SAFETY SOLUTIONS: How to Control Workers' Compensation Costs

We had a serious accident! Ohhhh no! There goes the cost for our workers’ compensation premium for the next three to four years.

Workers’ compensation insurance - these mere words can make a small business owner’s blood pressure soar. Throughout the United States, the cost for obtaining workers’ compensation insurance is outrageously expensive. Perhaps the most troubling risk for small to large employers in the United States is workers’ compensation. Over the past three years, its costs have increased an average of 50 percent and currently account for $.67 of every dollar spent on casualty insurance. This increase does not reflect any corresponding increase in workplace hazards or change in the types of reported injuries or diseases. In fact, spurred by the U.S. Occupational Safety & Health Administration, employers have successfully reduced the frequency of workplace injuries by almost 40 percent since 1990. Despite these safety gains, workers’ compensation costs have continued to rise far faster than the medical inflation rate.

What can I do to control these rising costs?

Implementing a good safety program, properly classifying employees, managing workers’ compensation cases and potentially using an experienced safety consultant can all help. Understanding which types of accidents fall outside its scope can also decrease the number of claims. The best way to control the cost of workers’ compensation insurance premiums is to avoid injury claims.

How do you avoid having an injury? One way to lower injury risks is by having a safe work environment that follows all the OSHA and EPA safety regulations. Another method is to have an effective safety training program and ongoing programs to promote safe work habits which are important keys to preventing employee injury.

Once employees are properly trained to perform their jobs safely, it’s important to maintain safety awareness. In addition to posting safety reminders in common areas, consider holding workshops or hosting safety seminars to talk in-depth about the specific issues affecting workers. In most states, workers’ compensation is “no fault.” That means that on-the-job injuries are covered by workers’ compensation insurance regardless of the cause of the accident. In other words, if employees are injured on the job due to their foolish or careless behavior, those accidents are covered by your workers’ compensation insurance. This is why it’s crucial to continually promote safety awareness and safe work habits.

Make safety a priority

If you have not done so already, develop a written safety control program. Better workplace safety leads to fewer claims, and fewer claims directly affect your workers’ compensation rate.

A disciplinary program also should be incorporated into the safety program, one that holds both management and hourly employees accountable for breaking the rules or rewards them for correctly following safety procedures.

A critical component to success is that the program needs to be endorsed by top management to ensure proper execution. Managers and lead workers should be assigned various responsibilities for safety enforcement in each work area. Holding regularly scheduled safety meetings and/or discussions about specific issues related to the work environment will convey the importance of safety at the company and the expectations necessary to comply. If you have a safety committee established, give them assignments to work for you instead of them giving you issues that may never get worked because of time restraints.

Take action when a claim occurs

When an employee experiences an injury on the job, complete an accident report with as much detail as possible. Take photographs of the scene and talk to any potential witnesses about what happened. The first report of injury should be sent within 24 hours to the insurance company to ensure prompt handling and to help fight fraudulent claims. A drug test should be required of the employee involved. While a positive drug test will not allow you to deny a claim in most states, it will certainly help. (You also might consider conducting random drug testing for all employees. Be up-front about telling all potential employees that submitting to random drug tests is a requirement for employment, which should decrease any potentially drug-related claims.)

Finally

Once again, learn how to manage the program or hire an outside firm to do it for you. Establishing “return to work programs” are your best return on your investment. Inappropriate claims are a major component of the workers’ compensation problem. As many as 25 percent of all filings may have some element of impropriety. There are many possible causes, including misunderstandings, honest mistakes, cost shifting from non-occupational health care, employee resentment, unscrupulous service providers and outright fraud. The National Insurance Crime Bureau estimates that workers’ compensation fraud alone costs insurers $5 billion each year. This, in turn, is billed back to employers in the form of at least $6.5 billion of premiums.

Workers’ compensation laws can create irrational incentives. The longer an employee is out of work, the more likely he or she is to get a cash award. Sometimes, claimants with injuries that should keep them out of the workplace for two or three days are tempted to stretch their absence to two or three weeks or more. Many don’t even regard such “secondary gain” behavior as fraudulent.

Every workers’ compensation jurisdiction has a waiting period - typically three or seven days - before a claimant is entitled to wage-replacement benefits. By extending an absence, an employee becomes entitled to indemnification for lost wages, often on a retroactive basis to day one of the claim. For many lower-paid workers, the “tax free” wage replacement represents an acceptable lifestyle.

The growing role of health care providers in the shaping of public policy has contributed to the stretching of absences. Workers’ compensation was initially a twosided compact between employers and employees, but it has now become a triangle with providers as the third side. The emergence of this triangle has had an adverse impact. The key problem has not been the amount charged per visit but the number of visits per claim. When medical services are over-utilized, employers must foot the bill, but employees suffer, too. The longer they stay out of work, the more likely they are to perceive themselves as disabled and the harder it becomes for them to re-establish the discipline of being in the workplace eight hours a day. Employees pay in another sense, too: higher workers’ compensation costs ultimately mean lower wages.

If you need help with your program, or need Job Safety & Health Analysis (JSA) for your work areas, let me know at the magazine and I will send you a sample copy and program of how to develop the best accident reduction tool in the safety world.

Take care and remember the magazine is here to help you.

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