The Executive Committee (TEC) members Gary Ullemeyer and Bill Litjen have identified six factors that cause workers’ compensation costs to go through the roof:
• Years of soft-market pricing by insurance firms.
• Lack of capacity and competition among insurers.
• Fallout from 9/11.
• Low interest rates/poor investing environment.
• High medical inflation.
• Fraud, abuse and regulatory inefficiencies.
The result is that many small and medium-sized firms are being strangled by a system that appears out-of-control. Ullemeyer and Litjen say companies can take five major steps to help lower these costs. Ask yourself if you have already taken them. They are:
Claim management
First, treat the injury. Use first aid when possible. If you can’t, call your workers’ compensation physician before sending the employee to receive care. If possible, avoid the emergency room and urgent care visits. Instead, use a pre-defined network of workers’ compensation medical providers. Don’t delay treatment, but scrupulously watch the nature of the care, such as excessive use of chiropractic or physical therapy treatment.
Don’t let employees miss a medical appointment because there will most likely be a missed appointment charge. Then, try to get the injured employee back to work as soon as possible, if necessary, by providing a modified work program.
Second, assess the claim. Many injuries/illnesses are simply not covered by workers’ compensation. They include alcohol or controlled substance abuse, intentional injuries, those suffered during direct participation in a felony or crime, voluntary wellness programs and vehicle accidents to or from work.
Third, manage the claim. Report all claims within 24 hours. Use designated health care professionals who have experience treating work injuries. Keep in close contact at all times with the injured employee, the treating physician and the claims examiner. And have a clearly defined early-return-to-work program.
Fourth, focus on the return to work. Statistics show that the ultimate cost of a claim is often associated with how long the person is out of work. So, a good return-to-work program should be based upon:
• Prompt injury treatment, making sure the care provider understands the job requirements.
• Communication by the care provider of a specific treatment plan to get the employee back to work.
• A written report from the physician stating what the employee can and cannot do.
• The creation of a modified work plan until the employee returns to his or her regular job.
Establish a medical network
The key here is to use medical specialists who recognize the importance of getting the injured employee back to work. Not to criticize primary care physicians, but most of them are not trained to treat occupational injuries, and they do not have the time to work with you on getting the employee back on the job.
Whomever you professionally engage, they should be willing to fill out the proper forms, specifically inform the employee about the treatment protocol, and explain to you what job modifications will be necessary upon the employee’s return. Remember, getting the employee back to work is to your best advantage.
Regarding the medical network, here are the specialists you should consider: psychiatrist (occupational medicine specialty), orthopedist; ophthalmologist; hand specialist (or other limb specialist depending on the work your employees do); and neurologist.
Select an
insurance broker
Uhlemeyer says your broker should meet four key criteria: experience/knowledge with your business/industry, a partnering mindset, the ability to represent multiple insurance lines, and the ability to deliver a full service range.
Don’t be bashful about asking for a certain amount of free consultation each year. A given should be quarterly loss analysis reports, recommendations about how to better handle claims, etc. Finally, ask your broker to tie their fees to results, such as putting 10 percent of their fee at risk if they don’t perform to agreed upon expectations.
The self-insured option
This may be a solution for the gutsy few, but it offers some advantages if your annual Wisconsin premiums exceed $200,000. It offers more flexibility on how claims are evaluated and handled. You have a getter chance of reducing the cost drivers of workers’ compensation. And it makes you more motivated to manage the workers’ compensation process. You’ll also see obvious financial and cash flow benefits.
If you want to pursue this option, Clifton & Gunderson, TEC’s Milwaukee accounting firm, recommends that you check with the state first. But in general, you must:
• Show a history of financial stability.
• Through an independent audit, show that you have the financial strength to self-fund any losses.
• Post a bond or letter of credit (a surety amount of $500,000 in Wisconsin) to establish the fund.
• Submit state compliance reports and agree to annual fund audits.
Long-term cost-cutting
strategies
You can take five steps to throttle down the escalating nightmare of workers’ compensation costs:
• Conduct regular claims reviews and fight fraudulent claims.
• Hire a risk manager to analyze the causes of losses.
• Educate (train) employees to avoid obvious injury situations.
• Work closely with your physicians to close old claims.
• Make sure you practice a "we care" policy with employees.
Let me conclude by saying that nothing has been said here about the obvious point that an "ounce of prevention equals a pound of cure." Start with a management commitment that focuses the company on safety first as a statement of "care" to all employees. Then use preventive hiring practices such as drug screening, effective hiring interviews and reference checking. Establish an ongoing safety/accident prevention program. Educate employees about all the ramifications of workers’ compensation.
Until next month, here’s to your effective workers’ compensation practices.
Harry S. Dennis III is the president of The Executive Committee in Wisconsin and Michigan. TEC is a professional development group for CEOs, presidents and business owners. He can be reached at (262) 821-3340.
– September 30, 2005, Small Business Times, Milwaukee, WI
