David Leng, CPCU, CIC, CBWA, CWCA, CRM
Best Selling Author | Speaker | Certified Risk Manager | Certified Work Comp Advisor
Author of #1 International Best Sellers
Laws of Insurance Attraction & Turning Premiums Into Profits
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Face it, your employees are the engine that power your company, much like a race car engine. IIf you have a well maintained, high performance team, they can endure challenges and go the distance while achieving victory for you. In terms of business, they can help you stay ahead of your competition and create a long- time, profitable company. They allow you to open the throttle and GO!
The end game is as healthcare costs rise for individuals, and doctors find themselves conflicted over where they can be better compensated, we may very well be seeing a rise in fraudulent claims. As Stacey Cheese, Claims Manager of East Coast Risk Management, a licensed TPA and a claims manager for over 1,500 employers states, “We have seen a dramatic increase in questionable or “red flag” claims as the ACA has been phasing into place, and identifying the true cause of an injury is becoming a larger and larger area of focus in our Workers’ Compensation claims handling process.”
With companies looking to grow not only their top line, but also their bottom line, in today’s economic conditions, more companies are looking for anything and everything they can do to give themselves a competitive advantage. The Workers’ Compensation Experience Modification Factor (MOD) and its link to being either a competitive advantage, or anchor holding you back, is easy to overlook. Although it’s certainly a significant employee benefit on one hand, it’s also a powerful business benchmark that is carefully scrutinized by those who are evaluating possible business partners.
Hang on to your wallets. Employers already are seeing the tip of a very nasty iceberg as the insurance industry feels itself reelin’ and rockin’ on a number of different fronts, all adding up to the “perfect storm.”
Combined ratios for workers compensation are hitting upwards of 112 percent. This means the insurance industry isn’t making any profits on workers’ compensation this year as every dollar coming in is going out at $1.09. This is worse than 2011, when it was $1.02 going out.
Most business owners and managers purchase Workers’ Compensation in the wrong way. About 90 to 120 days before their policies expire, they put it out to bid and get quotes. Once in, they review the prices and usually select the policies with the lowest premiums.
While this may sound like a good business approach, it’s not only the least effective way to control Workers’ Compensation Insurance expenses, but it actually drives up the costs.
The number of on-the-job injuries continues to decline; yet the total cost of workplace injuries continues to escalate. The paradox of fewer injuries and greater costs continues to baffle employers and professionals in the insurance industry.
One of the most confusing components of an employer’s Workers’ Compensation Policy is the Experience Modification Factor. They watch it increase and decrease from year to year – higher Experience Modification Factors generally increase costs and lower factors reduce them. What’s often missing is an understanding of how the Experience Mod factor works and what an employer can do to manage it to the absolute minimum.
A perplexing paradox exists in the world of Workers’ Compensation insurance.
Thanks to safety professionals and the efforts of employers, employees have much safer workplaces, greatly reduced risks for injuries, and far better education in how to avoid injuries in the workplace of today than they did 15 years ago. According to the annual “Issues Report” of the National Council on Compensation Insurance (NCCI), from 1990 to 2004 there was a 45% decrease in work-related injuries.
Workers’ Compensation rates have been trending downward, as have the number of job-related injuries. Even injuries totaling $50,000 or more dropped for the first time in 2005.
But before we let loose the balloons and congratulate ourselves on what is clearly a notable achievement for American business, there’s another side of the story that deserves serious attention.
“We’ve got an employee who’s abusing the system and we’re just about fed up. So are our people.” Every insurance agent has heard these words from frustrated employers who are certain injured workers are taking advantage of the Workers’ Compensation system. While we all know such abuses occur, they may be far less frequent than we may think, particularly when 90% of job related injuries are first-time occurrences. Very few employees have a pattern of multiple injuries.
While Workers’ Compensation Managed Care is widely viewed as a means of controlling expenses, the results are sometimes quite different from what is expected. In fact, in many cases the consequences are not only unintended but also undesirable and costly to employers. How is it that a system developed to manage the utilization of care and costs associated with Workers’ Compensation actually ends up costing employers more than is necessary? Here are five common mistakes that are often made when working with WCMCOs:
Implementing a Return-To-Work (RTW) program often meets with resistance. “There are no light duty jobs”, “it’s too costly to implement”, “the employee will hurt himself again”, or “the employee will refuse the offer and be disgruntled” are just some of the many objections employers raise about RTW programs.
Whether you have five employees or 50,000, seasoned HR executives or not, sound HR practices can go a long way in controlling Worker’s Compensation costs. Front line managers are key to an effective Workers’ Compensation program, yet often an excellent employee is promoted to manager with disastrous results.
With few exceptions, Workers’ Compensation insurance rates are in decline across the country. Although rates are certainly an important component of Workers Compensation insurance costs, there are other considerations companies must address during a declining rate environment.
As a starting point, it’s important to have a basic understanding of the Workers’ Compensation insurance price cycle, Experience Rating, as well as some history of this coverage’s market.
How do we keep score in Workers’ Compensation? Typically insurance carriers provide “top of the line measurements,” such as total number of claim dollars spent in a given year, average claims costs for medical only claims and average claims costs for lost time claims to employers. They may even break down some injury costs by department.
A worker in a machine shop in Pennsylvania is injured when a conveyor belt snaps and strikes him in the face. On the surface, this appears to be a common workplace injury, especially in an environment where belts and pulleys are moving at high speed.
Throughout much of the country declining Workers’ Compensation rates are music to employers’ ears. After all, that seems like long-awaited good news, particularly since Workers’ Compensation is more often than not viewed as a necessity and a significant cost of doing business.
While the effects of fatigue have long been a major issue in the transportation industry, the problem has not received much attention in other industries. Yet, as Americans become increasingly a 24/7 society, fatigue is permeating workplaces across the country. According to research in the Journal of Occupational and Environmental Medicine, almost 40% of American workers experience fatigue.
You can also use any of the items from my BLOG as you need them. Please add my short bio to the end should any of your members have questions or comments and would like to reach out to me.
David R. Leng, CPCU, CIC, CBWA, CRM, CWCA, is author of Stop Being Frustrated & Overcharged and vice president of the Duncan Financial Group in Irwin, Pa. He is also an instructor for the Institute of WorkComp Professionals (IWCP) and can be contacted at firstname.lastname@example.org. For more information, visit www.StopBeingFrustrated.com