Workers comp is a big expense for most companies. Most companies don’t know just how much more they “actually” pay, than what they “could” pay.
Many businesses could reduce their worker comp insurance costs by 20 to 50% with a very modest effort. Why don’t they?
Here are the main reasons I see every day for failure to take control of their company’s workers comp costs:
- They believe that the rates are the same with every company.
In Florida (and several other states), the rates are set by the Insurance Department for all insurance companies. So technically, the “rates” are the same for all companies, BUT the final premiums you pay are NOT (those are the ones that come out of your checkbook). That is due primarily to the experience modification factor (Mod) each business has applied to their premium. We’ll talk more about the Mod later. - Accidents happen. There is nothing I can do about that.
I hear this all the time. If you believe this, I guarantee that you are paying much more than you should. That is because the ultimate claim cost is influenced dramtically by the actions (or inactions) taken by the employer (YOU) including returning injured employees to work as soon as medically possible. - No doctor relationship
Your choice of medical provider has a real impact on the ultimate costs you will pay for your workers comp. Some states allow the employer to choose the medical provider where you send your injured employees. Florida is one of those states. Developing a relationship with medical providers is one of the most important pieces to an effective workers comp program. The doctor can make or break the claim. Just because your doctor is listed in your insurance company’s listing, doesn’t make them the right choice for you. - The claim starts with hiring
You would be surprised at how many claims are actually “hired”. Do you screen applicants for their physical ability to do the job you are hiring them to do? Many claims occur within the first 90 days of employment. Many of those are employees who were not capable of doing the job. A routine medical exam may have eliminated that employee from becoming another claim in your loss experience. For about $100 or less, our employers are able to do a medical and drug screening to prevent the wrong employee from becoming one of your statistics.
Remember the Mod I referred to above?
The Mod is a factor (percentage) applied to workers comp premium for every business whose premium exceeds $5,000. Your Mod starts at 1.00 and goes up or down based on your claims experience. The Mod is the way the workers comp system penalizes businesses who have claims. It also rewards businesses who have no claims and those that have claims, but manage their claims well.
The Mod is really a financing mechanism for paying for claims. What companies don’t realize is that THEY really pay for their claims through this Mod formula. Let’s say you have a $10,000 claim. Your insurance company pays the $10,000. The next year your Mod increases due to the claim and you are charged $25,000 additional over the next 3 years. As you can see, YOU really paid for the claim, the insurance company just financed it for you. If you went to your bank and they told you they were going to charge you 50% interest, you would walk out. That’s exactly what happened in the above example.
Once a business realizes THEY are paying for their own workers comp claims, they become much more interested in learning how they can influence these costs.
What can I do?
“All the things I listed above sound good, but I’m trying to run a business. I don’t have time to do all these”.
I must tell you that there is some effort involved on your part. I can also tell you that in every case I have been involved in, the effort has been rewarded handsomely. ROI’s on this effort and expense often exceed
5 to 1.
Here’s what you can do:
1. Hire a workers comp expert
Any agent can sell workers comp. Not all understand the real opportunities to reduce your costs. Find one that you think may know something and begin a dialog to find out what they know (or don’t know).
2. Find out where your program currently is and where it could be
Knowing where you currently are and finding out how low your costs could be gives you a good map for improvement. A workers comp expert will be able to define this in concrete numbers.
3. Priortize your efforts
Maybe everything can’t be done right now. Some parts may be more important to you than others.With guidance from your expert, pick the ones that will make the most difference in your business.
The key is to START NOW.
Sure, it takes a little work, but remember that 5 to 1 ROI!
It is really not as hard as it may sound, when you have proper guidance. There is an initial learning curve and there will be challenges along the way, as not all claims go by the book. Finding the right advisor to help you,teach you and help manage your program is critical to the success of your program and will help you avoid the mistakes that most companies make year after year.
Steve Hall is a Certified Work Comp Professional, Certified Work Comp Advisor, Construction Risk Insurance Specialist and a Professional in Human Resources. Hall is the agency principal at East Coast Insurors, Inc and has a dedicated workers comp and injury management division known as CompCorrect. Hall focuses on the education, training and implementation of programs designed to reduce the number, duration and costs of occupational injuries, reduce risks and increase employee productivity for employers.