California Money saving workers’ compensation tips

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Grant Davis How to take control of your workers compensation premiums!

Safety Program Goals

Investigate near-miss incidents to prevent future accidents. Seventy-five percent of accidents are preceded by a near miss.

Create a risk control service plan based on your workers’ compensation losses. Pay particular attention to frequency and severity of claims to craft an appropriate plan.

Justify your risk control expenditures strategically to senior management so you receive the budget you need. Be sure they understand the importance of your company’s safety program and the money it saves in the long run.

Based on your experience with prior claims, create a workers’ compensation cost allocation program. Budget money by examining what types of claims you’ve had over the past several years and their cost.

Benchmark your company’s workers’ compensation performance against other comparable companies in your industry. This will help you identify areas to improve upon.


General Safety Procedures

Protect your employees by minimizing any job hazards. You should always be evaluating every aspects of your workplace to ensure the safest environment possible.

Prepare emergency announcements, and do test runs of emergency response systems to familiarize employees.

Choose a practical flooring surface, not just one that looks nice. Often, the best looking floors can be the most dangerous and will be slippery when wet.

Customize work spaces to fit each employee’s needs through ergonomic adjustments. By ensuring that an employee’s work space is tailored, you create a safer environment less prone to bodily stress or injury, and thus, less prone to workers’ compensation claims.

Educate your employees on the safest way to lift objects. Squatting with bent knees minimizes the stress to the back, regardless of what is being lifted.

Create a policy on distracted driving. Motor vehicle accidents account for a large percentage of work-related fatalities. Eating and drinking, cell phone use and music devices are all possible sources of distraction behind the wheel. The use of such devices could also be illegal, as more state and federal agencies crack down on distracted driving. A good policy can help prevent fatalities and limit liability for your company.

Along the same lines, prohibit texting while driving regardless of whether or not your state specifically prohibits the practice. Texting while driving makes an employee 23 times more likely to have an accident. A federal ban prohibiting divers of commercial vehicles from texting has also been recently enacted. Create a written policy for both distracted driving and texting while driving, and have all employees sign off on it.

Establish and enforce disciplinary measures for safety violations. There should be some type of corrective action for any employee who doesn’t abide by safety requirements.

Train your supervisors in-house. They may have previously been trained as supervisors in general, but they need to also be trained in your particular work environment.


Return to Work Strategies

  •  Job offers should always be made in writing and should thoroughly describe the offered position to ensure the hire is fit for all duties.
  • When the job is offered, send a formal job offer package along with the offer letter. Make sure it includes all the benefits the potential employee is eligible for, including return to work policies and procedures, so there is no confusion later.
  • When developing a temporary assignment for someone returning to work, find useful tasks that are not covered by other areas of the company – the goal is not to take work away from another employee.
  • Create a written job description and job analysis for all transitional duty jobs. These jobs should match physical capabilities with the work that needs to be done so that they are both useful and appropriate.
  • Hold employees working temporary assignments or transitional duty jobs to the same work rules as other employees. This prevents devaluation of the job by employees and sends the message that they are still contributing to the company.
  •  Develop and maintain a close working relationship with medical providers. Make sure they understand your business so they can help you evaluate return to work policies, procedures and cases.
  • For all employees assigned to temporary work, monitor their medical health regularly. Make sure they are doing well physically and, if they are making progress, find out from their physician if they can move forward to more demanding tasks.
  • Develop and maintain a close working relationship with claims adjusters. Make sure they know your return to work program, and ask them for advice and suggestions to improve it.
  •  Resist the temptation to turn temporary job assignments into indirect punishment. Understand that the work is therapy for the returning employee; make sure to stay positive and keep the work meaningful.
  • Consider establishing a transitional duty pay rate. It will be less than what the employee would earn working their normal job, but make sure it is consistent among all employees on transitional duty.
  • For return to work program employees, stay in frequent touch from the time of the return to work offer letter until they return to full working status. You should be accessible for them to be sure their return to work is progressing smoothly.
  • Develop a return to work plan for every injury that results in lost time. Communicate with the employee’s doctor so you understand when and how they can progress to various work tasks.

GDI's Exclusive Claims Management Program Takes Control Of Your Workers Comp Modification Factors!

