Filed Under:Markets, Workers Compensation

The Dollars and Sense of Workers’ Compensation

Return-to-Work Plans, Proposed New Mods Impact Pricing

No matter how safe an employer tries to make the worksite, accidents can still happen. The National Safety Council (NSC) reports that a disabling injury occurs every 1.3 seconds in the U.S. (more than 63,000 every day), and the Social Security Administration predicts that 3 out of 10 workers entering the workforce today will acquire some type of disability before they retire.

Getting injured employees back to work quickly—and providing positive communication and assistance during the rehabilitation process—has always been an important aspect of successful workers’ compensation programs. Research consistently shows that injured employees whose companies offer return-to-work programs recover faster, are more satisfied with their care, return to their full-duty jobs sooner, and are released from medical care earlier than if no return-to-work programs are in place.

Legal Matters
There is another important benefit for employers who offer medically appropriate modified or alternate work while an injured employee is recovering. If the employee declines this job offer, then the employer is in a much stronger position to prevail if the claim is litigated. It is tough to argue that an employee who rejected a reasonable offer to return to work should expect to receive long-term workers’ compensation benefits. Employers who routinely make good faith job offers have more favorable results in court. Conversely, the odds of having a judge remove an employee from workers’ compensation benefits drops significantly without a return-to-work job offer.

Avoiding litigation altogether is the optimum position, and here again return-to-work programs can help. The Workers Compensation Research Institute released a study in 2010 that found that workers are more likely to seek legal help when they feel threatened. Return-to-work programs offer assurance to employees that their jobs are safe, help combat fraud, and provide timely, positive communication. According to the California Workers’ Compensation Institute, calling injured employees within a week after an accident to talk about their value to the company reduces the chance of a lawsuit by 50 percent.

Today’s businesses also employ increasing numbers of individuals age 65 or older, a trend that seems likely to increase. According to the Department of Labor, a baby boomer turns 60 every 7 seconds. This generation is extending its working years dramatically because of both better health and the large scale collapse of retirement savings. They have experience, and they contribute greatly. However, the Bureau of Labor Statistics estimates that it takes an older worker two to three times longer than a younger worker to recover from the same injury. Employers who are prepared with workable, temporary job plans can dramatically cut these claim costs.

Anticipated NCCI Revisions
In Florida, workers’ compensation rates are calculated using a formula involving manual rates specific to job duties and classification, payroll, and an experience modification factor (mod). NCCI uses a complex formula to calculate the mod for eligible employers. The idea is to spread the cost of loss through members of a group likely to experience similar losses. For fairness, NCCI uses each company’s actual payroll and loss data over a 3-year period. Companies who do not qualify for a mod, or who have had average loss experience, break even at a 1.00 mod and pay the average rate.

Historically, NCCI divides losses into primary and excess portions, with a longtime split point with a $5,000 cap. (The primary costs are weighted at 100 percent in the mod formula for lost-time claims; any amount over that is allocated to excess and weighted at a lower percentage.) A company with several small losses creates a higher mod than a company with a single, larger loss even if the total loss dollars are the same.

The NCCI has proposed changing that primary loss cap beginning in 2013, the first such change in 25 years. The anticipated change—if approved—is expected to more than triple the current cap by 2015.

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