employees. The training process is typically a new hire focus, but education and review should be the focus of every employee.
When making a conditional offer of employment, it is important to have a medical questionnaire completed by the prospective employee. It is illegal to discriminate based on medical conditions, but it is not illegal to verify that a prospective employee will be physically capable to undertake the position. Be sure to read the questionnaire closely, looking for incomplete responses. A non-response is not considered fraud, therefore in order to build the ability to deny fraudulent claims, it is important for prospective employees to fully disclose their medical history.
Offering a safety reward to departments and or department heads also provides incentive to help reduce workplace accidents. Providing direct benefits to employees and managers for safety awareness will increase the likelihood that safety will remain at the forefront of employees daily rituals. These rewards do not need to be elaborate or expensive. The objective is also not to discourage claims reporting. The simple pride of accomplishment is often enough to encourage a paradigm shift, focusing the team on accident prevention. By that same thinking, incorporating the safety performance of a department into the performance review of managers as well as line workers can help drive home the principle that proper usage of safety procedure is a key component of every employee’s responsibility to the organization. The overall purpose of reducing occurrences is to reduce costs, whether short term in the case of loss sensitive workers compensation program, or reducing your organizations experience modification factor which will reduce your costs in the long term regardless of whether your program is loss sensitive or guaranteed cost.
Once an incident has occurred, there are several steps that can be taken to help reduce the cost of the claim. On average 80 percent of all workers compensation claims can be closed within 90 days for under $500. For claims with the potential of greater cost, it is important to take steps to help minimize the length and severity.
It is important to report all claims in a timely manner. Many states will levy fines for late reporting. The simple act of being sure that claims are filed quickly will avoid unnecessary fines which your carrier will often transfer to the cost c
Immediately after an accident occurs, it is very helpful to have employees give their full description of the accident and have them address whether they have ever injured that part of their body before. This has little legal ramification, but tends to be more of a psychological push to discourage employees from filing exorbitant or fraudulent claims.
It is critical that the employer maintain contact with injured employees. Often the reason given for employees hiring an attorney is that their company did not care about them. A saying often used by claims adjusters is 30 dollars in flowers can often save 30 grand in legal fees. Many employers have prepared ‘care kits’ to be sent to injured employees. An employee in recovery will often become frustrated by a lack of attention from the carrier adjuster or by the employer. Simple phone calls to check up on their recovery, making sure their families are being taken care of, or letting them know that they are missed will help maintain employee loyalty and discourage legal action. It is also important that the personal manager participate in maintaining contact with the injured employee and not just the administrator of the organization’s workers compensation program.
The employer is always entitled to know what has been done for treatment, what the diagnosis is, and what has been paid. An often misunderstood fact is that HIPAA, the Health Insurance Portability and Accountability Act which guarantees a level of privacy of individually identifiable health information, does not apply to workers compensation treatment. Stay informed. To avoid a claim from growing outside the realm of the original injury, simply monitoring the claim can help signal abuse of the system. This is not a cure-all but just one other method for controlling claims.
Finally, you should be sure that you have a strong ‘return to work/transitional duty’ policy which will help reduce claims. There is a level of subjectiveness involved in a medical physician’s decision to deem an injury a permanent disability versus a temporary disability. Though the existence of a ‘return to work/transitional duty’ policy will not insure a decision to deem an injury temporary, the act of getting an employee back to work can be a major influencing factor. Also, the act of providing light duty to injured employees in effect allows you to pay an employee to do something rather than paying them to sit at home. Giving an injured employee light duty work will get them back in the habit of working, and reduces the frequency of them viewing attorney advertisements while they remain stagnant.
In the end, it is important to remember that the processes described above should be viewed economically, and not through the lens of emotion or logic. The objective is to minimize the cost of the claim, period. Your ability to control your losses can greatly reduce one of your largest non-returning expenses and allow you to be more competitive as an organization in the industry.
(Note: Sean Lahey is an insurance consultant with the Insurance Office of
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