For employers large and small, the problem is the same: The rising cost of benefits is eroding the bottom line. And one of the costliest benefits is workers’ compensation insurance.
It’s understandable that you to want to trim expenses wherever possible, but doing any serious cost cutting in this area presents special challenges. For one thing, you can’t reduce benefit levels the same way you can with health insurance. That’s because states mandate full treatment for on–the–job injuries.
Your cost–cutting steps must be done in conformance with the law. And when it comes to workers’ comp, the state is all powerful.
“With the exceptions of federal employees and employees working in maritime industries, state laws control workers’ compensation,” says Christopher M. Fox, an associate in the Philadelphia office of Littler Mendelson, a law firm devoted to representing management in employment matters.
Understanding various state laws can get complicated.
“Each state has specific rules regarding how you notify employees of their rights, how they can file claims and what doctors they may or may not see,” Fox says. “Your state laws will also detail what steps you must take to report workplace injuries.”
You can find information about your state’s laws on the U.S. Department of Labor Web site, www.dol.gov. Click on “Topics,” then “Workers’ Compensation” and then “State Workers’ Compensation Board.”
No–fault coverage
No one wants to deny workers’ comp benefits for legitimate accidents. But what about incidents that are partly the fault of the employee? Suppose the worker failed to use a safety device, engaged in horseplay or worked while intoxicated? What if an injury was self–inflicted?
Many employers would like to weed out such questionable claims as a way of controlling insurance costs and it’s certainly possible to mount defenses against such claims. But unless some clear–cut fraud is involved, prevailing in court can be difficult.
“Most workers’ compensation systems have become very liberal as to the definition of an accident,” says James J. Moore, president of J&L Risk Management Consultants, a Raleigh, N.C.–based firm that helps employers manage workers’ comp costs. “The fact is that courts deny benefits only rarely.”
Why? One reason is a matter of judgment. Legitimate claims often arise because employees were not paying attention to what they were doing or performed tasks out of their normal work routine. Trying to draw a bright line between legitimate and improper situations can be difficult.
Another reason is a matter of perception.
“In any workers’ comp case it becomes the ‘big bad insurance company’ against the ‘one little employee,’ ” Moore says. “Workers’ compensation judges tend to lean toward the testimony of the employee.”
Lawsuits avoided
While it may seem that workers’ comp laws are stacked in favor of employees, they also protect employers from costly lawsuits brought by injured workers.
“The trade–off for a no–fault system is that workers’ compensation is generally the exclusive remedy for employees injured in the workplace,” Fox says. “Only in very limited instances may an employee circumvent the system and sue the employer.”
What are those instances? Once again state law rules.
“Using Pennsylvania as an example,” Fox says, “an injured worker could sue his employer outside of the workers’ compensation system if the employer failed to maintain workers’ compensation insurance or the injury was intentionally caused by the employer. That being said, Pennsylvania courts have held that even a willful violation of OSHA safety regulations will not expose an employer to civil liability.”
Safety first
There is one highly effective way to control workers’ comp costs: Launch a workplace safety program and constantly work to improve it. If you experience fewer accidents, you’ll incur lower medical costs, which translate into lower workers’ comp premiums.
“A lot of employers come to me and ask, ‘How can we reduce the cost of this claim?’ ” Moore says. “Unfortunately, once a claim is made you are not going to reduce the cost. The best approach is to take steps to reduce workplace accidents that lead to claims. The least expensive accident is the one that never happens.”
While safety programs can become quite complex, it’s wise to start small and build from there.
The first step is to identify the accidents most likely to happen.
“Slips, trips and falls are by far the most common accidents for almost all employers,” Moore says. “I see a ton of knee and ankle injuries resulting from what seem like minor accidents.”
Such injuries can be damaging to the worker and to the business.
“If you cannot put your weight on your hip or your knees or your ankle, you are going to be out of work a long time,” Moore says. “That is very costly.”
Train employees to quickly correct conditions that might seem innocuous but that can lead to slips, trips and falls. For example:
- Tangled rugs Straighten any rugs that have been folded over. Watch for corners that curve upward. Make sure the rugs themselves don’t move around easily on the floor.
- Wet floors When it rains, do the floors just inside your doorways get wet? Dry them immediately and install high–friction rugs. If necessary, put up temporary barriers to guide people around wet areas.
- Obstructions Don’t leave boxes or other items in walkways. Scoop up any papers, textile scraps or other waste that may cause people to slip.
“Studies show that stepping to different levels causes many trips and falls,” Moore says. “So you need to pay special attention to stairways, any changes in floor levels or sections of floor that are on a gradient.”
Put roughened safety strips across steps to help shoes get a firm hold. Place mats at the bottom and top of stairs (and secure them well) to catch any water tracked in when it rains. Make sure handrails and banisters are secure.
Changes in floor levels need to be clearly marked. Install brightly colored strips along divisions and railings. As for floors that are on a gradient, post warning signs and a walkway railing.
Other risks
Workers, like many on the mattress factory floor who are engaged in repetitive tasks, are subject to carpal tunnel syndrome and other injuries that can spark workers’ comp claims.
“In any situation involving repetitive work, I recommend job rotation,” says Pam Hart, director of safety and wellness programs at Doherty Employer Services, a Minneapolis–based human resource outsourcing firm. “You can also encourage frequent stretching and short breaks.”
Make sure workstations are structured properly so that workers’ bodies are in comfortable positions. Consultants schooled in ergonomics can assist.
“Be especially careful about any jobs that require employees to lift, pull or hold heavy items,” says Claire Wilkinson, vice president for global issues at the New York–based Insurance Information Institute.
“Overexertion of this kind accounts for a large proportion of injuries.”
Involve employees
Employees can be excellent sources of information on workplace hazards.
