Managing Your Workers' Compensation Costs

Don't wait until accidents and injuries occur.

By Thomas W. Eynon

What is your annual premium for Workers' Compensation: $10,000, $50,000, $300,000 or more? Whatever your costs, it's important that you manage these costs just as you manage all the other costs of doing business.

The first and most effective line of defense in controlling Workers' Compensation costs is to have an effective safety program that prevents employees from having injuries and filing claims. Studies have shown that for every proactive dollar spent preventing workplace accidents, four to six dollars are saved in direct and indirect costs. Effective safety programs require an unwavering management commitment that instills a true culture of safety and provides a work environment that promotes safe working habits.

The fewer work-related injuries or illnesses your employees experience, the better your premiums will ultimately be with a traditional insurance carrier. However, this is not necessarily the case if you're assigned to a risk pool. In a risk pool, the pool may consist of other small businesses as well as employers that have high-risk employees, and premiums could increase because of the overall claims activity in the pool. Firms that end up in this situation should attempt to join another pool that has a more favorable claims history, or ideally, place your coverage with a traditional insurance carrier.

Once you have established a positive safety culture, implemented an effective safety program, and obtained the most favorable coverage, there are additional steps you can take to help control your Workers' Compensation costs.

Employee Care
To have effective control of Workers' Compensation costs, you need to prepare for injuries and Workers' Compensation claims before they happen. Establish a relationship with a local physician or clinic that will agree to evaluate and treat employees on an emergency or priority basis.

To reap the greatest benefits from this partnership, take steps to familiarize the physician with your operations, job demands/essential functions of the job, and your return-to-work policy. When an employee is injured, make sure your employee receives immediate medical attention from this physician or clinic to determine the nature and severity of the injury. Accompany the employee to the doctor's office if possible or, at minimum, be in immediate contact with the office regarding the employee's condition and work status as a result of the incident.

In some states, employees have the choice of physician or they must select from a posting of a panel of doctors or clinics. However, if the employee understands that the medical arrangements you have made are to ensure prompt and high quality care, he or she will usually embrace such an arrangement.

Timely Reporting
Companies should have established and written policies that all accidents must be reported immediately, no matter how slight, before the end of the shift in which the accident occurred. This allows for prompt professional medical treatment for the employee, a timely investigation of the incident, and the submission of an “Employer's First Report of Injury or Illness” to your insurance carrier. The Employer's First Report of Injury or Illness is not an admission of liability, but simply a notification of an alleged incident. If an employee claims that an injury or work-related illness is, or could be, work-related, a report should be filed. Do not deny the employee's claim of an injury or illness by refusing to file a report with your carrier.

Stay in Touch
Open lines of communication with the injured employee are vital. If the employee is going to miss one day of work or more, make sure that an associate of the employee is in contact with him or her within 24 hours of the injury. If the injury results in hospitalization, someone from management must make contact with the next of kin to provide sensitive information regarding the situation.

An appropriate member of the company's management should visit the injured employee in the hospital the day after the accident. Experience has shown that sincere and compassionate communication and visits to the hospital on a regular basis are important to your employee and provide an opportunity to get answers to any questions he or she might have. It also demonstrates the company's concern and the employee's value to your organization.

Return-to-Work Program
Studies done by Zurich Services Corporation have determined that proactive return-to-work programs reduce occupational and non-occupational disability costs by as much as 40 percent. Return-to-work programs allow workers to begin a transition back into the work force earlier, through temporary alternate-duty jobs.

Such efforts help control and limit costs related to days away from work and help develop a better relationship between the employee and employer. Good communication between the company, employee and physician are critical for this to work, but it can result in bringing workers back into productive jobs sooner and safely.

Hiring Program and Orientation
Firms should establish a comprehensive hiring program that provides the opportunity to recruit the right people. This is accomplished by considering employee referrals, conducting comprehensive interviews, conducting background and reference checks, and conducting pre-placement physical examinations to determine fitness to work once the conditional offer of employment is made. Firms should also have an effective new-hire orientation program that describes company rules, policies and procedures, and establishes the company expectations for the new employee. Follow-up discussions and frequent contacts with new hires by managers are important.

Key to Controlling is Commitment
The keys to controlling Workers' Compensation costs are management's commitment to safety, proactive planning and preparation. Firms that wait until accidents and injuries occur to begin managing the Workers' Compensation claims process have already severely limited their ability to manage the process.