Comprehensive WorkComp
Program Cuts Claims Costs
Insured
The business is a masonry contractor located in Buffalo, MN, with 30 employees
and annual revenue in excess of $3 million (2004). The company constructs
residential brick walls, patios, sidewalks, floors and driveways
Situation
In a three-year span from 2002-2005, incurred injury claims losses of $123,107.
As a result, the employer saw her company’s Experience Modification
Factor (Mod) rise 50%, from 0.91 to 1.37.
Assessment
A Certified WorkComp Advisor (CWCA) reviewed the client’s WorkComp
program. He found that the employer was “shopping for rates”
to save money on Workers’ Compensation coverage rather controlling
work-related injury costs. As a result, the employer had no written policy
for dealing with employee injuries. As a result, employees were not notifying
the employer at the time of injury and were seeing their own chiropractor,
who happened to be related to an employee of the company and who excused
employees from work for indeterminate periods of time. Furthermore, the
employer was not taking advantage of a state law that allows companies to
self-pay indemnity costs and go to its WorkComp carrier for only the medical
portion of an injury claim. In two sample cases, this failure cost the employer
an additional $10,000 over three years for a claim of $1,800.
Solution
The CWCA began by showing the employer how little rates affect overall WorkComp
costs using the Institute’s “Iceberg” illustration, where
the rates are just the “tip of the iceberg” while the actual
costs are what lie below the surface. Then the CWCA addressed these cost
issues in several ways. First, he implemented an “indemnity review”
process that helps the employer to determine when to self-pay indemnity
costs. Next, using the Institute’s “HR That Works” program,
he provided the employer with an employee handbook that, among other things,
spells out in writing an injury-reporting program that requires immediate
notification upon occurrence of an injury and a return-to-work program that
defines the “light duty” jobs – such as inventory work
– that employees will perform if physically unable to perform their
regular jobs. Finally, the CWCA assisted the employer in establishing a
clinic relationship program with The Buffalo Clinic, a long-time local medical
provider, which directs employees where to go for covered medical treatments.
Result
Since September 2005, the employer has not filed a claim for employee injury
losses. Self-paying indemnity alone will save the company up to 70% of its
total claims costs. In addition, the written reporting and return-to-work
policies have significantly cut the number of work days lost while the clinic
relationship program keeps everyone – the employee, employer and medical
provider – informed about the employee’s recovery and working
towards the employee’s return to full duty.
Note: Self-funding of indemnity costs requires careful consideration of
a number of factors, including state law, particular characteristics of
exposure, financial condition of the company and an understanding of the
risks and resources it requires. You should seek the advice and guidance
of a CWCA to better understand if it is appropriate for you.
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