WORKERS’   COMPENSATION  INSURANCE:

ELEVEN WAYS TO CUT YOUR PREMIUMS NOW

Thanks to recent reform measures, workers’ compensation insurance rates
have, at least for some employers, dropped over the past two years.
Your premiums, however, may still be higher than they have to be.  In
fact, there are several money-saving steps you can take now to reduce
your costs.

First, a word about how workers’ comp rates are figured in California. A
base premium rate is assigned to each classification of workers — the
riskier the job, the higher the rate.  For example, the low-risk rates
include auditors and accountants at $.38 per $100 of payroll.  At the
other extreme are roofers with a rate of $29.90, or circus performers,
who have the highest rate of all at $50.51 per $100 of payroll.

Insurers use these basic rates as a starting point for determining
premiums.  They then adjust the rates, based on a variety of factors,
such as whether you have safety programs, the size of the premium
itself, the insurer’s losses and expenses, and your own claims’
experience, including how many claims you have had and how much has been
paid out.

Eleven Money-Saving Tips.....

1. Separate overtime from regular payroll.  Here is one area where
knowing the rules of the game is essential.  Many employers are unaware
that proper accounting can lower their premiums.

Overtime premium pay, if properly separated from your regular payroll,
doesn’t have to be included as part of your payroll for workers’ comp
purposes.  For example, if you pay $10 an hour employee $15 for overtime
(time and one-half), you don’t have to report the extra $5 to your
insurer.

2. Subcontract work.  Consider subcontracting high-risk jobs that may
have steep workers’ comp rates.  When you factor in payroll expense,
benefits, and workers’ comp coverage, subcontracting may reduce your
overall cost of getting a particular job done.  But make sure that you
go through a reputable subcontractor that carries its own workers’ comp
insurance on their workers.

3. Hire right.  You can cut the risk of accidents and injuries by hiring
the right people for the job.  Use pre-employment medical exams and drug
testing when appropriate.  And make sure you provide proper training and
supervision on an ongoing basis and hold supervisors accountable for
results.

4. Offer safety incentives.  Safety programs in which employees receive
bonuses such as money or time off from the job can work wonders in
reducing accidents.  Work with your employees to develop incentive
programs that will motivate them to be safety conscious and take pride
in their workplace and accomplishments.

5. Take advantage of your insurer’s services.  For example, ask to have
a loss control representative visit your business and offer
recommendations.  Work with that person to evaluate and improve safety
programs.  Also, most insurers will perform ergonomic studies of your
workplace free of charge.

6. Look for insurers who offer managed care.  Workers’ comp insurance
carriers are starting to contract with health care providers to offer
managed care in workers’ comp cases.  This can help an insurer to hold
down costs by having some control over medical care throughout the
course of an employee’s treatment.  And, this may translate into lower
premiums, or at least smaller premium increases.

7. Monitor claims.  Make sure your insurer is actively supervising
claims to keep costs down and get injured employees back to work
quickly.

The adjuster should be checking on your employee’s treatment and
progress.  For example, the adjuster should follow up on an injured
worker who might be receiving daily chiropractic care, which can be
costly and may not be necessary.

Also, keep in mind that you have a right to receive notice of claims and
settlement offers and information about your insurer’s basis for setting
“reserves” (see number 9 below).  In addition, you have the right to
review your carrier’s claim files.

8. Keep in touch with injured employees.  When employees feel alienated
or angry, it’s more likely they will hire a lawyer.  Both you and the
insurer should maintain contact with the injured employee so the person
never feels ignored by you or the workers’ comp system.

9. Question reserves.  “Reserves” are the amount of money your insurer
estimates is necessary to resolve a claim.  There can be a problem if an
insurer sets reserves at the beginning of a case that are too high or
fails to reduce that figure when the actual cost turns out to be less
than expected.  This affects your claims history, and your premiums can
go up.

10. Bring employees back to work.  Consider implementing a return to
work program encouraging employees to come back to work as soon as
possible, even though they may be performing a different job.  For
example, an injured construction worker may not be able to lift heavy
materials, but he might be able to drive a truck.

11. Use employee assistance programs.  An effective program could show
big returns in the form of reduced absenteeism, fewer workers’ comp
claims, and increased employee loyalty.  For example, access to family
counselors or classes on stress management and relaxation techniques can
help reduce legitimate stress claims.  Other worthwhile programs include
teaching employees about back care, proper procedures for lifting, and
good health and nutrition principles.

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 Back to:    Vol. 34. No. 3

Jan., 1998