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 lies 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, the 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.