  • Contact your injured workers early and often. This will let them know that you care about them, which can help keep morale up and encourage their return to full, regular duty.
  • Consider unconventional or outside-the-box treatment if it will help an employee recover and return faster.
  • If your state allows you to direct or encourage employees to use certain doctors, use doctors who understand your business whenever possible. This will help ensure the best treatment for your employees and hopefully aid in return to work scenarios, keeping claims costs down.
  • Integrate strategic wellness programs into your company to help reduce injuries. Understand how chronic conditions, like obesity and diabetes, can affect or cause other injuries. Managing such diseases properly can reduce workers’ compensation claims costs.
  • Explain workers’ compensation benefits, programs and expectations during new employee orientation to keep future claims costs down. Make sure employees understand that they will not be punished in any way for making a claim or reporting an injury, and explain the importance of promptly reporting any injury or incident.
  • Make return to work a priority across your entire organization – every job should have a return to work provision, and every employee should know about it. Return to work program awareness should not just be the job of human resources or your claims adjuster.
  • Keep up to date on laws that impact your workers’ compensation claims. Be sure to know your requirements and responsibilities as an employer and how to address any possible or suspected fraud.
  •  Keep tabs on what your claims administrator is doing; you should always know what is happening with a claim.


GDI's Claims Investigation

  • Exercise due diligence when investigating a claim. Beyond speaking to the direct supervisor and the injured employee, interview other witnesses or co-workers that could shed light on the situation.
  • After an incident or claim, be sure to investigate early and keep all the information organized. Make sure you gather all appropriate evidence and information so it can be verified later.
  • Determine whether the employee was actually working on the date that they claim to have been injured. Discrepancies or falsities happen often, particularly with late claims.

Medical Considerations

  • Make sure that your occupational medical practitioner does a thorough and proper examination when an employee first goes to see them; this way, you will not be surprised when the independent medical examiner (IME) tells you that you have a problem claimant. This includes performing Waddell’s tests when there is a lower back injury involved.
  • A diagnosis should be supported by the conditions of the accident. If the two don’t match up, then the diagnosed injury could be a result of something not directly related to work functions. In these situations, be very careful of what you pay for.
  • Don’t pay a bill for a surgery or procedure without reading the operative report. Sometimes it can contain things that had nothing to do with the incident that should not be your financial responsibility.
  • Don’t let diagnostic tests dictate your case management; tests only proves that there is an injury, not whether it happened at your workplace.
  • For a quick and easy way to save money, refer employees to physicians that you trust to provide legitimate findings and diagnoses.
  • Before a surgery takes place, establish whether it was caused by a work-related condition. Doctors may suggest surgery a bit more readily when they know it is a workers’ compensation claim.
  • Make sure that diagnoses are legitimate and universally accepted before you pay a claim. For instance, don’t list “pain” as your work-related diagnosis. Pain is a subjective finding – you cannot qualify it or quantify it.
  • Know the basics about common medical terms that you may encounter. For example, fibromyalgia is not a diagnosis; it is a symptom. The word itself means “pain in the fibrous tissue” (the suffix “algia” always indicates a symptom).
  • Be wary of paying for surgeries or operations caused by arthritis. Arthritis is not caused by trauma and thus cannot result from an on-the-job injury; therefore, in most cases, it should not be considered a workers’ compensation claim. The only exception is arthritis caused by repetitive trauma, found in employees who do a lot of squatting, kneeling or repetitive hand and finger movements.
  • Be wary of other common claims that may be masked as workers’ compensation injuries. For example, in general, trauma does not affect an existing replaced knee, making it rare for necessary loose knee replacement to be work-related.

Legal Considerations that affect what you pay for workers compensaiton.

  • Know and understand the interplay between your state workers’ compensation laws, the American with Disabilities Act (ADA), and the Family and Medical Leave Act (FMLA).
  • Keep your legal counsel in the loop on workplace injuries right from the beginning. The first 24 hours after an incident are crucial, and your lawyer needs to be informed about conditions, investigations and any updates.
  • When hiring, provide detailed job descriptions that include an accurate percentage of the amount of work that is physical. This may prevent later legal disputes.
  • Document and file everything throughout the workers’ compensation and return to work process, as it may become relevant information if there is a claim or later dispute.
  • After an incident, review the employee’s personnel file. This will help you understand the employee better, and it may offer clues or tendencies for potential fraud or a vendetta against a co-worker or manager.
  • After an incident, your legal team or representative should do an on-site inspection where the injury occurred. Be sure that they interview others who do a similar job in addition to any witnesses.
  • If there are changes in the diagnosis, the accident needs to be re-evaluated. It may not have happened as reported.
  • Keep an organized case chronology, documenting everything from initial claim to the close of a case. This includes previous history of the employee that may be relevant (past disputes with co-workers, claims history, problems at home, etc).
  • Make sure to provide the IME with everything you have, including your chronology.
  • Before a trial, make sure your witnesses are prepared. Someone from the company should be present at every hearing; it’s important to make sure that everyone is always on the same page.

