September 11, 2012

Saving Money On Your Worker’s Comp Costs

By Paul Bieber

I was talking with a local businessman the other day and the subject went to his worker’s comp insurance. He told me he was in great shape; he had five small accidents last year, but no big ones to really hike up his bill. We finished our lunch and walked to his office, just around the corner.  He pulled out his most recent comp bill, and much to his chagrin, his mod rate was up over 50%.  He hadn’t realized his costs had gone up so much as he had reduced his payroll and really didn’t see a big difference in the total bill from the previous year.

Here’s what we discussed.  The mod rate is based on the frequency and the severity of accidents.  In fact, many minor accidents will raise a bill more than one big one.  The adjusters will look at your business as basically unsafe when you have multiple claims.  They’ll think you are lucky that none of these were big, and the big one will more likely appear as you have a small cut just an inch away from being a major cut.

A once every five year major accident is what you have insurance for.  Based on the facts of the actual accident, this will affect your bill, but not as much as the small ones.  Most policies have a cap which will limit the amount charged back to your account on a major claim.

I looked at the five small accidents my buddy put claims in for.  Two were for a muscle strain, but the employee was back at work within three or four days.  One was a three stitch cut from the improper use of a carton opening knife.  The employee missed work the rest of that day and came back the next.  The fourth was a sprained ankle from slipping on ice in the parking lot, and the employee missed six days of work, and the last was a broken finger, from being caught in door that closed too quickly.  This employee was back to work in three days.

I told him that none of these had to be worker’s comp claims.  While they would need to be recorded on the OSHA 300 reports, they should have been paid for directly by the company to the hospital or walk-in clinic.  This would have saved my friend over $10,000 during the current billing period for his comp insurance.  I told him there is no requirement to place a claim with his insurance carrier, just like he can choose to fix a bumper on his car rather than placing a claim in his auto insurance.  As you take the employee to the hospital, explain to him, and to the hospital admitting, or the clinic, that you will be paying this directly.  Give them a credit card right now if they ask.

There are two main parts to the costs under worker’s comp:  The medical claim costs and the lost work time costs.  On these small accidents you absolutely should cover the medical claims.  Also, bring the employee back to work ASAP.  On the sprained ankle, give the employee a job licking envelopes in the office, or answering the phone.  Give time off during the day to ice the ankle.  If the employee wants to come back to work, even if they do absoluetly nothing, you come out ahead.

The costs are carried on your comp rating for three years.  So a lost week of work costs you three weeks of premium.  Also, if an employee is home during the day, all they see on TV are ads from injury lawyers who encourage suing the boss.  If you have a serious accident with weeks of time lost, see if the employee would like to work part-time from home.  Do everything you can to keep the employee active and involved with the company.  Unless the employee is a real malingerer, you are better off paying their wages than putting it through comp.

What happens to the broken finger that results in a surgery a month later?  You can still file a comp claim, in most states up to six months after the incident.  Still, with all the previous money you have paid out-of-pocket, your overall costs will be lower than if you put the claim in from day one.

The last thing my buddy and I did was look at the current bill.  Two of these small claims were still open on the books of his carrier, even thought there were no bills presented for seven months.  The carriers, fearing that new bills may come in, keep the case open, which continues to increase premiums.  Always contact your comp carrier when an employee gets a clear return-to-work from their physician or physical therapist.  This stops the claim and keeps your rate lower.  Yes, if something happens to reopen the claim, you can, but this is rare.  Look over your open claims each quarter, and make sure the closed ones are off your bill.  Ask your carrier or broker for a loss run list and you will see the open claims.

So my buddy will save ten grand, and I bought lunch.  Is this how a consultant is supposed to work?