Manage Claims to Lower Your Workers Compensation Premium

June 9, 2014Minnesota

Controlling the Effect of the Experience Modification Rating Through Claim Management 

One way of controlling workers’ compensation insurance costs is by controlling your experience modification rating. This can be done by reducing losses or the resulting financial impact of those losses. This is a challenge. The best way to meet this challenge is to analyze your safety measures, then address losses as they occur and after they occur using solid and proven claim management procedures.

Pre-Loss Claim Management
Believe it or not, affecting your experience modification rating starts with making the right hire. Hiring the wrong person may not only result in needing increased supervision, but may also result in a fraudulent and costly workers’ compensation claim. Although fraud is very difficult to prove, a 2008 Insurance Research Counsel Survey found that more than 1 out of 5 employees say that they have been aware of workers’ compensation fraud schemes in the workplace. It also found that 35% of the respondents considered it acceptable to “pad an insurance claim.”

Fraud in the workplace leads to high-cost claims, higher experience modification ratings, higher premiums, and increased prices for goods and services because businesses pass those premium increases onto customers. It can also lead to job losses because businesses reduce their workforce or move to another state with what they consider to be a better workers’ compensation program, file bankruptcy due to increased premiums, and/or freeze or lower wages to offset the resulting premium increases.

One pre-hire approach to avoid a poor hire is to measure a person’s level of character by testing. There are multiple screening programs available to help with this. Character testing can measure a multitude of attitudes including integrity, substance abuse, reliability and work ethic. Based on the results of the test, the employer is armed with more information regarding the employee as to avoid making the poor hire in which the employee would be more apt to conduct theft and fraud. A good HR consultant who understands the relationship between HR and claims can help identify the best program options for your organization.

Secondly, employers ought to look closely at all potential hires’ backgrounds. Consider multi-state criminal and financial background checks, always contact references, verify all information provided by the prospective employee and verify licenses, certifications and accreditations. Misstatements on resumes or applications could be simple mistakes, but they could also be signs of more dramatic issues.

Other useful pre-hire risk prevention efforts include drug and physical testing. Upon hiring a person, you cannot ask about prior workers’ compensation injuries, but isokinetic testing can identify injuries that would preclude that person from performing the essential job duties. Isokinetic physical capabilities evaluation measures an applicant’s strength and range of motion for knees, shoulders and lower back.

Finally, develop a formal, written procedure that allows for no deviation. Ultimately, people make companies successful and they are your greatest asset, so being sure you have the right people from the beginning is a smart business move and risk prevention effort

During-Loss Claim Management
Although you are not legally allowed to direct medical care in the state of Minnesota, it is beneficial to have a selection of preferred occupational clinics that you can provide to injured workers. The employer may contact the clinic to discuss their injured worker’s claim and resulting restrictions and light duty return-to-work plan in an attempt to avoid lost time. Getting an employee back to work within three days earns an employer a 70%-reduction on the experience modification worksheet, which can significantly affect their experience modification rating.

When a loss occurs, being able to quickly and accurately direct and manage the claim is important. A best practice is to have a “workers’ compensation claims kit” on hand that includes:

  • A First Report of Injury (FROI) form
  • Accident investigation form
  • Forms for and guidance on collecting witness statements 
  • Carrier billing and contact information for the employee to present to the clinic 
  • Preferred provider listing
  • Job description of injured worker to present to care provider(s)
  • Devotion to light duty statement to provide to physician
  • Workability document to be completed by physician

Post-Loss Claim Management
First and foremost, report all workers’ compensation injuries within 24 hours of being notified because carriers consider reporting lag time as a serious risk that leads to higher costs. Additionally, consider instituting a written policy requiring employees to immediately report all work-related injuries that includes disciplinary action for noncompliance. When reporting the claim to the carrier, the employer should also provide all additional information and concerns. This helps the adjuster meet the 14-day deadline to determine compensability.

After the loss, it is very important that you maintain communication with all parties including:

  • The adjuster, on restrictions, lost time, concerns, employment and medical management
  • The employee, on work restrictions, concerns, responsibilities, and to follow-up after each medical appointment
  • The physician, on light-duty accommodations and the employee’s appointment schedule
  • The employee’s manager, to complete the accident investigation and injured worker’s schedule
  • The human resources department, on FMLA, ADA and health insurance benefits and compliance
  • The safety manager, on accident investigation procedures and results
  • Throughout the process, the employer should continually analyze data by trending and promulgation to best form goals and strategies to combat the issues identified.

Implementing and maintaining an effective claims management program will, over time, result in numerous benefits for employers. Insurance carriers will be more likely to quote on the employer’s business due to their sound claims management practices, the employer will benefit from a lower experience modification rating and resulting decreased premium, and employees will benefit by working for a safe and caring employer, resulting in engaged and healthy employees.