Workers’ compensation claims can be incredibly expensive for insurers. At the top end of the spectrum, an amputation can cost an average of $126,033. Even a fracture or dislocation can add up to $62,240.
When your workers’ comp claims increase, the insurer passes on those cost increases to you. If your company has a lot of claims, it can impact your experience modification rate. Because a higher modification rate leads to significant cost increases for your business, it’s important to avoid workers’ comp claims whenever you possibly can.
What Can You Do to Reduce Your Workers’ Comp Costs?
There are three main ways to prevent higher workers’ compensation costs.
1. Risk management
2. Claims management
3. Insurance policy management
These three strategies can help you prevent claims, manage claims that do happen, and shop for the best policy. To help manage your company’s risk level, remember to incorporate these strategies into your workplace.
1. Risk Management: Preventing Future Problems
Risk management involves doing everything you can to prevent future injuries or deaths. This may involve identifying potential hazards, creating new safety policies, or training workers on how to report injuries.
Work on Hazard Identification
First, take some time to identify potential hazards in your workplace. Inspect each workplace for the following hazards.
- Chemical
- Physical
- Ergonomic
- Biological
You should also consider potential exposures in the workplace, like poor air quality. If there have been injuries at the work site in the past, review the medical records to see which hazard was responsible for the injury and make changes.
Improve Safety Management
Once you’ve identified hazards, you can determine the best course of action for resolving or preventing them. For example, man cages should be used when lifting someone on a forklift to prevent falls. Alternatively, you may want to retrain workers on how to do laboratory or factory work to prevent ergonomic injuries.
Ensure Excellent HR Infrastructure
To reduce your workers’ comp expenses, you need the best HR infrastructure possible. Your employee handbook and HR policies are your first line of defense against soaring workers’ comp claims.
Within the handbook, include policies about injury reporting and how to access medical help. For example, you should include a requirement for workers to reach out to nurse triage first. Your policy handbook should also require all injuries to be reported right away.
Once you’ve trained workers on your employee handbook, get them to sign a form saying that they’ve been trained on the policies and agree to follow them. If someone is injured outside of work and tries to fraudulently report it as a work-related injury, these signed policies will help you and your insurer push back against the fraudulent claim.
Build the Right Company Culture
You don’t want a company culture where your employees feel like workers’ comp claims are an extended summer vacation. When people enjoy coming to work, they’re less likely to report fraudulent workers’ comp claims. More importantly, a strong safety culture can help prevent dangerous behaviors and hazards.
Adopt Wellness Programs
Wellness programs can decrease the odds of workers’ comp claims over time. Workers who are overweight or obese are 25% to 68% more likely to experience injuries. By encouraging wellness, you can lower the cost of your workers’ comp claims and avoid higher premiums.
2. Claims Management: Mitigating Current Issues
While the first goal should be to prevent any claims from happening, the next best option is to manage claims that occur and keep them from costing as much. Your approach to claims management can significantly decrease the costs associated with workplace injuries.
Set Up Nurse Triage
One of the most important ways you can reduce the cost of a workers’ compensation claim is through nurse triage. Many insurers offer this option. Basically, you give employees the number to your insurer’s nurse triage. For anything that isn’t an immediate, life-or-death emergency, have the employee call the triage number first.
In Mission to Grow’s recent “Controlling Workers’ Comp Costs: The Three Key Drivers to Reduce Workers’ Comp Expenses” podcast, E-COMP’s vice president of partner strategy, Rob Campbell, spoke about using nurse triage. “In a lot of cases, those [nurse triage cases] don’t count as a claims event. We’ve now taken what could have been a claim and gotten the employee the medical treatment that they desired. And you didn’t have to open up a claim with your insurance company.”
Encourage a Return to Work
Anytime you lower the cost of an existing claim, you prevent your experience modification rating from becoming worse. After a claim has occurred, you can avoid additional costs from stacking up by getting your employee to come back to work sooner. This may involve changing their hours, providing them with extra tools, or adjusting their job duties. Instead of getting paid to sit at home, they can be a contributing member of your workplace.
Close Your Open Claims Whenever Possible
Sometimes, insurers will leave workers’ comp claims open unnecessarily. E-COMP applies appropriate pressure to close claims that should already be closed. This is important because open claims have reserve accounts that are set aside for paying out the claim. If the employee is already back at work and has had all of their injury-related costs paid, this reserve account doesn’t need to be set aside anymore. In turn, a lower number of open claims can impact your experience modification rating.
3. Insurance Policy Management: Shopping for the Best Options
Finally, the third thing you can do to lower your workers’ comp expenses is manage your insurance policy better. Shopping around, finding the right agent, and negotiating a better deal can make a large difference in how much you have to pay for your workers’ comp premiums.
Get a Great Agent
An agent is paid through commission. This is generally a percentage of your premium, so they don’t have an incentive to help you spend less money on workers’ comp. Because of this, it is incredibly important to find a great insurance agent to work with.
Shop Your Policy
According to Campbell, “There is a benefit to staying consistent with an insurance company. If you can avoid it, you don’t want to change insurance companies every year.” However, you should still shop your policy from time to time. At the very least, it will help you negotiate a better price with your current insurer. You may also be surprised by how much less other insurers charge. For example, our partners at E-COMP use pay-as-you-go workers’ comp to ensure accurate premiums in periodic installments instead of a large, upfront lump sum.
Negotiate With Your Insurer
Shopping around doesn’t mean that you have to actually leave your insurer. Once you have received price quotes from other insurers, you can bring the best price back to your current company and ask them to match it. In many cases, insurance agents aren’t trying to quote lower prices because it impacts their commission. When you get competitor quotes, it encourages them to recalculate the amount you should be charged, which generally results in lower costs.
Decrease Your Workers’ Compensation Costs Today
On average, American companies pay $1 in workers’ comp for every $100 of payroll. However, this can vary significantly based on your geographic area, industry, and experience modification rating. Through risk management, claims management, and insurance policy management, you can improve your experience modification rating and keep your costs down.
If you want to learn more about pay-as-you-go workers’ comp and other ways to decrease your expenses, reach out to our small business HR and payroll experts today.