Workers' compensation costs are rising every year. If not managed properly, workers’ compensation insurance can become a huge expense when workers become injured on the job due to safety infractions of established procedures or employee negligence.
According to the National Federation of Independent Businesses, 33% of small business owners identified workers’ compensation as a huge and critical issue. This is because, if an employee becomes injured in the workplace, workers’ compensation will step in and take care of medical bills, payment for lost time at work, and so much more. These can become huge expenses over time if not managed properly.
These following steps should reduce workers’ compensation costs by nearly 1/2 within 2 years if the processes discussed in the article are followed through. We will review the importance of an effective workers’ compensation management program and then discuss the 8 steps that can be implemented to reduce costs.
Ramifications of Workers' Compensation Costs
Before we continue, it is important to note that this endeavour is not a one person project. In order for the reduction plan to be a success, partners should be sought after to aid in the effort. Regardless of whether you are in the general industry sector or construction industry sector, the following personnel should share implementation of the plan at a minimum; attorneys, plant managers, plant foremen, safety committee members, engineers, workers’ compensation claim managers, workers’ compensation coordinators, operations managers, the construction foreman (if applicable), occupational safety consultants, HR managers, general industry business owners, construction business owners, plant supervisors, subcontractors, project managers and safety managers.
Rising cost of Workers’ Compensation costs and implication thereof are as follows:
- Claimant wages. In general, an average worker earns a slightly higher salary each year. This results in older workers often being paid significantly more than newer workers due to their experience and time on the job. Their average age of workers, at the time of a claimed injury, since the 1990s has risen from 38 to 43. Some work forces, particularly in skilled manual labor, are now entirely over the age of 50.
- Older injured workers recover more slowly. As humans age, healing processes can naturally slow and the addition of more co-morbidities such as diabetes and heart disease further increase recovery time.
- Rising costs of medical care, prescriptions, premiums, etc. Premiums, medical bills, and prescription costs are all on the rise compared to five years ago.
- Workers' compensation cost creates a deficiency to reinvest in workforce; employee bonuses, pay raises, company sponsored events for family, health insurance benefit payouts, and other benefits.
- Workers' compensation also creates a deficiency to reinvest in business itself; equipment upgrades, infrastructure upgrades, and expansions.
Reducing Workers' Compensation Costs
Now that the ramifications of workers' compensation costs are clear, we need to turn our attention to how to combat these costs by implementing the Workers' Compensation Reduction Plan.
Step 1. Make a Commitment to Dig In and Be Aggressive.
Dig into your claim history and make a commitment to be aggressive in developing a battle plan to defeat injuries in the workplace. You can’t change the outcome of the future if you do not know where you are now or where you have been. Be committed and remain committed to staying the course to reduce workers' compensation costs.
Step 2. Understand Your Claim History.
Answer these questions to start establishing a trend analysis so you can focus resources on the most frequent causes of workers' compensation claims. Once you have tackled the most frequent, then you can focus on the less common events.
- What is the average cost per claim?
- What is most frequent injury type? (overuse, contusion, strain, cut, burn, etc.) What is the injury frequency rate?
- What is most frequent injury severity? (lost workdays, restricted work days, etc.) What is the injury severity rate?
- Where are the most frequent injuries by department?
- Where are the most frequent injuries by shift or crew?
Step 3. Develop a Frequent Flyer Program.
- Identify repeatedly injured workers on a periodic basis, such as two or more reported injuries a quarter.
- Develop a conversation plan with employee.
- Develop an agreeable Personal Safety Action Plan (PSAP) for the injured employee.
- Develop an agreeable Employer Safety Action Plan (ESAP).
- Review the PSAP and ESAP on a frequent basis for completeness and validation.
Step 4. Incorporate a Safety Management System.
- A safety management system will help to prioritize safety objectives, corrective action plans, and assign individual responsibility and accountability in order to improve worker safety and health. Remember, safety is all about reducing a hazard to an acceptable level of risk.
- Using ISO format for your safety management system such as ISO 14001 for environmental or ISO 9001 for quality management systems is advisable. These ISO formats are very good formats to incorporate even if you are not seeking certification.
- Alternatively, ANSI Z10-2012 is another safety management system format to consider.
Step 5. Develop a Return to Work Program.
- Employees should meet restrictions applied by a physician, when applicable.
- When designing a return to work program, consult with the physician and claims adjuster; perform site visits, review job descriptions, and perform a job hazard analysis.
- Consider allowing employees to return to work with work restrictions.
- Keep the employee active while on restrictions. Do not have them sit in the break room with nothing to do. This damages morale.
- Be careful of where you place administrative tasks. Place them in the training room or an extra cubicle for administrative work rather than leaving them to find an unused corner for these tasks.
Step 6. Close claims rapidly.
- Maintain constant contact with claims adjuster during a claim.
- Continue investigation on claims even after they have been filed. New information may arise that could hinder the claim and cause it to be suspended or denied.
- Bring any new information to claims adjuster immediately in order to maintain the integrity of the process. Don't wait to see if the information will be asked for or needed later.
- If necessary, debate the validity of claim. Do not be afraid to debate the validity of an alleged injury or illness, especially soft tissue claims. As an employer, you have the right to contest if you believe the claim is fraudulent. Remember that workers' compensation fraud exists.
Step 7. Pre-Employment Screening of New Hires.
- Legal advice should be sought before implementing any type of pre-employment screening programs. (Learn more in The Importance of Determining an Employee's Pre-Existing Injuries).
- Contract/temporary employees and part time employees should also be considered for any pre-employment screening. (Learn more in How to Set Up a Fit-for-Work Testing Program).
- By using pre-employment screening coupled with a good physical demands analysis of the specific job in question, employers can quickly identify if a potential employee will likely be injured by the nature of the job duties or if the employee has a condition that makes them a general safety risk for certain jobs. (Learn more in 7 Fascinating Facts About Sleep Apnea and Workplace Safety). Studies have found this type of screening can reduce some of the most common injuries by up to 59%. (Learn more in When To Use A Functional Capacity Evaluation).
- Using pre-employment screening data may also allow employers to fight some workers compensation claims if it is found that an employee defrauded the employer by lying about a pre-existing condition that put them at risk or if the employer can use the information to prove the injury existed before the job rather than as a result of the job.
Step 8. Do not be afraid to deny and contest injury claims that you feel may be suspicious from the start.
- Work to determine the root cause of an injury/claim.
- Do not be afraid to challenge an alleged claim.
- If a claim will be challenged, begin building a case immediately.
- Document anything you are told and the source of the information.
- Consider hiring a private investigator.
- Have an adequate incident investigation kit on hand.
- Train supervisors to collect data/evidence in case of an incident.
- Remember that just because the pain is felt at work does not mean the injury was work related.
In closing, implementing and consistently managing workers’ compensation claims can be a tremendous value added activity for any business, large or small. It can save thousands of dollars annually and nudge management and employees to improve personal safety and health at the workplace through hazard identification and control.