Free Continuing Education for Small Business
It is a necessary evil of doing business – employers must carry workers’ compensation insurance in every state. Many small business owners are taken aback with the cost of workers’ compensation insurance. However, there are a number of things you can do to help control your insurance costs.
Workers’ compensation costs are calculated by multiplying a general class code rate (the riskier your business venture, the higher the base rate will be) by your modification (mod) rate. Your personal mod rate is based on what the insurance company pays out on your claims over the past 3 years. If you have a high rate of injuries, and the injuries cost the insurance company a lot of money, your mod rate can be affected for 3 years or more.
If one of your employees is injured on the job, they are entitled to file a claim under workers’ compensation. There are two types of benefits: medical and indemnity payments. Medical benefits pay for appropriate medical care that is related to an accepted workers’ compensation claim. Indemnity payments cover wages while an employee is unable to work, and may also compensate the employee for permanent impairment sustained as a result of a work injury. Here we will discuss how you can assist the insurance company in controlling both medical and indemnity costs, and ultimately have more control over your mod rate and your workers’ compensation premiums.
Some states allow the employer and/or insurance carrier to direct medical care to physicians and facilities that they are comfortable with. Even in states that don’t allow for direction of medical care, there are ways you can help to maintain control.
Many businesses form a partnership with a local urgent care clinic. When an employee is injured initially, the employer can offer treatment at their facility of choice. It is ideal if the physicians on staff know something about your business, so that they can make an accurate determination of whether or not the injury is work related, and address issues of modified duty work. Many times clinics will offer a reduced or special rate in exchange for referring your employees to their facility. You can work with your insurance company to help locate a doctor or clinic in your area that specializes in industrial injuries.
It is also imperative to notify your insurance company immediately when an injury occurs. While you may think that an injury is minor and you will simply pay the bills yourself, the insurance company is your partner and they are extensively trained in mitigating workers’ compensation costs. Most insurance companies have bill-reducing agreements, which can lower the overall value of the claim. And if the claim starts to head in a more complicated direction, your claim representative is able to create a plan help control the final outcome in a timely manner. Additionally, failure to report claims leaves you subject to penalties in many states. There is no insurance coverage for this type of fine.
If your employee’s injury is such that they are unable to do their regular job, the insurance company will likely ask you to consider providing modified duty work until the employee recovers. Remember that the insurance company has to provide wage compensation if the employee is unable to work. In some cases, the insurance company may ultimately need to retrain your employee if they are permanently incapable of returning to work in your business. Indemnity benefits are often times much more expensive than medical benefits (which will again drive up your modification rate).
You may initially think that you can’t afford to pay an injured worker wages for a job that they were not hired to do. The key here is creativity. Like just about every small business owner, there are likely things that need to be done that you just don’t have the time to do. Perhaps it’s an extensive cleaning of the property. Maybe you need someone to address Christmas cards for your clients. There may be a back load of filing duties, or perhaps you want to spruce up the place with a fresh coat of paint. Modified work assignments do not have to be permanent positions. The assignments simply need to fit within the restrictions provided by the doctor.
Some employers will offer light duty work at a reduced wage rate. Most states allow for this, but the insurance company will have to make up the difference until the employee returns to their pre-injury rate of pay. While you may initially balk at the idea, consider the benefits: tasks are getting done that you may not have time to get to yourself, your workers’ compensation claim costs are reduced, and employees are more likely to be motivated to return to their regular jobs more quickly if they are not allowed to sit home and collect a paycheck for nothing.
Workers’ compensation is likely a large portion of your operating costs. Successful business owners realize that it is more profitable to work with their insurance company to reduce costs up front. With a little advance planning on your part, you can create a plan that will allow you to maintain better control over your costs for years to come.