Worker’s Compensation is required for most employers in most states. It covers more than 140 million U.S. workers, over 94% of employees. The total cost to employers of workers’ compensation insurance is more than $95 billion annually. But the individual cost for workers’ compensation insurance for each employer is dependent on various variables.
Your company’s experience rating is the main pricing component within your workers’ compensation policy that you have control over. Experience rating is a method of evaluation used by insurance providers to adjust premiums up or down. The rating is created by the presumption that your historical loss experience predicts your future loss experience. Nationally, the average employer cost for providing workers’ compensation coverage was $1.32 per $100 of covered wages.
A workers’ compensation experience modification (ex-mod) is a number that baselines at 1.0 and tells you how your business compares to others in the industry. If your business mod is over 1.0, your business compares unfavorably. A modifier that is less than 1.0 will generate a credit, while a score lower than 1.0 will result in a debit. By prioritizing safety and prevention loss you can reduce losses, improve safety, and lower your experience modification factor.
Few insurance purchasers understand the importance of the ex-mod and what impacts the calculation the most. Here are five ways to improve your ex-mod rating:
Develop an Employee Screening Process
Before beginning the interview process, determine job specifications and physical requirements for the job. After hiring a new employee, require fit for duty tests and post-offer medical questionnaires. This allows you to determine what duties this specific employee will be able to successfully accomplish.
You would not pick an individual with horrible organization skills to be your receptionist, and the same theory applies when looking at employees for jobs requiring physical abilities.
Develop a Thorough Safety Program to Reduce Loss Frequency
The most expensive lost-time workers’ compensation claims are from motor vehicle crashes, burns, and falls. But if you identify hazards like this within the workplace beforehand, you can better develop a plan to reduce injury. Every industry is different, so you must identify what works best for you and your employees to ensure upmost safety.
You may also be able to establish bench marks for risk factors and how they decrease in your company over time by monitoring active and closed claims. Make regular reviews of your loss history in order to establish patterns and plans improve your preventative measures.
Investigate Accidents and Identify How to Prevent Similar Losses
After speaking to the injured employee, interview other witnesses or co-workers that could provide further incite on the occurrence. The purpose of this practice is not to punish the employee, but to learn as much as possible about the incident in order to prevent similar ones.
Make sure to report all claims promptly to your insurer and consider asking the insurer if you can pay medical-only claims that cost below $500 out of pocket. If the insurer allows you to pay out of pocket, then you can keep small losses out of your experience rating. However, small claims must still be reported to the insurer even if costs are covered out of pocket.
Get Employees Back to Work Fast and Contact Them Often
Although it may seem simple, it is very important to have a return to work program in place. Medical-only claims, or claims that don’t include indemnity lost wage payments, are discounted by a full 70% on your experience modification calculations.
For example, if you have a $10,000 medical-only claim, only $3000 of that claim will go into your rating calculations. Get your employee back to work faster, even if it’s with light duties in order to keep them safe and lower costs.
Create Safety Performance Goals for Supervisors
Success in achieving safety goals should be used as a measure during performance appraisals. If a supervisor knows that safety is part of their annual review, they will take measures to ensure their team is preforming in a safe manner. Build a relationship with your employees and frequently communicate the importance of safety with them.
If you are interested in more guidance on safety in the workplace, get in touch with us. RTR Consulting has more than 20 years devoted to developing effective and efficient human resources policies, procedures, and best practices for small, start-ups, and medium-sized businesses. Contact us today if you need help keeping your business running smoothly.