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April 29, 2021

Workers’ compensation insurance: 12 ways you can reduce costs now

Workers’ Compensation represents a large part of any organization’s total cost of risk. Some industries have significantly higher rates than others due to the kind of work performed.

Each incident impacts the experience modifier which affects future premiums.  There are also hidden costs involved with every incident. According to OSHA,  employers pay almost $1 billion per week for workers' compensation costs alone, including direct (workers' compensation payments, medical expenses, and costs for legal services) and indirect or “hidden” costs (training replacement employees, accident investigation and implementation of corrective measures, lost productivity, repairs of damaged equipment and property, and costs associated with lower employee morale and absenteeism).

How are workers' comp premiums calculated?
Premiums are calculated according to how employees are classified (the specific type of work they perform) and the rate assigned to each classification. The premium rate itself is expressed as the rate per $100 dollars of payroll for each class code.  In many states, the National Council on Compensation Insurance (NCCI) determines the classification rate and experience modification factor (MOD). 


  1. Report injuries immediately. Injuries tend to get worse; not better over time without treatment.  You need your carrier to begin managing the claim as soon as possible. A study by The Hartford showed claim costs increased by 18 percent after one week and jumped dramatically to 45 percent when reported after30 days.

  2. Keep informed about the status of open claims. Meet with your broker to develop strategies that drive claims to the earliest possible resolution.

  3. Maintain accurate reserves. Get in front of the e-mod calculation, 6 months prior to renewal, by having the MMA claims team review all open claims and analyze current standing to include medical treatment and work status, then compare that to reserves to ensure accuracy.

  4. Carefully review experience ratings for errors. It’s important to have your broker review the latest NCCI worksheet as soon as it is received to ensure accuracy and catch errors that could result in a premium increase.

  5. Develop a strong Return-to-Work program. This can reduce direct and indirect costs, speed healing, reduce litigation risk, and improve employee morale and engagement. Remember, 80 percent of employees off more than six weeks will need help returning to the workforce.  And medical-only injuries are reduced by 70 percent in the experience modifier calculation. 

  6. Separate overtime pay from regular pay. Workers’ compensation rates are based on percentage of pay, so keeping accurate payment records is essential to making sure you pay only what is appropriate.

  7. Understand any limitations on Executive Officer’s payroll. Payroll limitations typically apply only to sole proprietors, executive officers, partners, and certain noted classifications. In general liability, payroll limitations generally apply to executive officers, sole proprietors, and partners. The limitation varies by state.

  8. Make hiring and onboard training a priority – Providing proper safety training when an employees starts a new job or new job tasks helps prevent injuries in the first place. Conducing pre-employment exams ensures the employee is physically able to perform the job tasks. Statistics show that an employee is 30 percent more likely to be injured on the job than any other time during employments.

  9. Make sure someone is responsible for the worker’s compensation process. Assign leadership that focuses on the impact of worker’s compensation costs and continually educates employees to help them feel comfortable reporting claims.

  10. Reduce attorney involvement. Lawyers typically receive 15-25 percent of any settlement amount. So, communicate often with affected employees. Make sure they know they’re not simply a number, and offer them transitional duty work whenever possible.  Care and concern for your employees is the key here.  If they think you don’t care employees are more likely to hire an attorney. 

  11. Ensure medical care coordination. Caring for injured workers is more than simply processing claims. Applying a coordinated clinical approach ensures more appropriate care and better outcomes. More insurance carriers offer nurse care triage to help avoid unnecessary clinic visits while providing prompt medical advice. 

  12. Take advantage of risk management services provided by your carrier and broker.