Commercial HVAC: Reducing Your Workers' Comp Premium

Feb. 10, 2014
Despite the rising premiums, employers can take steps that mitigate the impact of these cost drivers and help control both their workers’ compensation premium and their overall business costs of work injuries.

Any good business wants to take a step up when one of its employees is injured on the job, and worker’s compensation premiums are a necessary expense to that end. There’s nothing wrong, however, with doing everything possible to keep those premiums as low as possible. Unfortunately, after years of low pricing, workers’ compensation premiums have been trending up. The uptick is greater for some employers and less for others, depending on factors such an organization’s injury experience, changes in business, loss controls, and projected costs of future claims.

Several factors are driving the uptick:

• Rising medical costs. Medical costs in workers’ compensation run higher than medical costs generally. They have come down from the double-digit annual increases of 10 years ago, but nationally are still rising 5% to 8% annually, according to studies by the National Council on Compensation Insurance and the Workers’ Compensation Research Institute. Just a few years ago, medical costs comprised 40% of the average lost-time claim’s total claim costs; now they’re 60%.

Increasing claim severity. Among the more expensive trends: increase in the use of narcotics for pain, increase in spine surgeries, increases in diabetes and other co-morbidities caused by the increase in workers who are overweight and workers who are older, increase in permanent total disability claims, and changes in federal Medicare Secondary Payer rules.

• Rising payrolls. Amidst an (admittedly slow) economic recovery, many employers are expanding operations, creating jobs, and increasing payrolls — upon which premiums are based.

Despite the rising premiums, employers can take steps that mitigate the impact of these cost drivers and help control both their workers’ compensation premium and their overall business costs of work injuries.

This first in a two-part series looks at some of the major factors that you control following an injury. Doing these well can have a substantial positive impact on your organization’s workers’ compensation premium.

Examine Your Return-to-Work Program
If you’re not sure why this matters, consider the following example. It demonstrates how your return-to-work program impacts your premium.

Let’s say one of your employees is injured on the job. With the treating doctor’s permission, you could choose to bring him back to work within the first few days in a light-duty capacity while he is still recuperating. Or you could choose to wait until he is fully healed, which, in this example, ends up taking three months. To show how the impact on premium plays out, let’s assume you have an annual workers’ comp premium of $21,759 and an experience modification factor of 1.0.

As you can see, getting employees back to work sooner rather than later can have a huge impact on your premium. Therefore, ask yourself, “Have I thought through the broad-based variety of possible jobs that a recuperating employee could do?”

Failure to compile job possibilities for recuperating employees is typically one of the biggest missing pieces in employers’ return-to-work programs. It’s something that needs to be done ahead of time, before an injury happens. That enables the employer to respond quickly and return the employee to work without the delay of figuring out a job that can accommodate the doctor’s restrictions. Delays of even a day or two can increase claims costs substantially by triggering wage-loss payments that would otherwise be unnecessary.

Some employers call it the “job jar”— lists of job ideas that are categorized as, for example, sit-down work, light-duty work, or non-repetitive work.

Here are some other questions to ask yourself:

Does our company have a point person for return-to-work? You need to have someone accountable for making sure that, anytime an employee is injured, the steps are taken to get the employee back to work as soon as medically possible. That generally includes working with the treating doctor(s) and involving the employee’s supervisor. If your firm has multiple locations, you may need special communications to coordinate accountabilities and make sure they are followed through.

Do our injured employees always understand their treating doctors’ medical restrictions? Failure to follow the restrictions prescribed by the doctor can result in reinjury and costly claim complications. Take time with the employee when he or she comes back to work. Go through the doctor’s restrictions with both the employee and the supervisor. Address situations in the job that could give rise to lapses in complying with the restrictions.

Are we aware of the employment options that make early return-to-work possible? Many employers are not aware they can bring an injured employee back to work at less than his or her full, pre-injury wage and that their workers’ compensation carrier will make up most of the difference.

To accommodate the medical restrictions of a recuperating employee receiving workers’ compensation benefits, you can:

• Reduce the employee’s work hours or work days

• Bring the employee back in a different position at a reduced wage

• Alter the employee’s equipment or work area

• Swap tasks with other employees, or reorganize work within the injured employee’s group

• Arrange for temporary work in a different area of the company

• Create a new lighter-duty job that will be transitional and temporary.

Ask your claims representative how these and other options apply to your organization, and the circumstances of a specific injured employee.

Do we make an occupationally focused 
clinic available to injured employees? 
Quality of treatment counts for a lot in medical costs and medical outcomes. This ultimately impacts your productivity and bottom line. A medical provider may be known as an occupational medicine specialist or, more likely, may have a less formal but effective occupational focus that can serve you just as well. Just ask. Some questions for a prospective clinic:

• Do you treat the injured employees of other employers?

• Do you accommodate return-to-work so that injured employees can heal while on the job?

• What will you need from us (for example, the injured worker’s job description)?

• Would you like to come out and look at our facility and jobs? Ask whether you would be expected to compensate the physician for his time.

For recommendations on occupationally focused clinics in your area, talk with your claims representative.

Do we know the status, expectations and return-to-work date for each injured employee? You should. You want to know if progress slows and what you can do to help get things back on track. Have a plan for each injured employee that includes the timing of return to work and any accommodations necessary.

Stay in touch with the employee, the supervisor and the claims representative. Keep a calendar. An injured employee off work faces emotional, uncertain days. Let the employee know that you are concerned about his injury and recovery, that you value what he brings to the organization, and that you are looking forward to his return. Employers are busy and can easily lose touch on a claim. Consider this a priority, part of your human resources responsibilities.

How quickly are work injuries reported
to our workers’ compensation insurer? 
This is an important statistic. As far as compliance with state deadlines goes, what starts the clock ticking is when you (the employer) find out about a work injury. If a supervisor sees someone get hurt, for example, that constitutes “employer knowledge” of the injury and starts the clock ticking toward the state deadline by which the injury must be reported to your insurer, and the deadline by which your insurer must accept or deny the claim and reimburse the employee for any initial loss of wages.

Report all injuries right away. Catastrophic injuries must be reported within 24 hours. Even if you don’t have all the information, go ahead and report what you know. Besides complying with state deadlines, your timely reporting enables your workers’ compensation carrier to be responsive to your employees and helps get each claim off to a good start. Delayed reporting can result in longer-duration claims and higher costs.

Beware of communications breakdowns. Employees need to know who to contact when injured on the job. Supervisors need to know that, too. Your organization’s point person for reporting claims needs to act with a sense of urgency. Organizations with multiple locations need to coordinate reporting responsibilities.

A Place to Start
Reducing overall costs relating to work injuries encompasses not just an employer’s workers’ comp premium but also the costs of absenteeism, indirect costs of injury, and impact on productivity. Employers have the responsibility for carrying through on the things within their control that will dramatically impact their workers’ comp performance, costs and insurability.

Your organization’s answers to these questions will show where you should think about focusing efforts, and that may call for broader involvement across your management team.    

The information in this article was reprinted by permission of SFM Mutual Insurance Co. SFM is the leading workers’ compensation insurer in the Midwest, serving employers of all sizes and types in 16 states. To speak  with SFM’s risk management consultants, call 800/937-1181. The company has many resources available on its website,