You don’t have to watch the news for very long before they start talking about inflation. Gas prices are high, building materials have been either unavailable or exorbitantly priced for two years now, and raw materials for manufacturing are along the same lines.
But what they’re not telling you is although your workers’ compensation program might not cure a disease or end a war, it could be the solution to the impact of inflation on your business.
Workers’ compensation is an employment cost. Every dollar you pay your employees increases your premium. Unlike your taxes or even the cost of health insurance, you have tremendous control over your workers’ compensation costs. When you can reduce your overall cost of labor, you automatically increase your margins, which will help to overcome the impact of inflation.
Taking control of your workers’ compensation is a process, and it takes time and effort to bear fruit, but there are a few things you can review today to set you on the path of controlling your workers’ compensation costs.
1) Review your classifications Your business is classified based on what you do. Unfortunately, the assigned classifications are often wrong or not applied correctly to your employees. In most industries, you classify the business and not the individual job activities inside the company. It can get complicated, but the most important thing is not to take for granted that your business is classified correctly. Your classifications determine your rates and also impact your experience mod. Being misclassified means your business is not paying what it should for workers’ compensation. You cannot rely on the classification’s 3–5-word title on your workers’ compensation policy. Classifications often contain paragraphs of information detailing exactly what businesses do and do not fit into that code. Classifications are amended, added, or removed frequently, and companies change over time. So just because your classification was correct years ago does not mean it is still correct today.
2) Form a relationship with a skilled occupational physician The treating physician is the most critical person in a workers’ compensation claim outside of the injured worker and the employer. Almost all states offer the employer some degree of control when choosing a physician to treat an injured employee. You reap several important rewards when you direct an employee to a physician skilled in occupational medicine. Occupational physicians understand that continuing to work is almost always in the best interest of the injured employee’s recovery. Employees recovering at work will lower the overall cost of the injury and limit the impact of the injury on your experience mod. A relationship with a physician also dramatically reduces the chance an injured employee goes to the emergency room for treatment when they have suffered an injury that does not require emergency care. Investigate the laws in your state to determine what rights you have for directing care and discuss with your agent if you aren’t taking advantage of your rights!
3) Returning injured employees to work immediately
Directly connected to having the right doctor is bringing injured employees back to recover at work immediately after an injury. The American College of Occupational and Environmental Medicine has identified three fundamental reasons an employee should not be able to return to some level of work following an injury:
1) They are hospitalized
2) They are contagious, and it is dangerous for them to be around their co-workers
3) They are medicated in a way that makes it unsafe for them to get to or be at work
Outside of these three situations, employees can return to work doing SOMETHING productive if you welcome them back.
The process begins with your team creating a Recovery-at-Work job bank. This is a collection of jobs of varying physical demands that an injured employee could do until they are ready to return to their full job. Having this job bank prepared prevents a situation where you are trying to come up with a solution on the fly and can’t think of anything. Preparation is key!
It is important to remember that these jobs do not need to be strictly sedentary. Many employees are capable of some amount of physical activity, even early in their recovery. Having jobs ranging from sedentary to close to the physical demands of their normal position is essential, so you can always accommodate the restrictions prescribed by the doctor. Not sure what to add to your job bank? Task your Safety Committee with brainstorming these jobs. Think about tasks that aren’t being completed as often as you’d like. Consider how you could modify their regular duty to accommodate restrictions such as not being able to use one of their arms or simply limiting lifting.
The key is to return them to some sort of work as quickly as possible to eliminate or limit the amount of lost wage payments the insurance company is required to pay as a result of the injury. In 36 states, if there are no lost wage payments made, the impact of the injury on your experience mod is reduced by 70%.
4) Know your minimum mod
The average experience mod is 1.0, and many employers are under the impression that as long as they are below 1.0, they have a successful workers’ compensation program. Do you know how low your experience mod could go? Do you know how much capital you have locked up in your workers’ compensation program that is driving up your costs and aggravating the impact of inflation on your business?
The minimum mod is what your experience mod would be if you suffered zero employee injuries during the period of time covered on your mod. When you know this number, you unlock knowledge of your potential.
Having a 1.0 experience mod is like receiving a C on your report card. It’s average. Achieving your minimum mod is earning an A+. Until you know what that A+ number is, you have little way of knowing how you are really performing.
When you take control of your workers’ compensation, you earn more flexibility with your cash. It becomes easier to absorb the higher costs of running your business right now. With so many external forces outside of your control, don’t miss the opportunities to seize control when it’s available. Building a successful workers’ compensation program isn’t a cure-all for the impact of inflation on your business, but it is a solid step in the right direction.
Kevin Ring is the Lead Workers’ Compensation Analyst for the Institute of WorkComp Professionals, which trains, certifies and mentors' insurance agents to help employers reduce workers compensation costs. A licensed property and casualty insurance agent, he is the co-developer of a worker's comp software suite that will help insurance professionals in working with employers. Contact him at (828) 274-0959 or Kevin@workcompprofessionals.com.