California’s Workers’ Compensation Problem – The Hidden Cause

Most, if not all, of work done over the past year on workers’ compensation reform has been directed at symptoms and not causes. The true cause of the workers’ compensation problem is poor employer management practices.

The issues of legal and medical reform and control are directly proportional to the magnitude of the employee injury situation. If the majority of employers managed better, and this resulted in fewer injuries, the professional services industry designed to service these claimants would not have grown to its current size. The driving force behind reform is to control the runaway costs associated with this industry. These are further aggravated by clever strategies to create claims and prolong and take advantage of legitimately injured workers.

This abuse has existed since the system was created, but it is the magnitude of neglect by management that has created this opportunity for the attorneys and doctors who service these claimants. The greatest impact can come from fewer claimants and not just legal and medical reform.

The employers in the state have a decision to make. They can continue to do damage control on a claim by claim basis and try to influence reform. Both of these are reactive and costly. They are also expenses that greatly reduce the employer’s bottom line. An alternative strategy would be to go the source. That is to address those issues that are causing the claims in the first place. This is an investment.

The obvious choice is to invest in a program to limit, or totally overcome, all employee injuries. If this is so obvious why don’t most employers choose to adopt this strategy? I believe that the reasons are many fold but generally fall into the following categories:

• Lack of employer understanding that loss prevention is a profit protection and competitive strategy and should be an objective or goal of any employer business plan
• Poor employer HR Systems to include recruiting, hiring and development/ training
• Lack of belief that they can control the amount of job related injuries

All of these can be overcome by an agent or broker who will take the time to educate their client. Insurance companies have greatly reduced the amount of service time and resources. It is now left to the agent or broker to fill that role. This can be accomplished many ways and without exceptional cost.

The agent or broker can manage the process without having to provide all of the services. It is their role today to promote the idea of prevention and to help the client obtain resources to build a responsive prevention program. It can start with a question on how much time an employer spends today on prevention. This will tell you how well a particular employer understands the impact of employee injuries. That will lead to a discussion of what an effective prevention program looks like and how it could be designed.

Today many brokers help in the area of damage control but spend little time promoting prevention. A program that blends the two is more powerful. This blended service program, with a focus on prevention as the starting point, will eventually lead to success in workers’ compensation cost containment.

Jim Hull is the president of the J. R. Hull Co. Inc., a management consulting firm specializing in building value in closely held companies. For more information, visit www.hullconsulting.com.