Take Control of Your Workers’ Comp Costs

What’s happened to workers’ compensation reform in California? The 2003 legislation enacted strict medical guidelines, followed the next year with a compensation schedule for medical provider networks and it worked. Workers’ comp costs came down 50 percent almost overnight.

That was then; this is now.

In mid-August 2008, the state’s Workers’ Compensation Insurance Rating Bureau voted to recommend raising premium rates by 16 percent. That’s not all. The Bureau reported that a combination of “medical-cost inflation continues to rise and claims frequency that had been declining has flattened.”

What does this picture tell us?

Worker’s Comp is an employee benefit. Although workers’ comp has been around for a century, it is misunderstood by employers and employees. Workers’ comp is essentially a company-paid employee benefit, providing employees with medical care coverage, a weekly paycheck and a death benefit if they are killed on the job.

Workers’ compensation insurance really doesn’t function like other forms of insurance. Instead, the employer pays virtually the entire cost of an injury. The insurer advances the employer money to pay medical expenses for the injury, plus the weekly indemnity payments to recovering injured workers.

Clearly, both employees and their employers should recognize workers’ compensation as an employer-paid employee benefit.

Employers let down their guard. Like other employee benefits, workers’ comp needs constant employer attention. Unfortunately, when workers’ comp rates drop as they did in California, employers seemed to conclude the problem was solved and, as a result, they let their guard down.

It wouldn’t be the first time that once a crisis appears to be resolved that we turn our attention to more pressing issues. When that happens, employers tend to give less attention, for example, to investigating job-related injuries to identify the cause of injury and prevent it from happening again.

Employers tend to think all is well when a bill goes down about 60 percent, as it has for workers’ comp in the past few years. When this happens, neglect can set in.

The supervisor is key. While the role of the supervisor is critical to a company’s operational success, the supervisor’s role in managing an injured worker is often overlooked. Yet the supervisor knows the worker best, and it only makes sense that he or she should be involved from the moment an injury occurs.

As the University of Santa Cruz states, “Prompt medical care is essential to a quick recovery from an injury or illness …. It is the responsibility of the employee’s supervisor to ensure proper medical treatment is obtained.”

The supervisor’s role includes immediate and continuing follow up to ensure the employee believes the company cares, is receiving proper care, and knows the supervisor is there to provide understanding and give support. All too often, an injured employee doesn’t hear from the employer and feels isolated.

Because of the supervisor’s relationship to an injured worker, he or she is the person who can do the most to help the individual get back on the job as soon as possible with a modified work plan that’s approved by the attending physician. Being wanted and making a contribution aids the healing process.

Lower workers’ comp costs may be coming to an end. While the number of workers’ comp claims has been declining, a low point may have been reached. The average cost of an indemnity claim was up in 2007 for the second consecutive year.

Employers need to remember that reforms can — and do — run their course. Workers’ comp is not an exception, even with its well-defined controls and careful monitoring?

Highly sophisticated and “secure” computer data systems become welcome challenges for hackers. Similarly, it doesn’t take either employers or workers long to circumvent the workers’ comp system.

A congressional report, “Hidden Tragedy: Underreporting of Workplace Injuries and Illnesses” explored the decline nationally in the number of workers’ comp claims, pointing that the drop may be caused by claims not being reported by both employers and workers. One finding was that the recent changes in the Occupational Safety and Health Administration’s record keeping procedures “have affected the accuracy of the count of musculoskeletal disorders,” the most common type of workers’ comp claim and an injury that is difficult to assess and treat.

The California Workers’ Compensation Institute’s study of prescription drug data from more than 166,000 California claims for musculoskeletal disorders, “back conditions with no spinal cord involvement,” indicated “higher levels of opioid use are associated with higher costs, as well as a higher prevalence of adverse outcomes such as increased likelihood of lost time from work, delayed recovery and increased attorney involvement.”

Further, the study supported other field work, suggesting “that at higher levels of use, opioids can have an adverse impact on both activity levels and on self-efficiency, and that prolonged administration of pain medication may impede rather than facilitate injured workers’ recovery from occupational back injuries.”

Workers do not live in a vacuum when it comes to job-related injuries and they quickly learn how to circumvent the system. That’s why there is a workers’ comp fraud unit in every district attorney’s office in the state.

Forces are at work helping to drive up workers’ comp costs and rates. What should employers be doing?

1. Give workers’ comp the same attention as other employee benefits. Workers’ compensation is complex, and mistakes and errors occur. When this happens, they default to the benefit of the insurance company.

With heavy workloads, well-meaning auditors do not have time to find audit errors, for example. Employers are paying the bills and need to take responsibility for the audits. If an agent doesn’t have the knowledge or training to analyze and verify audits, find someone who does. If the company’s experience modification factor is higher than you think it should be, don’t assume it’s correct. Find out why it seems high. What’s the lowest possible experience mod for your business? If you don’t know, you will pay far more than legally required, which puts you in a competitive disadvantage.

2. Get the right care for the injured worker. Workers are too valuable to receive anything less than the best possible medical care. Establish a relationship with physicians who understands your business and make sure the person has on file the job descriptions and requirements for each employee. Then, if an injury occurs, the attending physician has helpful information to develop the most appropriate treatment program to get the person back on the job as soon as possible. Working, not sitting at home, facilitates recovery.

If fraud is suspected, pursue a thorough investigation to determine what occurred.

3. Step up communication about workers’ comp with employees. Far too often, employees get their information about workers’ comp from co-workers, friends and family members —and most of it is hearsay. No employer that wants to serve the best interest of the company’s employees or to control costs should allow this to happen.

The responsibility for reducing workers’ comp costs rests only partially with the state’s system. Unless employers take an active role in monitoring their workers’ comp accounts, it won’t take long for costs to once again become onerous.