Colorado Real Estate Journal - March 4, 2015
Workers’ compensation typically is one of the biggest line items for businesses (and that’s especially true for the construction industry). It can be a challenging area in which to manage costs because it requires a change in behaviors as well as an understanding of policy, compliance and risk management strategy. Those factors, coupled with premium increases, can make it daunting to develop a solid strategy for managing costs. That doesn’t mean there aren’t steps you can take right now to start your business on the right track for 2015. You may have heard that this year, for the first time in several years, the Colorado Division of Insurance says the typical Colorado employer will see no increase in premium costs for the “loss costs” portion of their workers’ compensation insurance premiums. Loss costs refer to the average cost of lost wages and medical payments for workers who are injured during the course of their employment. These costs can be affected by several factors, including the number of claims and the severity of the injury. As one of the more risk-prone industries, however, construction businesses likely still will see an increase in their premiums in this area. So what can a business in the construction industry do to manage its workers’ compensation costs? The answer has a lot to do with putting together a smart strategy before a claim is ever filed. As one of the state’s largest writers of workers’ compensation insurance, Moody Insurance regularly counsels clients on developing risk management strategies that lower workers’ compensation costs, reduce losses, and protect the employees and assets of a business. Here are our top three recommendations for management looking to mitigate its workers’ compensation costs. Re-engage your safety program. During the recession, many businesses had to make tough cuts that unfortunately often included safety managers and safety management programs. I cannot stress enough the importance of having a robust safety program and a knowledgeable safety manager to spearhead the effort. Preventing accidents before they happen is the best way to reduce your injury costs. One of the best first steps to creating an effective safety program is forming a safety committee of individuals from throughout your organization. Part of this committee’s job should include visiting job sites, identifying potential hazards and then developing an associated safety checklist for everyone who will be on site. Should an accident or nearmiss take place, this committee’s job is to investigate and make recommendations for ensuring the event doesn’t happen in the future. Part of reinforcing a culture of safety is making it part of your process on the job site. Consider implementing a monthly “toolbox talk” where safety leaders on your job sites go through potential hazards and safety tasks with your on-site crew. Finally, to ensure that all new employees understand the importance of adhering to safety policies and procedures, your safety committee also should provide a list of the company’s safety rules for new employees to sign at new hire orientation. Implement an aggressive return-to-work program. When an injury does happen, the most effective way to mitigate losses (both for you and for your employee) is to get that person back to work. He might not be ready to return to full duties, but there should be an efficient system in place to ease back into work even in a limited capacity.
One of the biggest features of an effective return-to-work program is good communication. Too many companies allow communication to lapse, which means people are out of work longer, which costs everyone involved. The easiest way to get started is by defining specific modified duty tasks for someone returning to work and then outlining those tasks in your policy at the start of employment to ensure everyone is clear on the path back to work. As an added bonus, with the implementation of a safety committee and a return-towork program, you are halfway toward qualifying for Colorado’s Cost Containment Certification, which gives you a discount on your workers’ compensation insurance. Elect for higher-deductible plans where possible. Just like with a personal health insurance plan, choosing a workers’ compensation policy with a higher deductible can reduce your premium costs, but require you to assume a greater risk when and if your employees need to use the insurance. If you have a robust safety program and an aggressive return-to-work program, a higher-deductible plan is a good option for reducing your costs while ensuring your employees remain fully insured. Beyond the up-front premium savings, there are other long-term benefits to a high deductible plan. Colorado is a net reporting state for calculation of the workers’ compensation experience modification. That means that any losses under the deductible are not reported to the National Council on Compensation Insurance, the entity responsible for calculating experience modifications in Colorado. NCCI will therefore calculate the experience modification without these losses, which could help lower the modification and in turn lower your premium cost. Ultimately, the goal of workers’ compensation insurance is to protect you, your business and your employees. These three steps will take you a long way toward achieving that goal.