Four Steps I Took to Lower Our Workers Comp Costs

Workers Compensation is the bane of most employers, a much-hated tax they have to pay in order to support workers who get injured on the job. And the opportunities for fraud are so prevalent that just mentioning the phrase “Workers Comp” is enough to make any executive see red.

But I managed to reduce our Workers Comp claims by implementing some new policies that not only helped reduce the number of claims, it reduced our overall injury rate as well.

That sounds like a pretty neat trick, and you’re probably wondering how that all worked.

In Texas, it’s actually possible to opt out of the Texas Workers Comp plan. If you’re a part of the system as an employer, you don’t get a say about the way it’s administered. There’s a very high percentage of fraudulent claims that get through the system, which causes the employers’ rates to go up and hurts each company where the fraud is taking place.

So I decided to opt out of the Texas system and we created our own ERISA health and safety plan. We self-insured for stop loss for catastrophic injury — that meant any claim over a set amount, the insurance company would pay it — and we created clear and concise rules regarding filing claims. Basically, we were paying for our own system, but we figured that if we could eliminate the claims, our Workers Comp costs would actually go down.

Our workers comp rules were very clear where the state’s rules were very vague. In the state system, someone could claim they injured themselves 12 or 24 months earlier, but in our system, we required that if anyone was hurt, they had to report it on the shift in which it happened.

(Other companies will also have an on-staff nurse practitioner, or even a physician, to deal with the beginnings of injuries, which can also reduce ER costs. If someone hurts themselves on, say, a Friday morning, they can get treated for the injury right there, rather than going to the ER on a Saturday night when they’re in complete agony. This cuts down on total health care costs as well, because no one is making an unexpected $5,000 ER visit. This practice can turn your health care/insurance claims into a fixed line on the budget, not a variable one that changes every month.)

For example, soft tissue claims are very difficult to dispute and contest, because you don’t see evidence of gaping wounds. We realized that someone who claims they wrenched their back two years ago and it has been bothering them ever since, but only decided to claim it now, is probably making a bogus claim. By requiring the claim to be filed immediately, we helped eliminate fraudulent claims. And in the eventuality someone did get hurt, this would ensure they would get treatment very quickly, so they could be made whole in as short a timespan as possible.

Next, for all new employees, we instituted Fit For Duty medical examinations so that we created a “health baseline” for anybody who was hired. We knew what pre-existing issues they had when they started working for us, so nothing would come up later. We did this because there are certain physical ailments that are just degenerative, and our associates may have had them for a few years.

For example, carpal tunnel is degenerative, it’s not something you just develop in a few weeks. So if we saw that a new employee had the beginnings of carpal tunnel, we could not only help them to take steps to prevent further deterioration, we also knew that it didn’t happen as a result of working for us.

Finally, as part of our overall safety program, I borrowed a page from the Japanese management manual. In Japan, at the beginning of every shift, everyone does stretching and warmup exercises, and so did we. Working in a manufacturing facility can be physically demanding, just like regular exercise, and so injuries can occur. But by stretching at the beginning of every shift, we were able to reduce the number of workplace injuries.

As soon as we did these things, lost time accident claims for workplace injuries plummeted to zero, but we also eliminated the possibility for future Workers Comp fraud claims. While all of these were effective in lowering our workers comp costs, the single most effective step was opting out of the Texas Workers Comp program, because we changed the rules of engagement. It eliminated fraud, it helped people get treatment more quickly, and it raised the safety consciousness of all the constituents in the enterprise.

I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business. If you would like more information, please visit my website and connect with me on Twitter or LinkedIn.

Photo credit: Life of Pix (Pixabay, Creative Commons 0)