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Top 10 Tools for Combating a Hard Market

I. Develop a written safety program.

Workers' compensation insurance covers the direct costs of medical and lost-time payments associated with workplace accidents. However, behind every accident there are numerous indirect costs that can devastate a business including equipment downtime, replacement worker training, decreased productivity, morale problems and lost sales.

Often, these costs can run as much as seven times the direct cost and are absorbed entirely by the employer. Unfortunately, many companies fail to consider these indirect costs when estimating total accident costs. But these costs are very real and can adversely impact a business. They're another reason why it's crucial to develop effective safety and loss control programs for your business to reduce the chances of accidents ever occurring.

For any safety program to be effective, safety must become part of the corporate culture, part of everything that a company does. From the president of the company on down, everyone must know and communicate to others that safety is important.

Changing corporate culture is a process to move employees from a level of involvement to one of empowerment. Statistics show that 90 percent of all occupational injuries and illnesses are the result of unsafe behaviors. Therefore, if your employees are trained to perform clearly defined safe behaviors, and systems are in place to show management's commitment and active participation, desired behavior can become a natural way employees perform work. This simple concept is known as behavioral-based safety. It means letting your employees specify, define and ultimately assess safe work practices.

If employees are going to be performing the tasks, they should be involved in helping define what is appropriate. They also should be involved in assessing and measuring the results. Developing an effective way to communicate desired performance and measure outcomes is critical to any safety program's success.

But unfortunately, this is where many safety programs fall short. You need to show value-added outcomes. Management needs to see that safety does have tangible and financial benefits. Employees need to see they are getting positive results and that their efforts are going to be recognized. The best way to ensure that safety goals are defined, attained and evaluated is through a written safety program.

II. Implement a drug testing policy.

Some 70 percent of all illegal drug users are employed either full- or part-time. This suggests that more than 10 million employed people are current users of illicit drugs. In addition, one of every 10 people in the United States has an alcohol problem. (National Institute of Drug Abuse)

How does substance abuse affects your bottom line? Employees using alcohol and drugs have double the normal absence rates, use five times as much sick leave, arrive late three times more often and request early dismissal or time off during work hours 2.2 times more often. Substance abusers also affect your bottom line through overtime pay, health insurance claims, temporary labor, workers' compensation coverage and sometimes through liability suits. (Drugs Don't Work. A Program for a Drug-Free Workplace, City of Baton Rouge/Parish of East Baton Rouge)

In addition to these real-dollar costs, less measurable, hidden cost-drivers include diverted supervisory and managerial time, friction among workers, morale problems, theft or damage to property and equipment, poor decision-making and damage to the company's reputation. The ultimate cost is reduced productivity, not only by the abuser, but also by staff and management.

The good news is some 87 percent of major U.S. firms test employees or applicants for drug use; 98 percent of the Fortune 200 companies test employees for drugs. However, 80 percent of the U.S. workforce is employed in small to mid-sized companies where fewer employers test for substance abuse. ("The National Report on Substance Abuse," 1995). LWCC has the tools to help you begin.

III. Determine Second Injury Fund eligibility.

Imagine getting a refund for claims payments. Louisiana's Second Injury Fund is a state-administered program that reimburses part of a claim when an employee with a permanent, pre-existing condition is subsequently injured on the job. The fund encourages employers to hire people with disabilities by reducing financial liability if these employees get hurt on the job. Because the Second Injury Fund reimburses part of your claims costs, it can help reduce your experience modifier (E-mod) leading to lower workers' compensation premiums.

To be eligible for reimbursement
  • the injury must result from a qualifying permanent partial pre-existing disability
  • the employer must have proof he knowingly hired or retained an employee with a permanent partial disability
  • the injury must result in liability for workers' compensation benefits, the pre-existing condition must merge with the resulting injury in such a way that the injury would not have occurred but for the pre-existing condition OR the resulting disability is materially greater because of the pre-existing condition
  • the claim for reimbursement must be made within 52 weeks of the first medical or lost-time benefit payment.

