Are You In Control of Workers' Compensation?
 March 8, 2011

Insurance industry experts believe there are many practices that manufacturers can employ that will help them effectively manage and control their workers’ compensation costs. Frankly, we at the CMTA group program are no different. We believe there really are a number of practices that when applied with discipline will help manufacturers control, manage and reduce their workers’ compensation costs. What makes the CMTA group different is that we add a couple of practices up front that are often not addressed by the insurance experts, but in reality are the starting point of any workers’ compensation cost management program.

1. Select the Right Broker with Workers’ Compensation Expertise

Not every broker has expertise in workers’ compensation. They may be competent in finding you coverage and in the short term that might be at a competitive cost. But, can they provide the services necessary to help you manage workers’ compensation costs over the long-term?

There are a large number of brokers available with this expertise. In particular, brokers offering CompWest as an underwriter of workers’ compensation insurance have demonstrated to CMTA they understand what drives the cost of workers’ compensation insurance. Additionally, they have the necessary resources to help employers develop effective loss prevention programs, as well as, post-injury loss reduction programs.

Admittedly, brokers do not set reserves or close claims. But they can ensure that the insurance company keeps your interests in mind when decisions are made with respect to accepting claims or bringing claims to a resolution. We believe finding this kind of broker is the first step to developing a successful workers’ compensation cost management program and not just quoting rates.

2. Select the Right Insurance Company

A good insurance broker will understand your needs and help you find a workers’ compensation insurance carrier that, in combination with the broker, will deliver the necessary services to help you manage workers’ compensation costs over the long-term. But as we’ll see in a moment, your role in this cost management process is not passive.

Do your due diligence. When CMTA selected CompWest as our workers’ compensation partner we thoroughly evaluated their capabilities and commitment. Among the criteria we established were five critical concerns for selecting a partner we would recommend to our members:

Workers’ Compensation Specialization – Workers’ compensation is different for a variety of reasons. First, the individual filing the claim is not the person/entity paying the premium. In fact, these two parties can be adversaries. Be concerned if the person handling your claims also handles property or liability claims as well. Good workers’ compensation claims examiners balance protecting the employer’s position on liability for benefits with being sensitive to the injured workers needs.

California Focus – Workers’ compensation is different and California is really different. We have a unique set of challenges. A company that doesn’t make California a priority for their claims operation may tend to process claims instead of managing issues. If they do not have service offices in California it may suggest that California is an afterthought.

Commitment – Is California a key part of the insurance company’s business model? Do they invest in California as a business source? If not, when workers’ compensation profitability in California begins to decline you may find yourself left high and dry. You can always find coverage, but if claims are mismanaged you will live with those undesirable outcomes for many years to come.

In-House Services v. Outsourcing – Investing in claims and loss control services is a reflection of the insurance company’s commitment to workers’ compensation, California and you. Having oversight of underwriting (premium inflow) and claims (premium to pay losses) is critical to sound cost management. Outsourcing is a cost cutting measure that when ineffective drives up losses and loss ratios.

Results – Is the insurance company profitable? Historically, unprofitable businesses don’t last long. Nationally focused insurance companies that have not been profitable in California usually react by leaving the state. Since they are not wholly dependent in being profitable in California, their commitment is unsubstantial and they will cut their losses and move on. Remember two things:

  • You can’t sell something very long for $1.00 or less that costs you $1.16 to produce.
  • Your claims remain with the insurance company even if you and California are no longer their priority.

Now that you’ve selected the right broker and insurance carrier, what can you do as an employer? We polled brokers, insurers and people responsible for buying workers’ compensation insurance and asked them what they thought were effective loss cost management strategies. We’ll also offer our observations. Here are seven more cost management practices we recommend:

3.    The Hiring Process is Critical
The truth is, you hire your next claim. Make qualified hires. Ensure the employee can tolerate the physical requirements of the position. That enhances your chances of avoiding a work related injury down the road. Reducing the frequency of your claims begins with hiring the right people for the jobs and duties they perform. This will not only decrease your workers' compensation costs but also improve the productivity and efficiency of your company.

Prospective employees that have a history of "job hopping" and short-term employment relationships may also have a history of worker’s compensation claims. A common characteristic of people who tend to embellish their claim(s) was they often quit jobs and had periods of non-employment. You cannot discriminate against an applicant on the basis of filing a claim or presenting a disability, but employers should look out for applicants with a spotty work record. Completely research every applicant, confirming employment dates and the reasons they left their jobs. Make sure you are consistent in the candidate research practices you use when selecting employees.

4.    Make Safety Training a Priority

Make certain that employees are consistently made aware of the hazards that exist in the workplace and their potential injury or illness producing consequences. Employees that are not adequately trained can be an indirect contributing cause of work related injuries to those around them. California is a no-fault workers’ compensation system. The insured must pay regardless of who is at fault unless the injury was self-inflicted. Many employees injured on the job point to their lack of knowledge or training as a contributing cause of their incident and injuries.