“I highly recommend that (companies) gather employee feedback throughout the safety program and incorporate employees into establishing a safe place to work,” says Amy Trueblood, account manager at Awards Network, an organization in LaPorte, Ind., that sells safety awards programs.
She continues: “Many (companies) regularly hold meetings at the beginning of a new shift. I have found this presents a great opportunity for managers to discuss safety with their employees.”
Meeting topics can include how to avoid a known safety hazard, how an accident was prevented or how a recent accident could be avoided in the future.
“These meetings also give (companies) a chance to recognize employees for safety achievements in front of peers, which will positively reinforce employee attitudes about safety in the workplace,” Trueblood says.
Some employers establish awards programs that give employees incentives for injury–free work days. As vital as safety programs are, they can be counterproductive if poorly managed.
Trueblood offers four “don’ts”:
- Don’t set up safety goals that will encourage employees to not report accidents.
- Don’t develop a safety program but then fail to establish benchmarks or track its success over time.
- Don’t cap award earnings so that people slack off during periods when they can’t earn safety gifts.
- Don’t award safety gifts without considering the different tastes and preferences of employees.
Control fraud
As mentioned previously, the no–fault nature of workers’ comp laws usually means that employers find it difficult to defend against claims. But that doesn’t mean that steps shouldn’t be taken to ferret out cases of clear fraud.
Fraudulent activities result in increased workers’ comp exposure and higher premiums.
“Workers’ compensation fraud comes in many forms,” Fox says. “An injury can be staged. Or there can be simple malingering by an employee who is content collecting indemnity payments but who is really able to work. Or the employee may be collecting indemnity payments while working elsewhere.”
Insurance companies often contract with third parties to engage in surveillance that can help debunk workers’ comp fraud. For example, video footage may show the employee doing yard work or other physical labor that undermines a claim of his inability to work. Or they might uncover evidence that the person is working another job.
Stay involved
“Vigilance is absolutely key in managing workers’ compensation claims,” Fox says. “It starts at the time of injury with an investigation to determine if a claim is compensable under workers’ compensation laws. Beyond that you need to be involved after claims are filed.
“If your claims are being managed by a third–party administrator or an insurance company, make sure that organization is keeping an eye on the claim, assuring the claimant is not working elsewhere and checking periodically with medical providers to assess the status of the claimant’s medical condition.”
Workers’ comp benefits are typically divided into medical (reimbursement for doctor and hospital bills) and indemnity (payments for lost wages).
“Controlling medical costs is very important because they now represent a much larger portion of total workers’ compensation costs than they did 20 years ago,” Fox says. “And there is no indication that this trend will be reversed.”
To the extent that your state law allows, you can contest medical procedures that seem too frequent or costly. Turning again to Pennsylvania: In that state, if proper postings are in place and proper notification is provided to an injured worker, you can control the doctors seen by that employee during the first 90 days following a claim.
But after that period, the patient may go to any doctor. New Jersey, in contrast, allows the employer to control medical care for the life of the claim.
State law also can affect how you monitor the ability of the employee to work. In Pennsylvania, you can require that the employee see a doctor of your choosing twice a year for that purpose.
One more thing: Don’t treat accident victims like strangers.
“Keep in mind that injured employees are staying at home, looking at ads from workers’ compensation attorneys on the TV and computer,” Moore says. “So reach out to them. Call them. Send them get well cards. Asking how they are doing is important. Except for your safety program, it’s the best thing you can do to save money.”
Progress ahead
Safety programs have proven themselves effective tools for reducing workers’ comp costs and employers, including many in the mattress industry, have climbed aboard the bandwagon.
“Safety has improved considerably over the years,” Wilkinson says. “Employers are increasingly focused on making the workplace safer and reducing worker exposure to hazardous activities.”
But bear in mind that safety doesn’t happen by itself: It must be managed.
“A safe work environment starts with the attitude of top management,” Moore says. “Water runs downhill: If managers don’t care about safety then employees won’t.”
Additional resources
Need help developing an effective workplace safety program or better understanding workers’ compensation insurance? You may have good resources right in your community.
“Your insurance carrier may be glad to visit your business and conduct a safety inspection,” says James J. Moore, president of J&L Risk Management Consultants, a Raleigh, N.C.,–based firm that helps employers manage workers’ comp costs. “Further, your chamber of commerce and local community colleges may have leads to consultants who can provide assistance.”
Other options:
- Insurance Information Institute This organization offers a primer on workers’ comp. Check http://www.iii.org/smallbusiness/intro and click on “Workers’ Compensation.”
- Advanced Insurance Management How do you spot significant overcharges in your workers’ comp bill? That question and others are answered at www.cutcomp.com/questions.htm.
- National Safety Council This group provides consultants and maintains helpful materials on its Web site, www.nsc.org.
- Occupational Safety and Health Administration OSHA offers information on laws and provides links to state agencies at www.osha.gov.
3 ways to reduce premiums
Here are some ideas from Ron Peters, a partner in the San Jose, Calif., office of Littler Mendelson, a labor and employment law firm representing management.
- Investigate claims “A lot of employers just send to the doctor every worker who reports an injury,” Peters says. “That can lead to a lot of abuse. Once a culture of abuse gets started, it’s difficult to stop.” Investigate all claims to see if they are legitimate.
- Process claims quickly Set up procedures for handling injury claims efficiently. “Establish and communicate a policy that accidents must be reported immediately,” he says. “It is hard to investigate a report that is two days old. And late reports are often red flags for false claims.”
- Establish return–to–work plans “The faster people get back to work, the lower your expenses,” Peters says. “Get guidance from the doctor on how an injured worker can be accommodated in the workplace. Very often the individual can perform light duties.”