Post-offer written questionnaires and screenings are the best ways to obtain information about employees' health to prove prior knowledge for the SIF reimbursements. Such screenings should be a business necessity and should be consistently required of all applicants in the hiring process to comply with the ADA.

IV. Utilize preferred providers.

Working with one key physician allows him or her to gain a deeper understanding of your business and the requirements of various jobs. This knowledge will expedite the return-to-work process.

Before an injury occurs, visit the provider's facility to discuss your company's return-to-work program, drug testing policy, job descriptions and injury reporting procedures.

State law guarantees employees' right to choose their own healthcare provider for work-related injuries. However, 80 percent of employees who use employer-referred providers are just as satisfied with their treatment as those who do not use the recommended provider.

Take time to select your workers' comp company's preferred provider. To encourage network usage, let your employees know who the preferred doctor is via employee meetings, posters or paycheck stuffers.

OMNET, LWCC's occupational medicine network, provides injured employees with immediate access to more than 2,000 healthcare providers across the state. Through appropriate medical care, closer claims management and faster return to work, OMNET can reduce lost-time claims costs 32 percent and can result in 32 percent fewer days lost from work.

V. Develop a return-to-work program.

Having a formal program designed to get injured employees back to work as soon as possible after injuries is a smart decision. Here's why:

    1. Injured Employees Return to Work up to 50 Percent Sooner.
    In companies that have well-managed return-to-work programs including transitional duty, up to 90 percent of injured employees go back to work within four days of the injury.

    2. Reduce Claims Costs up to 70 Percent.
    Not only are lost-time days reduced, but studies show medical costs are also reduced.

    3. Recover Faster.
    Good return-to-work programs treat work as therapy to help the employee recover up to 3 times faster than if they stayed at home in bed.

    4. Reduce Litigation.
    When an employee is secure about employment, he's less likely to need an attorney. According to a 1995 study commissioned by Intracorp, injured employees participating in a return-to-work program were less likely to seek legal representation and returned to work sooner.

    5. Avoid Hiring and Training a Replacement Worker.
    Temporary labor can be expensive, especially when the new worker must be trained.

    6. Maintain Productivity.
    Your dollars pay for actual work. Without a return-to-work program, you pay an employee to stay home. In addition, transitional duty can provide employee cross-training.

    7. Reduce Fraud.
    Fraud can be tempting to any employee who views it as a way to get a paid vacation. Return-to-work programs demonstrate that getting injured doesn't necessarily mean being out of work.

    8. Increase Employee Morale.
    Return-to-work programs are a testament that employees are a valuable company asset, not a disposable resource.

    9. It's Effective.
    More than 90 percent of employers using return-to-work programs say they are effective, according to a 1995 Tillinghast-Towers Perrin survey of employer workers' compensation cost-containment initiatives.

    10. LWCC's Made it Easy.
    Order our return-to-work guidebook, "Managing Workplace Injuries: How to Design and Implement and Effective Return-to-Work Program."
VI. Report claims within an hour.

Do you sometimes wait to report an injury, hoping that it won't result in any medical or lost-time expenses or that these expenses will be minor enough to absorb? New evidence confirms that this practice actually hurts more than it helps in attempting to control workers' comp costs.

A study of more than 53,000 permanent partial disability and temporary total disability claims indicated the following when compared with claims reported within a week of occurrence (The Hartford, 2000):
  • 1-2 weeks after occurrence--18% more expensive
  • 3-4 weeks after occurrence--30% more expensive
  • Greater than 1 month after occurrence--45% more expensive
VII. Report suspected fraud.

Your employees work hard for their money and certainly wouldn't let anyone steal it out of their pockets. But that is exactly what happens when they see workers' comp fraud and don't report it.

Hard-working employees are the real victims. Not insurance companies, not necessarily even employers. When someone commits workers' comp fraud, the claims costs associated with the fraud or abuse contribute detrimentally to the policyholder's E-mod. When this causes the employer's premiums to increase, he tends to cut back on other employee benefits such as raises, retirement contributions, health insurance contributions or even jobs.

Although most workers' comp claims are perfectly legitimate, the FBI estimates that 10 percent of all claims contain some element of fraud. Workers' comp fraud costs Louisiana businesses some $80 million a year and $5 billion nationally. In addition, people who commit fraud mock employees whose lives are truly traumatized by an injury.

