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Don't be late for a very important date

Five steps that can lead to lower Workers' Comp premiums

While most employers focus on Workers' Comp close to the renewal date, this is not the opportune time to control costs. The most important day of the year for Workers' Compensation is the valuation date (aka, unit stat date). This date occurs six months after policy inception, the time when the insurance company sends loss information to the rating bureau to be used in the promulgation of the Experience Mod.

This information includes not only the money that the insurance company has spent on claims, but also what it expects to spend (the reserves). In effect, your insurer takes a snapshot of your loss information and it is absolutely critical that these numbers be correct. With few exceptions, once the bureau has the numbers, they are set in stone.

Don't assume the numbers are correct. Errors are rampant in the system. The window of opportunity is short and the process of correcting mistakes can take time, so review all open claims at least 90 days prior to the unit stat date.

Pay close attention to reserves. The reserves are the anticipated dollar amount needed to cover all obligations of the insurer arising from the Workers' Compensation claim. It is not a guess, but it is more of an art than a science. Its accuracy depends on the precision of the adjuster in evaluating the employee's medical condition, anticipated time away from work, cost of medical care and other relevant costs. If the reserve is set too high, you will pay too much.

Of course all reserves are not too high, but here are five steps to ensure that your reserves are managed effectively:

  1. Report injuries within 24-hours
    It is well documented that early reporting of injuries leads to lower costs. If the agent isn't made aware of an injury until 30-45 days after Joe Worker slips and falls on an oil spot on a factory floor, then it's too late to intervene effectively. By then, it's like trying to put toothpaste back in the tube.
  2. Keep track of the injured employee
    Maintaining contact with injured employees, shows employees that the employer is concerned about their recovery, improving the likelihood of cooperation, follow through with medical care and early return to work, and helps employers stay on top of the course of the claim.
  3. Get injured employees back to work quickly
    In many states, employers get a 70% discount for the injury on their Experience Mod if they return employees to work before lost wage payments begin. Even ignoring that benefit, employees who return to work in a transitional duty job, saves the employer from unnecessary lost wage payments that increase the Mod as well as the "soft costs" that accrue when employees are out of work. Additionally, it's a bridge back to full duty, keeping employees active and part of the team. The longer employees are off the job, the more isolated they become and the less likely they are to ever return to work. Studies show that recovery at home is faster than staying home, which translates into lower medical costs and lower disability ratings.
  4. Know the status of open claims
    While monitoring open claims should be an on-going process, make it a priority to look carefully at open claims at least 90-days before the valuation date. In reviewing loss information, a key number to watch is reserves. Adjusters have a difficult job, looking into a crystal ball to determine the final cost of an employee injury. It is rare that the crystal ball gives them a clear picture, which often leads to reserves being higher than need be.

    Moreover, insurance companies deal with thousands of clients and adjusters may have well over 100 open files they are tasked with managing. Employers must proactively work with agents to manage claims and when reserves appear to be too high, a cooperative, congenial approach with the adjuster can be effective in reducing the reserve.
  5. Communicate with the treating physician
    Too often, reserves aren't lowered due to a lack of communication with the treating physician. Adjusters don't have the time to hound a doctor to call back. While a physician's first responsibility is to the patient, the more the physician knows about the job, the return to work possibilities and the employer's commitment to the injured employee, the more the physician will work with you. Establishing a close relationship with quality medical providers who understand work-related injuries is key to managing costs over the long term.

A concerted focus on all open claims well in advance of the critical valuation date will help identify errors and excessive reserves that lead to higher premiums.