Workmans Comp Research Article

Here is a quick slide show overview of just some of the free services your GDI broker has to offer to help you take control of your workers compensation costs!


Workmans Comp Injury Prevention. Loss Control. Compliance.

Our agency can help you build solid loss control and safety programs to help you stay on top of your biggest risk management and compliance challenges.

We can provide you with the most important workers compensation information for your state. Most statutes change annually based on inflation, and we stay on top of these changes for you.

We have informational documents to assist you in understanding and controlling your MOD.

Your industry has risks and we have the programs and policies that outline how to control those safety risks to keep your employees injury-free on the job.

Workers’ compensation fraud is commonplace. We can instruct you on how to prevent fraud in your workplace.

Understanding workers compensation and how employees may be eligible can be confusing. Educate your employees with our easy-to-understand resources.

View the entire article to find out more!

Virtually Connected

We deliver documents on command and have OSHA record keeping capabilities, all from the convenience of your unique Web-based client portal. These tools allow you to access and share valuable resources, including employee newsletters, industry resources and connecting to peers in your industry.

Injury Prevention. Loss Control. Compliance.

GDI Your Workmans Compensation Partner

Our agency can deliver the strategies, tools and resources that will help you manage and understand common workers' compensation issues and concerns.

Your experience modification factor, or mod, is an important component used in calculating your workers' compensation premium. If you can control your mod, you can control your price - so we've gathered some top tips designed to positively impact your bottom line.

1. Investigate accidents immediately and thoroughly. Take corrective action to eliminate hazards. Be aware of fraud.

2. Report all claims to carrier immediately. Alert carrier to any serious, potentially serious, or suspect claims. Frequently monitor the status of the claim and communicate with the adjuster to resolve as quickly as possible.

3. Take an aggressive approach to providing light duty to all injured employees upon their release from treatment. Supervise light duty employees to assure their conformance with restrictions

4. In serious cases that involve lost time, communicate with the claims adjuster so that they recognize your interest in returning the injured employee back to gainful employment.

5. Set safety performance goals for persons with supervisory responsibility. Success in achieving safety goals should be used as one measure during performance appraisals.

6. Develop a written safety program and train employees in their responsibilities for safety. Incorporate a disciplinary policy into the program, one that holds employees accountable for breaking the rules or rewards them for correctly following safety procedures.

7. Frequently communicate with employees, on a formal and informal basis, regarding the importance of safety.

8. Make safety a priority. Senior management must be visible in the safety effort and must support improvement.

9. Evaluate accident history and near-misses at least monthly. Look for trends in experience and take corrective action on worst problems first, as soon as the problems manifest themselves.

10. Hire us to ensure success!

For more information, contact your broker representative.

Understanding Your Workmans Comp Experience Modification Factor

The key to calculating a workers' compensation premium is the experience modification factor, also known as your mod. Understanding your company's mod and the data used to obtain it provides you with the information necessary to determine how to keep your workers' compensation premium under control.

Who calculates the mod factor?

Most states use the National Council on Compensation Insurance (NCCI) to collect data and calculate the experience modification factor. NCCI is a private corporation funded by member insurance companies. However, the following states have their own government-run rating bureaus that are separate from the NCCI: California, Delaware, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, Texas and Wisconsin.

How is a mod calculated?

Calculating the experience modification factor is complex, but the underlying theory and purpose of the formula is straightforward. Your company's actual losses are compared to its expected losses by industry type. The formula incorporates factors that take into account company size, unexpected large losses and the difference between loss frequency and loss severity to achieve a balance between fairness and accountability.

How does my mod affect my premiums?

The mod factor represents either a credit or debit that is applied to your workers' compensation premium. A mod factor greater than 1.0 is a debit mod, which means that losses are worse than expected and a surcharge will be added to your premium. A mod factor less than 1.0 is a credit mod, which means the losses are better than expected, resulting in a discounted premium.

What is the experience rating period?

The mod is calculated using loss and payroll data for an experience rating period. The experience rating period typically includes data for three policy years, excluding the most recently completed year. For example, for a mod factor calculated on January 1, 2010, data would be used for the January 1, 2006-2007, January 1, 2007-2008 and January 1, 2008-2009 policy periods. The data for the January 1, 2009-2010 would be excluded.

