Navigating the maze of workers comp
The basic premise of workers compensation insurance is to protect both employees and employers in the event of a work-related injury. An injured worker is entitled to a wage loss benefit and full medical payments in the event they are injured on the job.
In return, the employer generally isn’t allowed to be sued by the injured employee for his injuries. This balance of benefit occurs regardless of who is at fault. Imagine how taxed an already heavily burdened legal system would be if every injured employee sued their employer to recoup wage and medical costs.
Three basic but important questions help define workers compensation insurance:
1. How does workers compensation compare to other types of insurance?
With professional assistance, employers can carefully control workers comp insurance costs. However, without ongoing industry and legal review, employers can quickly lose control of their workers compensation programs.
Some elements of workers compensation are dependent on outside factors:
– Workers compensation premiums are tied directly to medical costs.
– Workers compensation coverage requirements are subject to ever-changing case law. – What may have been a compensable injury for an employee a year ago, may not be today. The greatly litigated Haske vs. General Dynamics case, for instance, challenges whether an employer is responsible for a worker’s injury by simply having the workplace aggravate a pre-existing condition.
– In Michigan, the governor appoints workers compensation magistrates. Depending on political philosophy, this could affect a more favorable slant for the employer or employee.
– Good economic times tend to create less filed workers compensation claims.
All of the above factors are certainly out of the hands of the employer, but the good news is there are many ways an employer can counterbalance.
An employer with a sound safety program will no doubt tip the scale in their favor. It must be more than simply having a printed safety manual that gathers dust in the human resource or owner’s office. It takes active participation from all levels of management in an engaging safety program to effectively make a difference.
Couple this with the appropriate claims management techniques and a functional return-to-work program, and an employer can be well on their way to lower insurance premiums in the future.
2. How does an employer’s track record affect its premiums?
The state of Michigan tracks and records each employer’s workers compensation losses to create an actuarial number referred to as an experience modification. This number becomes a factor for the base premium rate in a particular industry.
For instance, a base rate for carpentry could be $10 per $100 in payroll. An employer with a favorable loss history could have an experience modification of .75. Thus, the employer’s actual rate per $100 after factoring in the experience modification would be $7.50 per $100. Compare this actual rate with someone with poor experience and a 2.0 experience modification, and it is easy to see employers can actually create a competitive edge by implementing loss control techniques.
3. What should employers do to best protect themselves?
Managing workers compensation requires a serious team approach: the employer, insurance carrier, insurance agency and local medical institution must work in concert to best position the company against losses. A proactive policy amongst all parties not only reduces the frequency of claims, but their severity as well.
Dennis Muth is a Certified Insurance Counselor with Peterson McGregor & Associates, which serves businesses and individuals throughout northern Michigan, specializing in workers compensation. For additional information, contact Muth at 922.7220. BN