How To Reduce Your Workers Comp Costs

– KPA CONFIDENTIAL –

How To Reduce Your Workers Comp Costs

March 17, 2010

QuestionsQuestions

• If you have questions during the presentation, please submit them using the “Questions” feature

• Questions will be answered at the end of the webinar

HistoryHistory

Employee must prove:

• The employer was negligent• The employee was not negligent• The employer’s negligence was the cause of the employee’s

damages

Employer defenses:

• Contributory negligence• Assumption of risk• Fellow servant rule

Current StructureCurrent Structure

The Great Trade Off

• No Fault System• In the course of employment• Scheduled Benefits• Exclusive Remedy

Sources• Monopolistic

• NV, ND, OH, WA, WV, WY• Competitive State Fund• Private Insurance• Self Insurance

Premium CalculationPremium Calculation

Premium Factors• Payroll • Employee Class Codes• Loss Experience

– Scheduled Ratings– Discounts

} Manual Premium

• Rates are pre-determined

• Common set of class codes

• Ensure accuracy with job descriptions

83808748

8810 94107380

Manual PremiumManual Premium

Manual Premium ExampleManual Premium Example

• 6 Point Dealer Group

• 100 Employees at each location

• Annual Payroll of $5 million per dealership

600 Total Employees with $30 million in payroll

Payroll For Aacme Motors

Classcode Employee Type % of

Payroll $ Payroll Premium$100 payroll

8380 Technicians/ Detailers/ Drivers 30% $9 mil $5

8748 Sales 30% $9 mil $2

8810 Administrative 40% $12 mil $1


Manual Premium ExampleManual Premium Example

• 8330 (Tech) $9,000,000 = $90,000 x $5.00 = $450,000 $100

• 8748 (Sales) $9,000,000 = $90,000 x $2.00 = $180,000 $100

• 8810 (Admin) $12,000,000 = $120,000 x $1.00 = $120,000 $100

Total manual premium: $750,000


Manual Premium CalculationManual Premium Calculation

Experience ModificationExperience Modification

“E-mod”

“X-mod”

“Mod Factor”

“Experience Rating”

“Merit Rating”


• Calculated by the National Council on Compensation Insurance (NCCI) or a state agency

• 3 consecutive years are used to calculate a rating• Excludes current and prior year

2004 2005 2006 2008

2005 2006 2007 2009

2006 2007 2008 2010

2007 2008 2009 2011

2008 2009 2010 2012


• Calculated by the National Council on Compensation Insurance (NCCI) or a state agency

• 3 consecutive years are used to calculate a rating• Excludes current and prior year

• Frequency of claims is weighted higher than severity• Used to compare businesses in the same industry

• Industry Average is set to “1”

$750,000 Manual Premium

Aacme Motors ABC Motors

Experience Mod .80 (-20%) 1.2 (+20%)

$600,0000 $900,000

A difference of $300,000!

Ratings are based on business characteristics the insurance company thinks can make a difference in reducing future losses.

• Regular safety committee meetings

• Positive incentive programs

• Written safety programs

• Hazard inspections

• Ongoing safety training

• Timely reporting

• Claims Management

Scheduled Ratings, Credits and DiscountsScheduled Ratings, Credits and Discounts

14– KPA CONFIDENTIAL –

Aacme Motors ABC MotorsTier Rating 1.17 (preferred plus) 1.67 (residual)Experience Mod -20% (.80 mod) +20% (1.2 mod)Deductible -3.9% ($500 ded.) 0%Provider Discount -2.5% 0%Association Disc. -4% 0% Cost Containment Cert. -5% 0%Schedule Rating -10% +10%Premium Disc. -8.6% -8.6%

$390,795 $1,189,804

A Difference of: $799,008!!!

$750,000 Manual Premium

Scheduled Ratings, Credits and DiscountsScheduled Ratings, Credits and Discounts

Reducing Your WC PremiumReducing Your WC Premium

• Eliminating sources of past losses• Insurer’s understanding of the business• Longevity with the insurer• Competition• Deductibles• Loss Control Inspections• Safety Program• Return to Work Program

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From the Employee’s Perspective From the Employee’s Perspective

• Medical care: Paid for by the employer to help employees recover from an injury or illness caused by work

• Temporary disability benefits: Payments to the employee if there are lost wages because the injury prevents you from doing the usual job while recovering

• Permanent disability benefits: Payments if the employee doesn't recover completely

• Supplemental job displacement benefits (if your date of injury is in 2004 or later in many states including CA): Vouchers to help pay for retraining or skill enhancement if the employee does not recover completely and don't return to work for your employer

• Vocational rehabilitation (in some states in including CA): Job placement counseling and possibly retraining for the employee if they are unable to return the old job and the employer doesn't offer other work

• Death benefits: Payments to the family if the employee dies from a job injury or illness.


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Checklist for Reporting a Claim Checklist for Reporting a Claim

• Post “How to Report a Claim” poster in the workplace

• Provide instructions and claim forms to employees during orientation

• Complete the “First Report of Injury” form and send to Carrier/TPA without delay

• Follow up with your carrier/TPA-be proactive!


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Claim SuppressionClaim Suppression

Never say to your employee who has reported an injury or illness

• You didn’t really hurt yourself on the job.• If we keep our work place accidents down,

employees will receive an incentive bonus. If you file a claim you will cause all your co-workers to lose their bonus.

• If you hurt yourself at work, you won’t be called out for another job with this company.

• You’ll be fired if you file a claim.• You don’t need to file a claim. We’ll take care of

it…• Why don’t you put this on your health insurance?


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Restricted Duty (Light Duty)Restricted Duty (Light Duty)

• Follow the doctor’s orders• Employers do not have “create work” to

fulfill restricted duty requests• Employees may not refuse restricted duty if

restricted duty is reasonable (don’t make it punitive)

• Studies show that employees offered light duty return to work faster than employee who are not offered light duty


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HIPAA and Workers’ CompHIPAA and Workers’ Comp

• Always keep employee medical records separate from other personnel files

• Do no share any information that is not directly related to the claim without the employees written permission

• Employees may not restrict protected health information in regards to a workers’ comp claim

• Employees are entitled to copies of their file


QuestionsQuestions

• If you have questions during the presentation, please submit them using the “Questions” feature

• Questions will be answered at the end of the webinar

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Questions and AnswersQuestions and Answers


QUESTIONS?

Contact InformationContact Information

23– KPA CONFIDENTIAL –

The recorded webinar and presentation slides will be emailed to you today including your local representative’s contact information.

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How To Reduce Your Workers Comp Costs