TThree years of data is used to provide a more accurate reflection of the losses, smoothing out the impact of any bad or good year of losses.

The actual loss data is separated into primary and excess pools. Primary losses, which are the first $5,000 of every loss, measure frequency. Excess losses - or amounts more than $5,000 - measure severity. The formula penalizes loss frequency by including all loss amounts in the calculation. The reason for this is that these types of claims can be controlled through proactive loss control programs. Losses in excess of $5,000 are capped at levels that vary by state. This minimizes the impact that any single claim can have on your premium. In approved states, medical-only claims figures are reduced by 70 percent.

Expected losses are then calculated by using your payroll data by state and class code, and applying the Expected Loss Ratio (ELR). The ELR is provided by each state rating bureau. These figures are also broken down into expected primary losses and expected excess losses.

How do your losses compare?

The final mod calculation compares your actual primary and excess loss figures to those expected for a company of the same size and industry type. To understand how workers' compensation losses to your business compare to state industry averages, contact GDI Insurance Agency, Inc. to review your experience modification worksheet.

How can you control your mod?

Your mod factor has a direct impact on your workers' compensation premium. The key to controlling your insurance costs is through accident prevention.

- The mod is calculated based on data reported to the rating bureau by past insurers. Incorrect or incomplete data can cause incorrect mod factors. Review the loss and payroll data to make sure the calculation is complete and accurate.

- Losses remain in the experience rating formula for three years. The experience modification factor is influenced more by small, frequent losses than by large, infrequent ones.

- Develop a sound safety program, return to work program and prevention procedures to reduce loss frequency.

- An effective self-inspection and accident investigation program are critical to managing claim frequency.

- Implement an active claims management program to manage outstanding reserves and focus on efficiently resolving open claims.

- Report all claims to your carrier immediately.

- Take an aggressive approach to providing light duty to all injured employees upon their release from treatment.

- Set safety performance goals for supervisory roles. Success in achieving safety goals should be used as one measure during performance appraisals.

- Train employees on their responsibilities for safety, and enforce conformance with these responsibilities.

- Frequently communicate with employees, on a formal and informal basis, regarding the importance of safety.

How can your experience rating save you money?

Establishing a proactive safety program is an effective way to reduce losses, which impacts your mod and workers' compensation premium. Contact us today. We have the loss control experience to help you advance safety and control your workers' compensation premium.

This Coverage Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice

Photography © Outdoor Office V154 Getty Images, Inc. Source: Insurance Information Institute. Reprinted with permission.



Fighting WC Fraud in the Workplace

According to OSHA, companies that treat their workers fairly and with concern have the fewest job injuries and fraudulent WC (workers compensation) claims.

As a supervisor, here are the top 10 proactive things you can do to fight WC fraud in the workplace.

1. Educate your employees. Employees should understand both their rights concerning legitimate WC claims and the penalties for fraudulent ones. Hold a safety meeting on the topic, and use posters, flyers and payroll stuffers to advance your fraud message. And don't be afraid to promote your tough stance against fraud by informing employees that all suspicious claims will be investigated and prosecuted.

2. Maintain a safe work environment. Initiate a formal Safety or Injury Prevention Program to minimize safety hazards.

3. Implement a Return to Work program. Experience shows that injured workers recover faster when they return to work. Returning to regular work usually occurs more quickly when transitional or modified duty is offered to the injured employee.

4. Keep in touch. Employees who feel valued are less likely to cheat the system. Keep in touch with an injured employee and make it clear you're looking forward to having them back at work as soon as they have their doctor's approval.

5. Partner with a reputable medical provider. Partner with a reputable medical clinic to serve as your company's primary provider to ensure workplace injuries are treated by a trustworthy physician.

6. Establish reporting procedures. Employees and supervisors should be familiar with reporting procedures, and keep accident forms on hand. Also, stress the importance of reporting injuries promptly.

7. Investigate immediately. If an accident occurs, investigate the accident while memories are still fresh. Separately talk to each witness and co-worker about the injury. Be sure to relay any suspicions about the incident to your claims adjuster.

8. Conduct exit interviews. You should document the work-related activities of employees who are about to be laid off or fired. Conduct exit interviews that include questions about the employee's physical condition and any on-the-job accidents or injuries that have not been reported. This may help to deter fraudulent claims or refute future false claims.

