Human Resource Department Tasked With Reducing Workers Compensation Cost – Pointers on How to Start

When a large company is faced with rising workers compensation premium costs upper management will often turn to their Human Resource Department seeking answers to some pretty difficult questions. Questions like:

  • How did our EMR get so high? After all, we run a safe company!
  • We haven’t had many claims so why does our workers compensation premium continue to rise?
  • We’ve only had one claim! What’s going on with our EMR?
  • What do you mean we can’t bid on government jobs because our EMR is out of control?
  • Our workers must be misclassed. Isn’t our premium is too high?
  • Why are we paying more for workers compensation insurance than our competitors?
  • What are you doing to reduce our workers compensation cost?

All good questions, unless you’re on the receiving side!

We’ve discovered that more and more HR Departments are being tasked with the burden of reducing workers compensation costs. Our recent case load has been filled with employers gearing up their HR departments to meet that task. We continue to work with many employers in the capacity of providing consulting services and a variety of tools they can use to examine the efficiency of their workers comp programs and gain a better control of their experience rating process. Here’s a few pointers that may help an HR department better answer those questions that come from above.

  • Correct Classification Codes – Make sure you are using correct workers compensation class codes on your policy. It’s a great place to start because codes play such an important part in the whole cost process. Not only from a direct premium an employer pays but from the more subtle but great effect they have on the EMR calculation. Institute a classification code review process. Keep in mind that when work processes change in a business there’s a good chance codes will need to be adjusted. Codes get to be complicated so don’t assume you know what you’re doing! Work with your insurance agent and independent work comp consultant to assure your codes are correct!
  • Audit Review – Never pass on the opportunity to verify that your workers compensation audit is correct! Develop a process to have your audits reviewed every year by an outside consultant.  Audited payroll and classifications identified in the audit not only have a direct relationship to the adjusted premium you pay but are also reported to your rating bureau and used in the development of your EMR!
  • EMR or Experience Modification Rate Review – Development of an employers EMR is left to the rating bureau or advisory organization for that individual employers state. It’s a somewhat complicated calculation process dependent upon many independent rating elements. It is essential that an experience rated employer have their EMR verified by an independent source. Most of the time an employer with a high or out of control EMR will have already contacted a work comp consultant for assistance. But by that time it may be too late to have any direct impact on the current EMR. So it becomes very important for the HR department to have in place a method to review their EMR on an annual basis. Hook up with a work comp consultant for help with this!
  • Claim Review – Having a constant handle on workers compensation claims should be a no brainer. After all claims make a significant direct impact on the EMR and ultimately on the premium any experience rated employer pays! For the HR department it is of paramount importance to develop, implement and maintain in place a working claim control program. Sometimes folks refer to this as a workers compensation cost containment program. I personally believe that a comprehensive cost containment program should be much broader and encompass the entire workers compensation process however that’s for another post. Certainly at a minimum a formal claim review should be conducted at least once during the policy year. Timing of this review is also important as it should be conducted immediately after your renewal and prior to your Unit Statistical Reporting Date. Did I mention a work comp consultant can help you with your claim review?
  • Safety Program – Now here’s a topic that’s been written about ad nauseam! But with good reason! Up to this point I’ve talked about implementing verification systems for the quantitative part of workers compensation, those things that produce and rely upon numbers. But a safety program that teaches employees how to work safely within the employers work environment can never be replaced by verification of numbers. Eliminate work place injuries and you’re on the way to controlling your workers compensation costs! Remember those signs that used to be posted outside some kind of plant in the community you grew up in that said “420 DAYS WITH NO LOST TIME INJURIES!” What could be more important?

An essential part of gaining control of costs related to a workers compensation policy is to have in place a method of verifying the various cost related elements. Coupled with an aggressive work safety program and claim review an employer can gain control over their workers compensation costs.

So if you run an HR department and are tasked with gaining control and reducing your companies workers compensation costs just remember these two words:  Verify and Control. Do that an you’re off to a great start!

Hope this helps you out and thanks for reading!