Watching workers' comp needs can help cut its costs
By Jennie L. Phipps • Bankrate.com

If you have more than a half-dozen employees, one of the basic costs of doing business is insuring them against injury on the job.

That protection generally comes in the form of workers' compensation insurance. It's mandatory in every state except Texas, and even there, the state operates an insurance program that covers medical expenses and a portion of lost wages for employees who are hurt while at work.

States delineate how much coverage an employer must buy and what percentage of the employee's salary a company will pay if a worker is off the job because of a workplace injury. As a result, insurance packages are pretty standard and include coverage for medical treatment, rehabilitation costs and lost-wage replacement (usually two-thirds of an employee's regular salary). Most policies also contain liability coverage, which kicks in if your business is sued for damages stemming from a workers' comp claim.

If you're unsure about your local law, check the U.S. Department of Labor's directory of state workers' compensation officials. It contains contact information as well as links to state Web sites that detail specific insurance requirements. Insure.com also has an online program to answer questions about each state's requirements.

Once you know your exact insurance obligation, then comes paying for it. Costs for workers' comp leveled off in the mid-'90s with the advent of managed care. However, as that system has proven increasing unwieldy, workers' comp costs have risen commensurately. But a business owner can save by taking specific steps, before and after a workplace accident.

The following advice on how to curtail workers' comp costs comes from Carol Corcoran, senior vice president of client services for Managed Comp, a Boston-based workers' compensation service company; William M. Conwell, an attorney at Dickie, McCamey, and Chilcote, headquartered in Pittsburgh, Pa.; and Scott Hauge, an independent insurance agent and president of CAL Insurance & Associates in San Francisco.

Examine coverage options
Be prepared before an accident happens. Appoint someone to be in charge of workers' comp issues. A good benefits person can help guarantee that your business gets the proper and best coverage, especially if he or she has a good rapport with your carrier.

Training can improve your insurance point person's expertise. Take advantage of education programs your state may offer. On the private side, call your state bar association. They often have continuing education workers' comp conferences and a law degree isn't required for attendance.

Shop around, understanding that price isn't everything. If the laws in your state allow it, choose your workers' compensation insurer just like you'd choose any other vendor. Key questions to ask include:

• What is your average cost per claim?
• What percentage of claims allows a worker to be out of work longer than the day of injury?
• Does the insurer have a way to measure employee satisfaction? What is it and what are the results? What percentage of their cases is litigated?
• How long does it take to close a claim?

Armed with the answers, compare insurance carriers. And if you don't get complete answers to these questions quickly, keep looking.

You also need to know how workers' compensation premiums are calculated in your state and how your company's injury experience affects premiums. Some states require employees to get professional medical care even for minor injuries. But in other states, having on-site employees who are trained in first aid can hold down costs significantly. If you can cut your coverage outlay by sending staff to Red Cross first-aid training, do so.

Pick a doctor -- if you can. Some states demand that you allow your employees to choose their own physicians in case of injury. If, however, you're able to pick the doctor, line up a practice in advance that has experience in handling workers' comp cases and that will work with you in getting injured employees back on the job quickly.

Be careful to choose a practitioner who has a good reputation in your community. Not only do you want your workers to get good care, but if there is a dispute, having a credible medical practice on your side is very persuasive.

On-the-job considerations
After you've explored the administrative ways you can save on workers' comp insurance, take a long look at operational aspects of your business that affect coverage.

Hire carefully. While federal labor law restricts the kind of questions you can ask when you hire someone, there are legal ways to find out if a worker might be inclined to make a claim. For instance, you can't ask a worker if he's ever been involved in a workers' comp case. But you can inquire whether he has any health problems that would prevent him from doing everything in the job description.

You also can ask a worker to take a pre-employment physical. If the work is strenuous, don't hesitate. If nothing else, this creates a baseline from which the extent of an injury can be determined.

Run a safe workplace and make sure your employees do their part in keeping it that way. Know what the safety issues are in your line of business, post safety rules and don't be shy about enforcing them. Discipline workers who don't cooperate. Conwell says a judge won't be sympathetic to an owner' s position if it's clear that management routinely ignored its own policy. "It's hard to defend a case when an employer doesn't support his own program."

Hold employee-training sessions that include a discussion of health and safety issues. These don't have to be lengthy and time-consuming, but schedule them often enough to make sure new employees learn and old employees are reminded. Your insurer probably will be happy to offer these sessions free of charge.

Explain to staff exactly what workers' compensation insurance is. Many people think the state pays, so they don't feel too guilty when they manipulate the system. At a company meeting, tell employees: "If you are injured on the job, I want to take care of you. But I'm paying a lot of money for this insurance and, like anything else, I have to make sure that I get my money's worth."

Make sure your business uses the appropriate equipment. Cutting costs here could be dangerous. And keep the property surrounding the workplace in good repair. Install good lighting for parking lots, make sure sidewalks don't have dangerous cracks and remove ice and snow promptly.

When accidents happen
Regardless of precautions, injuries are going to happen. When they do, the proper response is important.

Make sure the person gets immediate medical care. In most states, an employee must get treatment from a company doctor for 90 days. In some, they have to stay with that physician forever. If you are in a state where a worker can choose his own doctor, work with the physician and your carrier to make sure that the employee is getting the appropriate care.

Create a file. Get as much as you can in writing from the very beginning. Record time and circumstance and what witnesses have to say. Include any correspondence with doctor, the insurer and the employee.

Reassure the injured worker. Put yourself in your injured employee's place; his livelihood could be threatened. Call within 24 hours to check on his condition and tell him the company is there for him. Describe the wage-protection program and medical benefits. Consider sending flowers. Not only does this make your employee feel better, it could make it less likely that he'll listen to any ambulance chasers who might call.

Don't let the injured employee languish at home. Get him back to work as soon as possible. This approach isn't just for the short-term benefit of your company. Statistics indicate that the longer an employee stays idle, the more likely that he'll never be fully employed again. Such long-term claims drive up your rates. Talk to the doctor about what the employee is able to do and explore how you can put him to work profitably, even if he's not doing what he did before.

Just how bad is the injury?
What if you have some doubts about the legitimacy of a claim? Unfortunately, some people do try to put one past the boss, so don't feel too bad if your business intuition tells you something is up. Just make sure you follow through on your suspicions properly.

Do a little detective work to determine accident specifics. Was this employee where he was supposed to be, doing what he was supposed to be doing? Talk to people to learn what you can about the worker's circumstances. Even scuttlebutt may give you insight.

If you decide to contest the case, your insurance carrier will probably assign you a lawyer. Don't wait for him to call; call him. Make sure the attorney understands your concerns and is prepared to spend time on your case.

If you're in a position to hire your own lawyer, hire a specialist who recognizes all the players, including doctors and judges. And if an investigator could help you sort out the truth, hire a reputable one.

Be very careful if you don't take someone back to work. It's not illegal to refuse as long as you don't have a job available. But it is illegal to fail to rehire a worker because of an injury, and wrongful termination claims aren't covered under workers' comp policies.

Sometimes a lawyer can help you negotiate a settlement in which the worker resigns, but proceed carefully. This is not safe territory for an amateur.

"The bottom line is the burden of proof in a workers' comp cases is always on the employer," says Hauge. "If the doctor backs up your employee, you'll have a hard time proving otherwise."

Jennie L. Phipps is a contributing editor based in Michigan.

-- Posted: Oct. 30, 2002