Workers’ Compensation Savings Strategies

Employers do not have to be held hostage to rising workers’ compensationcosts. But it takes strategic planning to get and keep them under control. Hereare some ways to control costs and to build a top-notch workers’ compensationprogram at the same time:

Keep employees healthy. MCG Health, Inc., is not experiencing workers’compensation premium increases largely because it is committed to keepingemployees healthy, says William Hayes, vice president of human resources for thenonprofit corporation and head of the health system of the Medical College ofGeorgia. “Healthy employees are less likely to file for workers’ compensationbenefits.”

MCGHI’s 3,000 employees stay healthy because of a health insurance plan thatprovides annual physicals and low-cost coverage to encourage them to getnecessary medical care. The organization also has a wellness program and anexercise facility.

Prevent workplace injuries and illnesses. “Preventing claims is always themost effective strategy,” says Eric Oxfeld, president of the NationalFoundation for Unemployment Compensation and Workers’ Compensation inWashington, D.C.

Prevention also demonstrates a company’s commitment to employee health–amorale booster–while saving money on other insurance such as group health anddisability, says Sara Taylor, president of Structured Health Resources Inc., aChicago disability-management consulting company.

Go beyond compliance with Occupational Safety and Health Administration (OSHA)regulations and examine workers’ compensation claims to find high-risk areas,says Paul Moss, vice president for global health, safety, and environment atDade Behring Inc. For this medical-diagnostics manufacturer, motor vehicleaccidents and ergonomics were the biggest workers’ compensation costs. To reduceaccidents for the 750 employees who operate cars and vans, the company providesannual defensive-driver training and requires accident reports for everyincident.

Dade Behring also initiated an ergonomic program. Initially, 77 percent ofthe employees assessed experienced varying degrees of physical discomfort. Aftertraining and changes to the work environment, 90 percent of those employeesreported the reduction or elimination of symptoms.

    Keep employees happy. Good labor relations are crucial, Oxfeld says. “Theworkers’ compensation experience is always worse in work environments wherethere is a lot of labor-management tension.”

Promote early claim reporting. Front-line managers need to know how to handlea workrelated injury or illness. At Dade Behring, front-line managers aretrained to contact the proper personnel, ensuring that claims are handled asquickly as possible, Moss says.

    Manage medically. International Truck and Engine is taking medical casemanagement a step further by targeting its “highest-risk plant”–a3,500-employee facility that files 70 percent of the 17,000-employee company’sworkers’ compensation claims–says Dr. William Bunn, vice president of health,safety, and productivity. The self-insured company is working with medicalproviders near the Springfield, Ohio, plant to develop treatment guidelines.Injured employees will receive the same quality of care, regardless of theirmedical provider, so that they can return to work as quickly as possible.

Establish a return-to-work program. Taylor recommends a “work maintenanceprogram” in which employees stay at work while getting the medical attentionthey need. For example, an employer could help an employee with carpal tunnelsyndrome by setting up surgery on a Friday afternoon, arranging transportation,and getting the employee back to work, with restrictions, on Monday morning.

    Even better, create a disability-management culture. Employers need to changetheir attitudes about disability, Taylor says. “Disability is negotiable.”What should determine employee disability is not the medical provider but theemployer’s willingness to adapt to the restrictions or limitations of an injuredemployee.

Manage vendors. Make sure internal departments and external vendors are clearabout their roles and responsibilities, Taylor says. Establish accountability.At Dade Behring, Moss says, it is necessary to “aggressively manage” itsthird-party administrator to ensure that cases are handled thoroughly.

Develop supporting plans. Company policies describe how the corporate cultureprevents and manages disability, Taylor says. Awareness of current policies isessential to improving disability-management efforts and to making betterpurchasing decisions.

Benchmark results to measure progress. “Internal data must be captured toanalyze the effects of your program,” Taylor says. Begin by assessing the costof workers’ compensation as a percentage of payroll or the cost of lostproductivity per injured worker. Also track claim-specific information, such asnumber of workers’ compensation claims, number of lost workdays, average claimcost, and average claim duration.

Shop around. “A lot of medium-sized employers are going to find their ratesgoing up rapidly,” says John Burton, publisher of Workers’ Compensation PolicyReview. To get a better deal, employers should investigate policies with largerdeductibles, state-based assigned-risk pools, or group self-insurance, which istypically offered through state-based trade associations.

For Moss, pricing was about the same from several insurers, so he lookedclosely at value-added services, such as claim-management services, and theinsurers’ records for closing cases. After shopping around, Dade Behring keptits insurer–but with higher service expectations.

Consider self-insurance. Even though MCGHI has not seen a premium increase,it will begin self-insuring its workers’ compensation program in 2003, Hayessays. He expects that selfinsuring will cut costs in half.

The organization currently has a $250,000 deductible for workers’compensation insurance and is paying a total of about $400,000 a year inworkers’ compensation expenses.

Get involved. Employers play a key role in developing state workers’compensation laws, Oxfeld says. “States will listen when employers can showthey are having a problem.”

Workforce, February 2003, pp. 46-48 — Subscribe Now!