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How employers can stay sane in a challenging Workers' Comp climate

This year brings a host of changes in Workers' Compensation of particular importance to businesses, especially in terms of controlling costs. Experts seem to disagree as to which of these changes will have the most impact. However, they all agree on one thing: Workers' Compensation insurance is going to be insane in 2014.

In many states, rates are increasing. In others, insurers are being much more selective about the companies they choose to insure. In the 36 states where the National Council on Compensation Insurance (NCCI) is the rating bureau, changes to the split point began in 2013 and will continue. From 1991 to 2012, the split point was $5,000. In 2013 it went to $10,000 and in 2014 it's going up to $13,500.

The Experience Mod calculation splits injuries into two areas: primary loss and excess loss. The primary loss is counted 100 percent in the mod calculation. Everything above that is excess loss and it's discounted depending on the size of the business. This means that the first dollars in the claim are the most important. So, if there are ten injuries at $10,000, the Experience Mod will be impacted more than if there is one $100,000 injury.

In most cases, businesses that are substantially worse than average will see a higher Mod, while businesses that are better than average are likely to see a decrease.

Takeaway: This change will reduce the minimum Mod to the lowest Experience Mod that a business can have, which gives more control over Workers' Compensation costs.

What companies can control

There are several steps involved in managing and controlling an Experience Mod. The first is the hiring process, which should be focused on hiring employees who are fit to do the job. The best way to do this is to offer them the job using a conditional offer of employment form. This form describes the job, asks the employee if there are any conditions that may prevent them from safely doing the job, and contains a very important paragraph stating the job offer is conditional, contingent upon receiving a medical opinion that the job applicant is mentally and physically able to perform all of the duties that the position requires.

The next step is to have a physician complete a medical history questionnaire and perform a thorough physical exam. From the medical history questionnaire, the doctor will be able to develop an informed opinion on what, if any, restrictions the applicant may have in performing the job duties.

Hiring in this way allows you to ensure that new hires can safely do the job. The goal is not to prevent employees from getting the job; the goal is to prevent employees who are unable to do the work from getting hurt on the job. When there is an injury, it's bad for the employee and it's bad for the business. Every single dollar that the insurance company spends on employee injuries impacts Workers' Compensation costs.

Once employees are on the job, it is critical to train them how to perform their work safely. It's also important to build a safety culture in the workplace that makes it crystal clear that doing a job in an unsafe manner isn't acceptable, and when someone isn't following safety protocol, their fellow employees call them out it, and that there needn't be a safety manager on the job site for work to be performed in a safe manner.

Having a safe workplace will prevent the vast majority of employee injuries. Nevertheless, occasionally an employee injury will occur. When that happens, it is imperative to have a return-to-work or transitional duty program in place for employees to get back on the job as quickly as possible. This is important for several reasons:

  1. When employees are out of work and sitting at home, they are more likely to contact an attorney. Having an attorney involved in a Workers' Comp claim is the most reliable way to dramatically increase the cost of that employee's injury.
  2. When employees are back at work they get well faster because they're moving around and actively recovering from their injuries. A study from the RAND Corporation found that companies with a written return to work program returned their employees to full duty 46-percent faster than companies without a written program.
  3. In many states if an employee isn't out of work long enough to trigger lost wage payments from the insurance company, there is a 70-percent discount for those injuries.

When injured employees are out of work for any period of time, frequent communication is key. Send them get-well cards, call and check on them and see how they're feeling, and if they need anything. Make them feel like they are a crucial part of the business. The number one reason injured employees retain attorneys is they don't feel anybody cares about them - until the attorney on television tells them that they care and that they will get them what they're owed.

While state laws govern the ability to direct care, a key to returning employees to work is building relationships with doctors in the area who specialize in Workers' Compensation and will take the time to understand job requirements. They have facilities to diagnose and treat injured employees and understand return to work programs.

Understanding how the Experience Mod actually works will help manage it. It's a complicated formula; but understanding how employee injuries impact the Experience Mod and how much higher costs are because of each individual employee injury will pinpoint problem areas. Loss frequency will drive costs more than one severe loss. Knowing the lowest possible Experience Mod for the business and striving to reach it can save significant dollars.

It's important to understand that the old adage "accidents will happen" isn't true. It is possible to record zero employee injuries by training them how to do the work safely, making sure they are fit for the job, and creating a safety culture in the workplace.

However, if "accidents will happen" is myth, then "accidents can happen" is reality. When someone is injured, make sure that the injury is reported as soon as it happens. Sometimes an employee will get hurt, but think, "It's not that big a deal." Don't let them make that decision. Have them immediately report the injury and seek treatment.

The good news is you can take control of your Worker's Compensation costs by hiring the right employees, having a safe workplace, building relationships with physicians versed in occupational medicine, creating a return to work program that brings injured employees back to the job as quickly as possible, and understanding your Experience Mod. Only then will you be able to maintain your sanity in the quickly changing world of Workers' Compensation.

This article was adopted from an article by Kevin Ring, Director of Community Growth for the Institute of WorkComp Professionals of which we are a member