Last year, workplace injuries affected thousands of employees and cost U.S. companies more than $110 billion. Most companies will eventually be faced with having to deal with a workplace injury -- which means that they will also have to deal with a workers’ compensation claim. Often, workers’ compensation is seen as an uncontrollable cost of doing business. However, if a company understands how the system works, it can take advantage of effective ways to reduce its workers' compensation costs.

The Benefits
Workers’ compensation insurance coverage first began in Wisconsin in 1911, offering benefits to both injured employees and employers.  Since then, every state in the U.S. has enacted a statute requiring employers to carry workers’ compensation insurance.

For employees, the workers’ compensation insurance benefit includes a reduced burden of proving that the injury was work-related, payment for medical expenses and a wage benefit (as defined by state statute) designed to compensate an employee for loss of wages due to a work-related injury. 

The employer benefits from a limitation of financial exposure to expenses directly related to the injured employee’s recovery and protection from lawsuits against the employer for pain and suffering damages. 

Limiting the Costs
The high cost of workers’ compensation can be frustrating for a business.  But there are a number of ways employers can limit their exposure to workers’ compensation costs:

• First, fully understand what drives your policy cost. Take measures to control or decrease those factors.

• Organize a safety program to prevent injuries from occurring

• When an injury occurs, provide for:

  • Prompt medical attention for the injured from your designated medical provider

  • Immediate accident investigation to identify causes and actions to prevent reoccurrence

  • A formal Transitional Duty Program to assist injured workers to return-to-work as soon as they are medically able

  • A strong partnership with your workers’ compensation claims adjuster to monitor the claim’s progress and associated costs

One of the main factors that could be driving your cost of workers’ compensation insurance premiums is your experience modifier (in some cases, your company might not have its own experience modifier).  An experience modifier is used to develop a company’s ultimate insurance costs.  The insurance industry compares the loss experience of a particular company with all other companies in the same classification code.  This process uses a formula which takes into account the total number of claims, number of large claims, the actual costs and the reserves (the amount that the carrier believes will be needed to fully fund a given claim), the company’s past premiums paid and other factors, and compares the expected number of claims and costs with the company's actual experience.  An experience modifier of 1.00 is average; anything above 1.00 is worse than average, and anything below 1.00 is better than average. 

For instance, a company with a 2.00 experience modifier has twice the expected loss experience of a similarly-situated company.  If a company finds its experience modifier is greater than 1.00, it may want to strengthen its injury prevention and safety program to help reduce injuries. 

Being Proactive
One of the ways you can help reduce the cost of workers’ compensation insurance is by having documented policies and processes in place to help minimize risk and exposure.   Proactive programs could include: 

• Establishing an active safety program and/or a safety committee.  A safety program can identify hazards before an employee gets hurt.  Depending on the kind of activities that occur at a company, it may be important to train some employees as a first aid team to provide assistance to employees who get hurt on the job.

• Discussing safety rules with recently hired employees, making sure employees and supervisors know what to do in the event of an emergency.  Review safety expectations and rules in your company, including what to do when an injury occurs, or in an emergency such as severe weather or other circumstances. 

• Establishing a formal accident investigation process.   Put together a formal process to systematically investigate accidents immediately.  Include identifying root causes and methods to prevent reoccurrence.  Designate someone to investigate every accident.  Have them observe the conditions to be certain they match what has been documented as leading up to the accident.  Interview witnesses who might have seen or heard the accident occur.  And lastly, gather all information about the accident, to assist in developing an action plan to prevent it from happening again. 

• Identifying a designated medical provider to handle any medical emergencies in your company.  By developing a relationship with a designated clinic before an injury occurs, a company can establish requirements for communication with the medical provider.  It may also be a good idea to invite the medical provider to tour the facility and let them know about the return-to-work program. 

• Meeting with your workers’ compensation carrier’s representatives to learn what services they can provide.  Many carriers provide training videos and programs to assist in your safety efforts. Find out from your insurance carrier’s representative if workers’ compensation claims may be filed online or by e-mail.  In addition, obtain contact information so you can discuss a strategy with your claims adjuster on handling claims and to ensure all important claims information is communicated properly.  Periodically, go through all open workers’ compensation claims with the adjuster to monitor progress, review reserves and establish strategy.

• Establishing a Return-to-Work Program.  The quickest way to reduce your workers’ compensation claims is by helping the employee come back to work as soon as medically possible.  Review documentation from the treating doctor about the injury and prognosis.  Note if there are any work restrictions.  If the document only states that the employee must be off work for a specified number of days, the employer should call the doctor to inquire if there are medical restrictions that would allow the employee to return to work on “transitional duty.” All states require a medical practitioner to provide the employer with that information under the workers' compensation laws.  
  
  If an injured employee can do some, but not all, of the components of his/her job, consider allowing him/her to come in to work and do what he/she is medically able to do.  Look for additional tasks that an injured employee could do, and make a list of these tasks for future reference.

Summary
From the smallest office to the largest manufacturing plant, all companies run the risk of an accident.  An accident may be a slip on the floor, a smashed finger in a desk drawer or an injury due to working with a machine.  Workers’ compensation insurance is an important benefit to both employees and employers to ensure both parties are covered when and if an accident does occur.  Although it is possible that a workplace accident could occur, it is also possible to prevent accidents.  In the end, accident prevention is the best way for companies to avoid workers’ compensation claims.  Providing a safe workplace for employees should be a primary goal of all organizations for the benefit of its workers, as well as for the profitability of the company.  

See these useful websites for resources to assist in preventing injuries in the workplace:  The Occupational Safety & Health Administration (OSHA) at www.osha.gov and the National Safety Council at www.nsc.org

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