9. Be cautious. Fraud is a serious accusation that if not handled properly could put you in the middle of a lawsuit for libel or slander. Give your company the added protection by working with your claims carrier to validate your suspicions, and to determine if the incident should be reported to the appropriate authorities.

10. Be honest. Honesty works both ways. Don't knowingly provide false or misleading information with regard to entitlement to WC benefits in order to discourage an injured worker from pursuing a claim.

Safety Programs and the Impact to Your Bottom Line

If you could save your company money, improve productivity and increase employee morale, would you? According to the Occupational Safety and Health Administration (OSHA), workplaces that establish safety and health management systems can reduce their injury and illness costs by 20 to 40 percent. Safe environments also improve employee morale, which positively impacts productivity and service. When it comes to the costs associated with safety, consider the following statistics from OSHA:

• It is estimated that employers pay almost $1 billion per week for direct workers' compensation costs alone; this comes straight out of company profits.

• Injuries and illnesses increase workers' compensation and retraining costs. Lost productivity from injuries and illnesses costs companies roughly $63 billion each year.

In today's business environment, these safety-related costs can be the difference between reporting a profit or a loss.

Measuring the Cost of Safety

Demonstrating the value of safety to management is often a challenge because the return on investment (ROI) can be cumbersome to measure. Your goal in measuring safety is to balance your investment vs. the return expected. Where do you begin?

According to the International Risk Management Institute's (IRMI), there are many different approaches to measuring the cost of safety, depending on your goal. Defining your goal helps you to determine what costs to track and how complex your tracking will be.

For example, you may want to capture certain data simply to determine what costs to build into the price of a product or service, or you may want to track your company's total cost of safety to show increased profitability, which would include more specific data collection like safety wages and benefits, operational costs (such as safety training expenses), insurance costs, etc.

Since measuring can be time consuming, general cost formulas are available. A Stanford study conducted by Levitt and Samuelson places safety costs at two and a half percent of costs, and a study published by The Economist Intelligence Unit (EIU) estimates general safety costs at about eight percent of payroll.

If it's important for your organization to measure safety as it relates to profitability, more accurate tracking should be done. For measuring data, safety costs can be divided into two categories:

1. Direct or 'hard' costs, which include:

- Safety wages

- Operational costs

- Insurance premiums and/or attorney's fees

- Accidents and incidents

- Fines and/or penalties

2. Indirect or 'soft' costs, which go beyond those recorded on paper, such as:

- Accident investigation

- Repairing damaged property

- Administrative expenses

- Worker stress in the aftermath of an accident resulting in lost productivity, low employee morale and increased absenteeism

- Training and compensating replacement workers

- Developing a poor reputation, which translates to difficulty in attracting skilled workers, losing business share, etc.

When calculating 'soft' costs, minor accidents are considered to be about four times greater than direct costs, and serious accidents about 10 to 15 times greater, especially if the accident generates OSHA fines and/or litigation costs.

According to IRMI, just the act of measuring costs will drive improvement. In theory, those providing the data become more aware of the costs and begin managing them. This supports the common business belief that what gets measured gets managed. And, as costs go down, what gets rewarded gets repeated.

How Can You Show ROI?

OSHA studies indicate that for every $1 invested in effective safety programs, $4 to $6 may be saved as illnesses, injuries and fatalities decline. With a good safety program in place, your costs will naturally decrease. It is important to determine what costs to measure to establish benchmarks, which can then be used to demonstrate the value of safety over time.

Also, keep in mind, your total cost of safety is just one part of managing your total cost of risk. When safety is managed and monitored, it can also help drive down your total cost of risk.

Safety as a Core Business Strategy

Industry studies report that companies who focus on safety as a core business strategy come out ahead. Consider the following as reported in Return on Investment (ROI) for Safety, Health and Environmental (SH&E) Management Programs, by the American Society of Safety Engineers:

- A coal mining company in West Virginia reduced its workers' compensation rate of $1.28 per $100 payroll vs. its competitor's rate of $13.78.

- Implementation of an OSHA consultation program reduced losses at a forklift manufacturing operation from $70,000 to $7,000 per year.

- A fall protection program implementation reduced one employer's accident costs by 96 percent -- from $4.25 to $0.18 per person-hour.

- Implementation of an improved safety and health program reduced Service master's workers' compensation costs by $2.4 million over a two-year period.

Considering the statistics, safety experts believe that there is direct correlation between safety and a company's profit. We are committed to helping you establish a strong safety, health and environmental program that protects both your workers and your bottom line. Contact us today at 209-634-2929 to learn more about our value-added services.

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