Four Ways to Control Workers’ Compensation Costs
As a small business owner, you’re keeping a close eye on cash flow and making sure every dollar you invest helps your business grow. Your workers’ compensation insurance is a smart strategic investment that helps you protect your most important asset – your employees. It is also an area where you can be proactive to help minimize your costs.
Here are four ways you can keep your workers’ compensation insurance costs as low as possible:
- Create a culture of safety. The most important thing you can do to control workers’ compensation costs is to foster a workplace where all employees understand the importance of safety. Through its Safety Pays program, the Occupational Safety and Health Administration (OSHA) offers an online estimator program that allows you to see the potential direct and indirect costs of workplace injuries. Even seemingly small injuries can add up to big expenses. That’s why fostering a safe work environment helps businesses avoid potentially costly workplace injuries and illnesses that could result in higher premiums. Expectations and safety procedures should be documented and reviewed with all staff on a regular basis. Managers also need to lead by example and hold employees accountable for maintaining a safe work environment. Businesses can also create incentive programs that reward “safety champions” for helping reduce workplace accidents and injuries. Most workers’ compensation carriers have online resources and safety professionals who are able to share best practices for creating a culture of safety.
- Watch for the “red flags” of fraud. According to an analysis by the U.S. Social Security Administration, fraudulent workers’ compensation claims cost $6 billion annually, about 10 percent of all claims payments. Every claim against your insurance can potentially impact your premium, so it is important to try to prevent fraudulent claims. Business owners play an important role in reducing these costs. They need to be aware of the potential indicators of claim-related fraud and should report suspicious claims to their insurance provider as soon as possible. Potential signs of fraudulent claims may include: employees who report injuries at the start of a shift, or at the end of the week; employees who have a history of suspicious claims; and employees who refuse medical diagnoses to confirm an injury.
- Provide transitional work options. After an injury occurs, employers can influence the cost of the claim by providing alternative work options. The longer an employee is on a medical leave of absence, the more likely it is they’ll never return to their pre-accident job. Prolonged medical leaves increase costs to the business in the forms of lost productivity and training replacement employees. One way to get injured employees back to work sooner is through physician-approved transitional work. For example, an employee who previously had a physically active job could be offered a less strenuous desk job on a temporary or long-term basis. Transitional work options are beneficial to both the employee and the business owner. The employee is able to remain active in his or her career, while the business owner is able to avoid short-term wage replacement claims and, potentially, long-term disability costs.
- Manage claims proactively. While preventing employee injuries or illnesses is the best way to reduce claim-related costs, sometimes accidents do happen. In those cases, claims should be reported to your insurance carrier within 24 hours of an incident so employees can get the care they need. Prompt reporting and medical care helps control potential medical, administrative and litigation costs. Additionally, it can help reduce payments for lost wages and curtail lost productivity due to down-time.