Workers' comp fraud is not only costly, it's illegal -- a felony to be exact. Employees who knowingly lie or help someone else provide false information in order to receive benefits face up to five years in prison and a $5,000 fine. Employers who lie to pay lower premiums face up to 10 years in prison and a $10,000 fine.

The first step in combating fraud at work is getting employees to understand its direct connection to their own pocketbooks.

VIII. Conduct accident investigations.

A goal of every safety program is to control and eliminate accidents. When accidents do occur, your safety program needs a process to "learn" from these undesirable events. Accident investigation provides a way for you do this each and every time an accident or "near miss" incident occurs.

Since nearly every accident is preventable, accident investigation becomes imperative. After all, how can you prevent accidents if you don't know how they happened?

Accident investigation is a systematic approach to identify accident causation factors and implement corrective action. It includes investigating personal injuries, property damage and all incidents, no matter how minor, which had the potential to produce injury or property damage.

There are four practical reasons to investigate accidents:

  • to use the knowledge from the investigation to control future accidents and therefore costs
  • to prepare reports required by federal and state laws
  • to communicate management support of the safety process
  • to provide appropriate information to your workers' compensation insurer which will aid in better injury management and lead to lower premiums. Information uncovered through an investigation is crucial in spotting potential fraud or opportunities for subrogation, when a third-party of faulty equipment is at least partially responsible for the accident.
In addition, your company will benefit as a result of the accident investigation
process by:
  • improving procedures
  • identifying unsafe work practices
  • determining additional training needs
  • gaining knowledge about exposures and preventive measures
  • developing a plan to control or eliminate the exposures

IX. Be prepared for an emergency.

A business contingency plan is a set of procedures which set up how a business will function in the event of an unplanned disruption.

The idea is to look at every possible point of failure and try to find an alternate means of keeping business continuity; however, it is hard to plan for everything. For example, millions of mayflies invaded Toledo, Ohio, and caused a massive power blackout when they smothered an electrical generation plant. In Honduras, 14 patients died in a state-run hospital when a rat gnawed through wiring leaving the facility without power. And in AT&T's credit card processing facility in Georgia, heavy storms in the El Nino year left them with 7000 checks which could not be opened and read with their high speed equipment because they were soaking wet. After trying hair dryers, personnel borrowed microwaves from the break room and used the "Danish" setting to dry the checks.

These situations demonstrate why planning is so important. In addition, contingency plans will help you:

  • to minimize decisions when crisis strikes
  • to reduce dependency on one person
  • to minimize a loss of data
  • to facilitate a timely recovery of business functions
  • to minimize loss of customers/revenue
  • to maintain public image and reputation
  • to stay in business!
Sometimes the benefits of having a contingency plan can be two-fold. Beyond providing a way for the business to function during a disaster, planning efforts can also lead to improvements in the daily operations of your business. Some aspects of the business that are not as efficient as they could be may surface and can be eliminated before they ever become a problem.

X. Communicate with your employees.

It would seem that if you shared all the details about workers' compensation coverage with employees, they might be tempted to take advantage of it. I mean, after all, if you tell your employees they will still get a paycheck if they aren't working, won't they decide to sit on the couch and watch television claiming to have some sort of injury rather than showing up at work?

For this very reason, many companies do the very least required by law in communicating workers' compensation information. They might put up a notice in the back corner of the break room, hoping no one will really pay attention. They fear that by being forthcoming, they are leaving themselves vulnerable to fraudulent claims.

However, this usually backfires. This perceived "secrecy" breeds employee distrust. When an employee does get hurt and hears from someone else that the injury should be covered by workers' comp insurance, he or she gets scared and feels that his needs will not be met by his employer. Because of this fear, he might even hire an attorney.

A study by Intracorp found that injured employees who didn't receive workers' comp training prior to being injured were not only more likely to seek legal help but were also out for longer periods of time than those who were informed about their benefits regarding workers' compensation. Another reason to give your employees information on their workers' comp benefits is to help guide their medical care.

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