SAFETY SOLUTIONS: How to Control Workers' Compensation Costs
We had a serious accident! Ohhhh no! There goes
the cost for our workers’ compensation premium
for the next three to four years.
Workers’ compensation insurance - these mere words
can make a small business owner’s blood pressure soar.
Throughout the United States, the cost for obtaining
workers’ compensation insurance is outrageously expensive.
Perhaps the most troubling risk for small to large
employers in the United States is workers’ compensation.
Over the past three years, its costs have increased
an average of 50 percent and currently account for $.67
of every dollar spent on casualty insurance. This increase
does not reflect any corresponding increase in workplace
hazards or change in the types of reported injuries or
diseases. In fact, spurred by the U.S. Occupational
Safety & Health Administration, employers have successfully
reduced the frequency of workplace injuries by
almost 40 percent since 1990. Despite these safety
gains, workers’ compensation costs have continued to
rise far faster than the medical inflation rate.
What can I do to control
these rising costs?
Implementing a good safety program, properly classifying
employees, managing workers’ compensation cases
and potentially using an experienced safety consultant
can all help. Understanding which types of accidents fall
outside its scope can also decrease the number of claims.
The best way to control the cost of workers’ compensation
insurance premiums is to avoid injury claims.
How do you avoid having an injury? One way to lower
injury risks is by having a safe work environment that follows
all the OSHA and EPA safety regulations. Another
method is to have an effective safety training program and
ongoing programs to promote safe work habits which are
important keys to preventing employee injury.
Once employees are properly trained to perform their
jobs safely, it’s important to maintain safety awareness. In
addition to posting safety reminders in common areas,
consider holding workshops or hosting safety seminars to
talk in-depth about the specific issues affecting workers. In
most states, workers’ compensation is “no fault.” That
means that on-the-job injuries are covered by workers’
compensation insurance regardless of the cause of the
accident. In other words, if employees are injured on the
job due to their foolish or careless behavior, those accidents
are covered by your workers’ compensation insurance.
This is why it’s crucial to continually promote safety
awareness and safe work habits.
Make safety a priority
If you have not done so already, develop a written safety
control program. Better workplace safety leads to fewer
claims, and fewer claims directly affect your workers’ compensation
A disciplinary program also should be incorporated into
the safety program, one that holds both management and
hourly employees accountable for breaking the rules or
rewards them for correctly following safety procedures.
A critical component to success is that the program
needs to be endorsed by top management to ensure proper
execution. Managers and lead workers should be
assigned various responsibilities for safety enforcement in
each work area. Holding regularly scheduled safety meetings
and/or discussions about specific issues related to
the work environment will convey the importance of safety
at the company and the expectations necessary to comply.
If you have a safety committee established, give them assignments to work for you instead of them giving you
issues that may never get worked because of time
Take action when a claim occurs
When an employee experiences an injury on the job,
complete an accident report with as much detail as possible.
Take photographs of the scene and talk to any potential
witnesses about what happened. The first report of
injury should be sent within 24 hours to the insurance
company to ensure prompt handling and to help fight
fraudulent claims. A drug test should be required of the
employee involved. While a positive drug test will not
allow you to deny a claim in most states, it will certainly
help. (You also might consider conducting random drug
testing for all employees. Be up-front about telling all
potential employees that submitting to random drug tests
is a requirement for employment, which should decrease
any potentially drug-related claims.)
Once again, learn how to manage the program or hire
an outside firm to do it for you. Establishing “return to
work programs” are your best return on your investment.
Inappropriate claims are a major component of the workers’
compensation problem. As many as 25 percent of all
filings may have some element of impropriety. There are
many possible causes, including misunderstandings, honest
mistakes, cost shifting from non-occupational health
care, employee resentment, unscrupulous service
providers and outright fraud. The National Insurance
Crime Bureau estimates that workers’ compensation fraud
alone costs insurers $5 billion each year. This, in turn, is
billed back to employers in the form of at least $6.5 billion
Workers’ compensation laws can create irrational incentives.
The longer an employee is out of work, the more
likely he or she is to get a cash award. Sometimes,
claimants with injuries that should keep them out of the
workplace for two or three days are tempted to stretch
their absence to two or three weeks or more. Many don’t
even regard such “secondary gain” behavior as fraudulent.
Every workers’ compensation jurisdiction has a waiting
period - typically three or seven days - before a claimant is
entitled to wage-replacement benefits. By extending an
absence, an employee becomes entitled to indemnification
for lost wages, often on a retroactive basis to day one of
the claim. For many lower-paid workers, the “tax free”
wage replacement represents an acceptable lifestyle.
The growing role of health care providers in the shaping
of public policy has contributed to the stretching of
absences. Workers’ compensation was initially a twosided
compact between employers and employees, but it
has now become a triangle with providers as the third
side. The emergence of this triangle has had an adverse
impact. The key problem has not been the amount
charged per visit but the number of visits per claim.
When medical services are over-utilized, employers must
foot the bill, but employees suffer, too. The longer they
stay out of work, the more likely they are to perceive
themselves as disabled and the harder it becomes for
them to re-establish the discipline of being in the workplace
eight hours a day. Employees pay in another sense,
too: higher workers’ compensation costs ultimately mean
If you need help with your program, or need Job Safety
& Health Analysis (JSA) for your work areas, let me know
at the magazine and I will send you a sample copy and
program of how to develop the best accident reduction
tool in the safety world.
Take care and remember the magazine is here to help you.
For more information, click on the author biography at the top of this page.