Fundamental to developing and maintaining a safe work place, as well as reducing work related injuries, companies must periodically train employees on proper safety techniques and practices. This also enhances employee skills and makes the workplace more productive. And, make good results public. Display signs that proclaim the number of days since the last lost-time injury. Consider recognizing and rewarding employees caught in the act of being safe. Remember the basics of maintaining a safe workplace:

  • Keep your Injury and Illness Prevention Plan (IIPP) up to date.
  • Ensure your employee handbooks require immediate notification of any injury and that obtaining medical care is the primary concern.
  • Hold monthly, compulsory safety training meetings.
  • Conduct periodic inspections looking for hazards and unsafe acts.
  • Address and correct hazards you identify to avoid injury (document in your IIPP binder).
  • Consider group and individual safety incentives for results within goals.

5. Provide Health Insurance

This is clearly a challenging economy and all companies are tightening their belts. But, studies show that offering medical insurance provides a host of benefits for employers. For one, employees who are uninsured often turn to workers' compensation to treat their condition. This goes beyond "Monday morning" minor strains and sprains, although they are the most common abuses. When faced with significant bills for more serious non-industrial conditions employees without medical insurance may file fraudulent claims to collect workers' compensation benefits.

Oftentimes, companies providing health insurance receive special discounts of their workers’ compensation premiums. Workers Compensation insurers have a strong motivation to reward you; their exposure to fraudulent and non-work related claims decreases significantly when employees have health coverage.

6. KeepEmployeesWorking

Keeping injured workers on the job reduces temporary disability costs, permanent disability costs and even medical treatment costs. Many employers support documented early return to work programs. This type of program allows employees that are not severely disabled to keep working at modified and transitional duty when recovering from an injury. Another benefit of this program is the positive message sent to the employee. They realize they are valuable and wanted. When employees are working they are less likely to consider alternatives to resolving their workers’ compensation claims through litigation. CMTA’s workers’ compensation partner, CompWest, has a state-of-the-art Keep At Work program and they are so confident of its positive effects they reward companies participating in Keep At Work (KAW) with a premium discount.

7. Keep Communicating

Most employees injured at work feel bad, even apologetic about the damage they may have done. They might feel guilty because their accident kept the group from receiving a safety reward. Don’t let this happen. Communicate with injured workers with empathy and interest. You will help build their morale and you may learn something that will help in the claims management process, such as problems with their medical treatment.

Being separated from the employer creates uncertainty in the mind of the injured worker. They are bombarded with the opinions of friends and countless daytime television ads about attorneys protecting their interests. This uncertainty, because their employer failed to stay connected, is the number on reason injured employees decide to hire an attorney and or obtain legal advice regarding their claim. When workers' compensation claims are litigated, the cost of claims rises, substantially. This can affect the loss experience of your company and lead to increases in loss reserves and even your experience modification.

Make certain you communicate your interest and share concern. Employees who have been treated fairly will rarely see the need to litigate for workers' compensation benefits. Consider the following:

Make at least one weekly call to the injured worker. Make the tone one of empathy and not alienation. Ask:

  • Is the employee OK, how is he or she feeling?
  • Does he or she feel discomfort or pain?
  • How is the treatment going?
  • Are there any concerns or problems?

Remember, good employees are costly to replace and a valuable asset to your business.

8. Get Involved and Investigate

Whenever an injury occurs, your injury and illness prevention plan (IIPP) requires you to complete an accident investigation. The purpose is to identify the direct, indirect and root causes of the accident. Accident investigations can have three key benefits. First, information developed may help reduce the cost of a claim and aid in your defense should the matter be litigated. Second, if the injury was the fault of a third party, information you develop may help recover claims costs from that responsible third party. Third, the investigation will likely develop information that will lead to developing a loss prevention plan that will keep this type of accident from occurring in the future. Your investigation should include:

  • Pictures of the accident site.
  • Notation about the facts about the events and detailed descriptions of the physical characteristics of the claimant(s), machinery, equipment, facilities, conditions and environment.
  • Identification of any witnesses.
  • The prompt reporting of the injury to the insurance company.
  • Maintaining investigation records in your IIPP.
  • Update of your OSHA 300 log.

9. Understand Your Experience Modification

Claims of all sizes affect your experience modification. Claims open too long have a greater adverse impact on your experience modification and drive up your workers' compensation premiums. What can you do as an employer?

After a claim is reported to your workers' compensation insurance carrier, a loss-reserve is set aside on your policy based on anticipated future costs of the claim. Such costs can include medical costs, temporary disability and permanent disability. Make sure these reserves accurately reflect these exposures.

Once a year, your workers' compensation carrier sends a report to the Workers’ Compensation Insurance Rating Bureau (WCIRB) to determine your experience modification. The "Unit Statistical Report" provides the WCIRB with information on both payrolls by occupational class and losses incurred as a result of injuries. Ask your broker to provide you with the payroll and loss data that will be part of that report. This ensures payrolls and losses are accurate and consistent with your expectations. It is recommended you meet with your broker in advance of this report being filed to ensure it is accurate.

Be sure to request a copy of your experience modification once it is issued. You can get this directly from the WCIRB. This document provides the calculation and factors involved in the development of your experience modification. The experience modification is a calculation based on the relationship of your actual losses, payroll by occupational class and the expected losses for all employers by those occupational classes. A credit experience modification will serve to reduce your premium and a debit experience modification will increase it.

In closing, like many issues that plague California employers today, there is only so much that you as an employer can do. But, you can manage your workers’ compensation costs. Look for what you can control such as selecting a broker, an insurance company and hiring employees. Get help when you need it. Tap into CMTA’s workers’ compensation expertise and safety programs. We’re here to help you take control in California.

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