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CEO Best Practice: Worker's Compensation

Executive Tools

  • Executive Summary
  • Self Assessment Checklist

Expert Practices Articles

  • Ten Steps to Reducing Your Workers' Comp Costs
  • An Ounce of Prevention Equals a Pound of Cure
  • Managing Claims to Reduce Your Costs
  • Setting Up a Workers' Comp Medical Network
  • Selecting an Insurance Broker
  • The Self-Insured Option
  • Long-Term Cost-Cutting Strategies

Book List: Workers’ Compensation

Request the Entire Best Practice Module: Workers’ Compensation

CEO Best Practice: Workers’ Compensation

Executive Summary

  • Ten Steps to Reducing Your Workers' Comp Costs
  • An Ounce of Prevention Equals a Pound of Cure
  • Managing Claims to Reduce Your Costs
  • Setting Up a Workers' Comp Medical Network
  • Selecting an Insurance Broker
  • The Self-Insured Option
  • Long-Term Cost-Cutting Strategies

Ten Steps to Reducing Your Workers' Comp Costs

Have you taken a look at the workers' compensation situation lately?

If you're a business owner or CEO, it's hard to ignore. In most states, workers' compensation insurance premiums are escalating at double-digit rates. Insurance companies are losing money and/or going out of business with alarming frequency. Injured employees often receive inadequate benefits, while attorneys, doctors and other service providers scoop up the lion's share of the dollars.

What's causing workers' comp costs to go through the roof? Vistage members Gary Uhlemeyer and Bill Litjen, along with former members Marilyn Murata and Marcia De Witt, identify several causes:

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An Ounce of Prevention Equals a Pound of Cure


Our experts believe that minimizing workers' comp costs starts with a solid dose of prevention applied in four key areas:

  1. Management commitment. To demonstrate commitment from the top, Uhlemeyer recommends that CEOs:
    • Spearhead a program that focuses on reducing the number of claims and the cost of those claims once they occur.
    • Select an insurance broker and/or third-party administrator who will help proactively address the true causes of loss in the business.
    • Focus the entire organization on safety and accident/injury prevention.
    • Make sure a competent person, either internal or third-party administrator, aggressively manages any claims that occur.
    • Conduct regular reviews of the company's safety processes and loss analysis.
  2. Preventive hiring practices. According to Murata, preventive hiring includes:
    • A clear and accurate job description that lists the specific tasks to be performed and the physical requirements needed to get the job done
    • A drug screen and a complete physical to determine the applicant's health status and ability to physically perform the job (drug screens must apply to all job applicants; they cannot be used selectively)
    • Using the employment interview to weed out potential abusers of the system
    • Strict reference checking and, when appropriate, background checks

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Managing Claims to Reduce Your Costs

To reduce the costs of claims once they occur, our experts recommend aggressive action in four key areas:

1. Treat the injury. To properly treat a legitimate work injury, Litjen recommends the following:

    • Use first aid when possible. If uncertain, call your workers' comp physician before sending the employee to receive care.
    • Avoid emergency room and urgent care visits. Use a pre-established network of specially-trained workers' comp medical providers.
    • Don't delay appropriate treatment or testing, but be expedient with care. Don't allow excessive use of chiropractic treatment or physical therapy.
    • Require employees to keep all medical appointments; don't allow them to reschedule.
    • Strive to get injured employees back to work as soon as possible. If necessary, provide a modified work program

In addition, says DeWitt, the company's response to the injury plays a major role in how the employee experiences the workers' comp system. She recommends a "care and concern" injury management model which sends an important message to injured employees -- we're sorry you got hurt, we care about you, we want you to get the best possible treatment, and we want to bring you back to work as quickly as possible.

2. Assess the claim. According to Litjen, many injuries/illnesses are not covered by workers' comp, including injuries caused by intoxication of alcohol or controlled substances, intentional injuries, injuries suffered during commission of a felony or crime, voluntary wellness programs, car accidents on the way to work and many more. In these situations, employers can file an "affirmative defense" which, if upheld, precludes them from paying the claim.

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Setting Up a Workers' Comp Medical Network

To limit the cost of workers' comp claims, only use medical practitioners who specialize in workers' comp injuries and occupational medicine. Specialists may cost a few dollars more up front, but in the long run they will save you a lot of money.

"In many cases, the cost of getting the injured worker back to work far outweighs the initial cost per doctor visit," explains DeWitt. "That's where the specialists come in. Most primary care doctors aren't trained to diagnose and treat occupational injuries. Plus, they don't have the time or interest in working with you to get injured employees back to work. To reduce your claims costs, use medical specialists who understand the importance of getting people back on the job."

In addition, look for physicians who agree that on the day they see your employee they will fill out the proper forms, tell the worker what follow-up treatment is necessary, identify any required job modifications and communicate (in writing) all this information to you. Your specialists should also agree to see every injured worker within 24 to 48 hours. The quicker the employee gets back to work, the less you have to pay in lost wages and replacement wages for temporary workers.

To handle the broad spectrum of possible injuries, DeWitt recommends establishing relationships with five types of specialists:

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Selecting an Insurance Broker

What makes for a good broker? Uhlemeyer lists four key criteria:

  • Experience with your business/industry
  • Partner mindset
  • Ability to sell multiple lines of insurance
  • Ability to deliver a full range of services

Before shopping for a broker, Murata suggests creating a wish list to present to prospective brokers. What might you ask for? A certain amount of free consultation each year. Regular reviews and status reports, with recommendations on how to better handle claims. Quarterly loss analysis reports. Regular meetings with claims examiners. It all depends on the unique needs of your business and your workers' comp environment.

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The Self-Insured Option

Some companies save money by self-insuring rather than purchasing insurance from a carrier. According to Uhlemeyer, companies that self-insure enjoy four main benefits:

  • More flexibility over how claims are investigated and handled
  • Better ability to minimize the cost drivers of workers comp
  • Increased motivation to manage the process and reduce costs
  • Financial and cash flow benefits

Who qualifies for self-insurance? Each state has its own set of criteria. However, in general a company must:

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Long-Term Cost-Cutting Strategies


To further lower your workers' comp costs, our experts recommend the following steps:

  • Conduct regular claims reviews and fight all fraudulent claims.
  • Hire a risk manager to analyze the causes of loss.
  • Practice attorney avoidance by educating employees before injuries occur.
  • Work closely with your physicians and TPA to close all lingering claims.
  • Adopt a "we care" attitude.

"Too often, employers simply forget about injured employees until they return to work," notes Uhlemeyer. "Treating people with dignity, care and respect always leads to a more positive outcome."

Finally, urge our experts, contact your state legislators and demand reform. In particular Litjen recommends six specific actions to request:

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