Employee Risk Management: Reduce Your Workers' Compensation Costs

As work environments become safer, the number of workers' compensation claims continues to decline. At the same time, the cost per claim has continued to rise along with the rising cost of health care in general, making the business costs substantial. Along with death and taxes, workers' compensation is something every small business owner with employees must deal with.

As of September 2008, figures from the U.S. Department of Labor's Bureau of Labor Statistics show that businesses spend an average of $28.87 per hour for each employee. This includes salary, as well as benefit expenses such as health insurance, vacation time, and workers' compensation benefits. Overall, 69.7 percent (or $20.13) of the hourly compensation given to employees goes toward salary, and 30.3 percent ($8.74) goes toward benefits, with 1.6 percent ($0.47) of that benefit percentage making its way to workers' compensation. Although 47 cents an hour doesn't sound like much, it adds up over time and can severely impact your business expenses, particularly if this per-hour amount increases.

Job classification is the main factor determining the cost of your premiums. Roofers and construction people, who work around heavy equipment, have the highest risks, whereas office workers have the lowest risk. The basic rates for each job classification are set by each individual state, but there are more guidelines for insurance carriers to follow than there are rules.

By working with your risk management insurance carrier, you can implement both pre- and post-claims programs that will reduce your workers' compensation costs overall. Besides implementing procedures that make your business a more desirable client in terms of insurance rates, you can save even more on your risk management costs by implementing the following practices:

When paying an employee time and a half for overtime, you may only have to report the regular wages, decreasing the amount of payroll that determines your insurance premiums.

Implement programs that bring workers back into the workforce at a faster rate, even if it means bringing them back part time or in a limited capacity. Rising workers' compensation costs are primarily due to increased use of benefits and longer duration of disability. The more time an employee spends on disability, the more wage replacement and medical services increase in cost.

Look for a pattern to claims. Do some locations or areas in your business have fewer claims than others? Determine the reason why. Reducing the number of workers' compensation claims gives your business a better safety record. This makes you a much better risk to an insurance company, making it more likely they will give you better rates in the long run. Overall, this is the best way to reduce your risk management expenses.

Judge Rules Healthcare Challenge Can Go to Trial

On Thursday, in Pensacola, Florida, U.S district Judge Roger Vinson said that crucial pieces of a lawsuit challenging the Obama administration’s health-care overhaul can go to trial. The judge stated that he wants to hear more arguments over whether it’s constitutional to force citizens to buy health insurance.

The ruling also stated that it needs to be decided whether it’s constitutional to penalize, with taxes, people who do not buy insurance and to require states to expand their Medicaid programs. Judge Vinson set a hearing date for December 16th. The lawsuit will likely wind up before the U.S. Supreme Court.

In his 65 page ruling, Vinson largely agreed with the 20 states and the National Federation of Independent Business, saying Congress was intentionally unclear when it created penalties in the legislation. The states have argued that Congress is overstepping its constitutional authority by penalizing people for not doing something-not buying health insurance.

Drug use “snapshot” reports on current levels in Workplace

According to the Substance Abuse and Mental Health Administration, an agency withing the U.S. Department of Health and Human Services, 1 in 10 (10%) of the employees nationwide admit to illegal drug use within the last month- most of them full time employees.

Some of the highest rates of illegal drug users among business types are:

---Restaurants 19.2%

---Construction workers 17.8%
---Truck Drivers 14.7%

Most of the drug use involved marijuana or cocaine.

How effective is your current drug policy within your company? Do you know if any of you employees are operating machinery or driving your company vehicles while under the influence of illegal drugs? How about heavy prescription drugs? This is also a large problem.

Make sure you have a RANDOM drug testing policy that every employee has signed off on. In addition, make it MANDATORY that all employees that have an accident on the job are drug tested within 8 hours of the injury. You are putting your business at a very high risk if you’re not doing both of these things!

In addition, more than 18% of employees were found to be on heavy prescription medication, mostly anti-depressants or barbiturates, while they are at work. Scary, isn’t it?

The Principal to Exit Medical Insurance Business

After careful consideration, The Principal has decided to exit the medical insurance business (insured and self-insured) and has entered into an agreement with United Healthcare to renew medical insurance coverage for customers of The Principal as the business transitions within the next 36 months.
We will be contacting all of our Principal clients to set a time to meet with you personally and review your situation. If you have any questions, feel free to contact Wayne Perkins at 479-273-1376 or wayne@commercialriskservice.com.