Controlling Workers’ Compensation Claims and Costs

There are precautions you can take to minimize risk of hiring employees with a tendency toward Workers’ Compensation claims.

There are six aspects to the best practices for controlling work comp claims:

1. Hiring
2. Training
3. Culture
4. Early return-to-work programs
5. Accident investigation
6. Claim analysis.

Hiring

We’ve all heard horror stories about new employees who file work comp claims after only a few days on the job. To avoid situations like this, it is critical to manage the hiring process. In other words, avoid troublesome employees from the beginning. However, in today’s environment of HIPAA, ADA and privacy concerns, that’s easier said than done, and it’s often unclear to employers how to properly, and legally, navigate this issue.

Although many states prohibit employers from asking about past work comp injuries, there are precautions you can take to minimize risk. Checking references is a good place to start. Don’t be afraid to ask former employers about applicants’ safety practices. Do be cautious how you use any information that you learn. Telling an applicant he or she didn’t get the job because a former employer disclosed a work comp history is only asking for a lawsuit.

Criminal background checks and drug testing are commonplace and should be conducted before hiring a new employee. Companies that aren’t conducting these checks are susceptible to making poor hiring choices. Why? They may receive an abundance of applicants rejected by other firms that do test, leading to a sub-standard employee pool.

The most cutting-edge form of preemployment screening is strength testing, and specialty firms with the proper equipment are popping up all over the country. Strength eliminates applicants who are physically incapable of performing required duties. It is also much safer to send prospective employees to a professional strength tester than to “test” their skills on the job. Strength testing could also help determine whether an employee is ready to come back to work after an injury.

Before strength testing becomes a part of your hiring process, it is important to have a detailed, written job description in place. This should specify all job functions, including frequency of tasks, body positions required to perform tasks, and lifting and handling requirements. Objective requirements of a job, such as the minimum amount of weight to be lifted, can assist a company with hiring and firing decisions, as well as lawsuits that could occur as a result of a termination.

A written job description is also useful during the initial interviews with your applicants. During interviews, applicants should read the full job description and confirm that they are able to perform the essential job functions. If an applicant cannot meet the required functions, a new applicant should be considered.

Training

Safety training and monitoring are common practices. Although you may have conducted a training session on a specific topic, the chances are slim that your employees remember the full scope of the discussion. Continuous reinforcement of important safety topics and involvement from your safety committee are crucial for keeping issues at the forefront of your employees’ daily tasks.

In addition to training, reinforce topics through paycheck stuffers, handouts, toolbox talks or company newsletters.

The final point to remember is that whenever training is conducted, it is important to document and record the session with a sign-off or sign-in sheet showing attendance. These documents could prove useful should any lawsuits arise as a result of inadequate training, or during OSHA inspections.

Culture

While safety training is important, it is not feasible to train someone all day, every day, on safe work behavior. Your company culture should pick up the slack between training and actual job performance. Also, maintaining a safe corporate culture will keep safety on your employees’ minds.

Inevitably, there are rush orders and delayed routes, but it is important that employees know their priorities. No one should ever sacrifice safety to get a product to a customer more quickly. If an accident occurs as a result of rushing or cutting corners, the net effect would actually be a slower response to the customer.

Early Return-to-Work Programs

Early return-to-work programs (also known as light duty) allow companies to protect themselves from malingering employees, while simultaneously promoting quicker recoveries. The ultimate goal is to get employees back to work and reduce claim payments for lost time (aka indemnity losses). Many insurers have designed light duty programs that can be modified for an industry. Common tasks in the welding and gases industry include inventory, paper filing, conducting customer service surveys, cleaning the showroom, sweeping the plant, checking cylinder labels and watching safety training videos.

One of the primary drivers behind your work comp premium is your Experience Modification Factor (the number that compares your claims against your peers and gives you a multiplier against your premium). Bringing your employees back to work sooner reduces claim dollars, which significantly decreases the adverse impact that your experience mod will incur.

Work comp claim payments are split into two major categories as they are applied to your experience mod: medical only claims and lost time claims. Medical only claims involve medical expenses alone, while lost time claims involve indemnity payouts when employees miss work as a result of injuries. If a claim is medical only, its impact on your experience mod is decreased by 70 percent of the claim (i.e., out of a $1,000 medical expense claim, only $300 would be applied toward the calculation of your experience mod). If a claim includes lost time payments, the full amount of the claim is applied toward the experience mod, which could end up costing a company thousands of dollars.

Accident Investigation

To prevent incidents from reoccurring, it is important to document and investigate every accident or near-miss. When you realize why an incident occurred, you can better manage the risk in the future.

The investigation includes a description of what happened from the employee(s) involved, comments from the supervisor and analysis by management and the safety committee. If possible, tours of the accident site or pictures are helpful for documentation. After the investigation is complete, proper training or instructions for preventing future incidents should be communicated to all employees performing similar duties.

Claim Analysis

Similar to accident investigation, the best way to predict the future is to take a look at the past. While investigating, look for what caused a specific claim. When analyzing claim data, look for areas where injuries are either more frequent or severe to help prioritize efforts for control. A good work comp platform incorporates both strategies.

When analyzing claim history, look for trends. They could include injury types (see the chart for an example), dollar amounts, specific employees, days of the week, season, year, location, etc. Once trends are identified, it is important to ask questions like, Why did this happen? What can we do to avoid having it happen again?

Six Ways to Control Claims

1. Hiring
2. Training
3. Culture
4. Early Return-to-Work
5. Accident Investigation
6. Claim Analysis

Do it Today

In order to effectively control your work comp costs, a balance of structured hiring practices, training, return-to-work programs, accident investigation and claim history analysis is needed. The good news is that all of these recommendations are relatively inexpensive (if they cost anything at all), especially compared to the increased insurance costs if best practices are not implemented. Make the proactive decision to put the measures in place now. This will not only make your employees safer, happier and healthier, but lower your work comp costs and make your operation a more desirable risk to insurance carriers.

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