It’s an unfortunate fact of construction management that you will become quite familiar with worker’s compensation programs. The industry sees more than its fair share of serious on-the-job injuries. You can save yourself some trouble and some money by doing a few things that will keep your worker’s comp claims to a minimum.
#1. Create a safe working environment
This sounds pretty obvious, but it seems to cause some people a little trouble in practical terms. It shouldn't.
OSHA requires you to develop programs that meet its stringent safety standards. Make those programs part of your standard operating procedure by training all new or returning workers, supervisors, and managers on the requirements of your safety program. Hold regular safety training for everyone at the jobsite and make sure your supervisors and managers know your expectations in this matter.
If and when an accident does occur, thoroughly investigate and document it at the time it happens. This will save you a load of trouble down the road. Modify the safety program if needed to address this type of problem.
Review your safety program on a regular basis to make sure you remain in compliance with OSHA and to have information addressing your particular company as well. If you need to, hire a risk management company to help you with claims and developing future programs.
#2. Manage your risk
Much of your risk management comes from a comprehensive safety program and training. However, you also need to manage the risk of complications from the worker’s comp claim itself.
There have always been complaints about the processes and procedures of filing a claim. Learn where the traps are and take advantage of any opportunities you can find to write your claims properly. Stick to the facts, which is why you should investigate and document accidents promptly. It’s hard to go back and pick up details later.
#3. Understand worker’s compensation insurance
First of all, worker’s compensation is considered a no-fault insurance system; workers give up their rights to sue for injuries while employers are required by the system to carry insurance that will pay for medical treatment and lost work time for injured workers.
Incidentally, the state of Texas does not require employers to carry worker’s compensation insurance, leaving the employer open to personal injury lawsuits or, alternatively, leaving the employee without adequate coverage.
Most state worker's compensation law is written so that employers with the best safety records get the best rates. Rate determination is based on two components:
- Manual Rate
- Experience Modification Rating (EMR)
The manual rate is based on the average medical costs and benefits paid plus the costs added for administrative overhead. It also includes the insurance company profits for previous years.
The manual has listings for around 450 work classifications, and the rate is expressed in dollars per $100.00 of payroll (except in Washington State where is dollars per payroll hours).
The EMR, or experience modification rate, refers to the compensation actually paid as a result of claims against the employer’s insurance policy. The EMR is then multiplied by the manual rate to find the final premium.
The lower you can keep your EMR, the lower your premium will be. It will give you a competitive edge, too. A higher premium may cause your costs to exceed your anticipated profit on a potential job. On top of that, there are some out there who will not accept bids from companies with an EMR higher than 1.0.
How to lower your EMR
Believe it or not, the number of claims you file is more serious than the severity of the accidents you file for. It seems strange that filing a bunch of claims for little bitty stuff can cause you higher premiums than a single bad accident, but there it is.
On the other hand, that makes it easier to improve your EMR. Just improve your basic safety performance by developing a good safety program and maintaining a strict training schedule. Encourage good work habits and don’t hire knuckleheads who can’t stay out of trouble.
Get a copy of your EMR from the insurance company, your agent or broker, or order a copy from the National Council on Compensation Insurance (NCCI). In it you will find your payroll numbers, the claims you have made, and some other factors, all of which can help you find ways to lower your EMR.
The rates for each employer are recalculated every year, although they are based on a rolling average of the previous three years before the last one. (Confused yet?) They do that because the previous year’s claims are typically undergoing too many adjustments to be reliable.
All of this means that any changes you make won't be taken into account for at least two years after they are implemented. Then, because of the rolling three-year average, it will take four years to see the full impact to your EMR. Changes must be sustained to make a difference.
Review your worker classifications
Your premium rate is also impacted by the way you classify your workers. Go to the online SCOPES Manual from NCCI to find all the available classifications as well as when they may be used (or not used).
Then get together with your insurance firm's auditor to discuss setting up the payroll records, so the wages are appropriately allocated and to ensure you have allocated to all the classifications your company is entitled to. Keep in mind that classification with the lowest rate doesn’t automatically result in the lowest premium because classification is only part of the EMR.
It’s entirely possible that the lower classifications will be offset by a higher EMR and a lower CCPAP (Contracting Classification Premium Adjustment Program) rating. The result could be higher premiums. In other words, a higher EMR may have a larger negative impact than can be recovered by lower premium benefits.
Mediators and patient advocates
Hiring a mediator can reduce your legal costs if they should come up. A mediator can provide expertise in alternatives to lawsuits and other legal issues. Just having someone who can smooth communication between employer and employee can minimize worker frustration with the injury and, through it, the employer.
A patient advocate can focus on treatment plans that will be the beneficial for the injured worker, getting him or her back to work without unnecessary expenses or delays. A patient advocate can also calm the frustrations of an injured worker.
On-the-job injuries and worker’s compensation insurance are facts of life for construction contractors. Develop, maintain, and enforce a comprehensive safety program to minimize the number and severity of injuries to your workers. Manage your overall risk and learn all you can about your options for coverage.
A good safety record will lower the costs for required insurance and provides a competitive advantage within the industry.