Sometimes company leaders may feel as though there is very little that they can do to control their company’s WC costs. The premium is what it is, and aside from encouraging workers to “be careful” there isn’t a lot they can do. This is simply not true! To see why, here’s a look at a selected few of the elements of cost that go into your WC premium, three specific things that you can control.

No matter what state your utility operates in and no matter how large or small your company, there are three basic elements of every WC claim that you can have some impact on. These three “levers” that you can pull are frequency, severity and lag time. Let’s define and then analyze each of these three.

Frequency: The total number of claims that are filed by an employer in a given 12-month period.
Severity: The cost of the average claim, I.E., how bad the injury is, and how long it takes for the worker to recover and return to work, (the number of “days off work” due to medical issues).
Lag Time: The amount of time, usually measured in calendar days, between the original date of injury and the date of filing the workers' compensation claim.

In the world of workers’ compensation, “Frequency” refers to the total number of claims filed by an employer in a 12-month period. Some elements of frequency may be fortuitous and the result of chance, but the majority of OTJ injuries occur due to errors by workers or flaws in the work processes management has designed. The frequency numbers go up further when a company has a flawed safety program or no effective safety program at all. Since one element of a good safety program is a Post Accident Review designed to uncover and fix the root cause of each injury, these factors are interrelated. The lesson here is that a good safety program can help develop work practices that reduce injury frequencies and ultimately lower workers’ compensation premiums.

[For a review of the Post Incident Review process see the RE-marks Archive for Post Incident Review, Part 1 and Part 2, in the 4/1/2000 and 7/1/2000 issues of RE-marks or click here for Part 1 and here for Part 2.]

To an insurance person, "Severity" is simply the cost of the injury in dollars. It includes the dollars paid in medical bills and lost wages (and in some cases, permanency awards) for the average claim reported in a given year. If after doing everything possible to prevent injuries, one does occur, employers may still have some ability to control the severity of the claim, or the amount of time the injured worker stays off work. Limiting the time off to that required for medical recovery is should be everyone’s goal. The outreach needed is so common sense it is hard to believe how seldom it is practiced. Simply stay in touch with the injured worker! If you value your staff, want them to get well and come back, why wouldn’t you say so? And say it clearly and often, too. Personal attention from management can reassure a worker who is often home, alone, and cut off from friends and co-workers back at the “shop.” Other programs can supplement this effort, including Return to Work (RTW) programs that offer work options with physical restrictions during the period of medical recovery, approved by the treating physician(s).

[For a review of Return to Work programs see the RE-marks Archive for the article on Case Management in the 7/1/2009 issues of RE-marks or click here.]

The final lever controlling your workers’ compensation cost is Lag time. As everyone knows, time is money. And, according to insurance industry standards, just one week’s delay in reporting an injury can increase the cost of the claim by 10%. As lag time increases, the cost of the claim increases, and as a result, the level of complexity in properly managing the cost of the claim also increases. The costs of both medical treatment and wage replacement for lost time increase substantially with delayed reporting, and also delays and complicates the physical healing process. Therefore, timely reporting of an injury is critical. This not only helps to control the medical treatment involved in the claim by ensuring the employee receives the appropriate and immediate medical treatment, it also facilitates a more efficient and productive return to work for the injured employee.

[For more on lag time and prompt reporting, see the RE-marks Archive for the article this subject in the 1/1/2007 Issue, or click here.]

Summary
There are a variety of steps a company’s leaders can take to reduce the cost of their WC Insurance. There are three key components of this cost that offer opportunities to reduce cost. They are related to the effects on claim costs of frequency, severity, and lag times. You should take steps to attack each element.

At the least, here are some basic steps that you can put into place immediately to reduce your WC claims costs and improve your loss history:

1. Review every incident of injury or near injury using a formal Post Accident Review program designed to uncover and fix the root cause of each injury, that is, to find out what went wrong, why it went wrong, and what can be done to ensure it never happens again to this, or any other, employee.
2. Establish an effective and efficient claims reporting procedure to ensure your employees know the company policy for reporting all injuries, no matter how slight, immediately to their supervisor, then can immediately report the injury to the person who is responsible for managing workers’ compensation claims.
3. Provide access to effective and educated medical providers. Some states permit the employer to designate occupational health providers. If yours does, select a qualified provider. If not, have a plan to assist any employee who seeks help. Either way, let your employees know that you have established a relationship with a provider who is an expert in the care of the particular injury types that they may be exposed to at work.
4. Offer a limited duty plan for workers who are only partially recovered and under medical restrictions. Keep in mind that in most jurisdictions you can bring a skilled worker back to a less skilled job, pay the worker only at the fair market rate for that job, and the WC insurer will pay a pro-rated, reduced workers' compensation benefit to the worker to keep the worker “whole” while you pay only the real value of the job. 
5. Provide for management contact with injured workers. A case management program requires regular follow-up by management with the injured worker, the medical care provider, and the adjuster. Keep in mind that the person calling the employee should be in that employee's direct chain of command. The call is not merely an attempt to remind a worker that you know he is off work with a workers' compensation injury, but it is an opportunity to show workers that you know they are out with an injury, they are missed, the company has an interest in helping them recover, and you have a light duty job for them as soon as they are able to handle it.
6. Create and follow a communication protocol for all injured workers. Although this is listed separately it is included in everything above, and is actually the first thing to implement. Right from the start, you should communicate your philosophy toward dealing with on-the-job injuries to all your employees.

If you take these steps you may find that you have more control over your WC costs than you thought!