One of the biggest employee-related expenses affecting employers is the rising cost of workers’ compensation insurance. In this post we’ll discuss 3 tips to reduce employer work comp costs.
A small business owner with just a few employees can pay up to $3,000 in workers’ compensation premiums annually. Of course, these numbers increase right along with payroll headcounts. Data from 2017 shows the average workers’ compensation cost for employers was $97.4 billion or $1.25 for every $100 in covered payroll. 2019 data showed the total cost of work injuries was $171 billion in wage and productivity losses as well as medical and administrative expenses.
The high costs of workers’ compensation dictate that employers do everything they can to reduce their costs. We have three tips to help you reduce employer work comp costs to take control of these spiraling, but necessary corporate expenses.
The Rising Costs of Workers’ Compensation
Workers’ compensation helps cover employee medical bills, lost wages, disability, and funeral payments. However, companies struggle to administer these programs efficiently. In 2020, small business owners nationwide paid an average of $.45 per hour worked, which is 1.3% of the employers’ today compensation costs.
The states with the biggest premium increases in 2020 included:
- Kentucky – $.09 increase
- Kansas – $.08 increase
- Louisiana – $.06 increase
- Hawaii – $.05 cent increase
- Nevada – $.04 cent increase
Each state regulates the cap on injured worker payments differently. For example, Alaska pays up to 80% of a workers’ wages if they are disabled by an on-site injury. Most other states have a cap at around 66%. There are also varying rules around how long payments will be issued. Massachusetts stops at 156 weeks while Wisconsin pays up to 400 weeks, depending on the injury and disability.
All of this adds up to the massively complex and costly system we know as workers’ compensation. It’s a program that cost an average per claim of $41,000 in 2017-2018. That is equal to about $62 billion paid out in workers’ compensation benefits in that one year alone.
Factors Influencing Workers’ Compensation Costs
Workers’ compensation costs change yearly. While each state is responsible for administering their own program, companies are evaluated annually based on four primary factors:
Risk is a primary cost-center for workers’ compensation. Some jobs put employees more at risk for injury than others. The National Council of Compensation Insurance (NCCI) has a business risk classification that helps designate a company’s risk category. This includes:
- Annual payroll
- History of workers’ compensation claims and recordable injuries
- Your location
Each state is different. For example, the average workers’ compensation rates in Oregon are predicted to drop for the eighth consecutive year in 2021. However, Alaska is highest, with employers paying $2.25 for workers’ comp for every $100 of payroll.
While employers can control their head count and even the states where they choose to do business, factors like risk and the response to that risk in the form of recordable injuries, must be controlled on the ground.
Tips for Cutting the High Cost of Workers’ Compensation
The top three ways to cut the high costs of workers’ compensation include:
- Create a culture of safety to reduce injury risks
- Reduce recordable workers’ compensation events
- Leverage telemedicine for better injury response
Creating a culture of safety to reduce injury risks is a necessity for any company in a high-risk labor category. EHSToday points out, “Better workplace safety leads to fewer claims, and fewer claims directly affect your workers’ compensation rate.”
They recommend both an educational and an accountability program to both reward or discipline employees who follow safety protocols. This process should be company-wide and endorsed and supported by company leadership. It should be a regular part of company culture and discussed regularly to achieve a true culture where safety is top of mind.
Reducing recordable workers’ compensation events requires that companies assist workers in avoiding specific Occupational Safety and Health Administration (OSHA) reporting requirements, including:
- Work-related injuries resulting in a loss of consciousness
- Injuries that cause the employee to miss work
- Injuries that force a job transfer or work restrictions
- Injuries that require treatment beyond first aid
In an ironic state of affairs, the top workplace injuries are musculoskeletal in nature. Most of these injuries are related to overexertion or muscle strain, falls, and repetitive motion disorders. They make up nearly 90% of all of the OSHA recordables each year. However, the employer response is often overblown, which is why an injury as simple as an ankle twist can wind up in the ER. Once the treatment goes beyond first aid, it should be documented for OSHA. The more recordable events, the higher the workers’ compensation premium.
Leveraging telemedicine for better injury response in the workplace reduces OSHA recordable events and helps employers cut workers’ compensation costs. Telemedicine for workplace injury allows for an immediate onsite virtual connection with a clinical professional to assess, triage, and provide treatment for the injury.
This technology is as close as a personal cell phone, and it can be very useful at times when medical treatment isn’t available and the only recourse is a trip to the ER. For example, telemedicine can help:
- During an overnight shift when many treatment facilities are closed
- In remote areas where there are limited care facilities available
- For companies that have off-site workers in the field that make for unpredictable care delivery options
Telemedicine can eliminate any unnecessary ER trips for non-severe musculoskeletal injuries. These tools cut OSHA recordables but also contribute to a culture of safety in your organization by giving your workforce the satisfaction of quick, efficient medical treatment.
Today, affordable, secure technology is available to help businesses cut OSHA recordables and provide immediate on-site care for their valuable workforce. OrthoLive is one of the nation’s top providers of telemedicine for workers’ compensation. We have a track record of saving businesses up to 80% of their job-related injury expenses.
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