From what I've seen over the years, at least in terms of dealing with a company's workers' compensation experience modification factor, most companies think everything is hunky-dory as long as that magic number hovers in the 1.0 range, which is considered by all indicators to be an "average" rating.
The experience mod primarily is based on zero losses over a three-year period, and many factors come into play to get a company's experience mod to 1.0 (i.e. types of injuries on the job, time out of work, number of injuries, etc.), which is an "average" rating. The big question is why are employers content to just have an "average" rating, when they should be realizing that workers' compensation costs are controllable, depending on how much effort they put into "controlling" them?
For instance, let's say your experience mod is 1.0 and you are paying $50,000 in workers' compensation costs. Just by putting forth the effort to lower it to .80, you are going to save approximately $10,000. This means money going out of your pocket is now staying in your pocket. So in essence, what you have done is make money by lowering your experience mod. Now you can instill in your employees that through their combined efforts in adhering to job safety, they aren't just saving their employer money, they actively are involved in helping the company make money.
The mindset of your employees is probably the biggest key in reducing your experience mod. To get employees focused on job safety, it very often takes a remolding of the culture currently permeating throughout the business, from the supervisor right down to the workers sweeping the floor. You need to instill in them a sense of how to operate in an efficient manner, and share with them what they should do before they do it. It has to be a constant conversation and a philosophy embraced by management, where the mantra is: "Injuries can be controlled and eliminated." This can't be accomplished by just tacking a policy sheet on the bulletin board in the employee lounge, or via a once-a-year mass email. The employees have to live it, breathe it and make it one of the most important things they focus on day-to-day.
Unfortunately, someone also once said zebras don't change their stripes and leopards don't change their spots. So if the floor of your plant looks like a zoo, you have your work cut out for you. Because not only is your experience mod going to start moving northward – costing you money along the way – but you are looking at a significant loss in potential revenue.
If the mindset of the employees, after 20 years on the job, is that injuries are part of the corporate landscape, you will have your work cut out for you. It potentially could be very difficult to have certain people embrace that change, even to the point where they are resisting it. That is when a negative culture directly affects a company's ability to grow and prosper.
I have worked closely with an environmental services company with locations in Missouri and Illinois that specializes in customized environmental, remediation, waste and recycling services. Due to the type of work – handling 55-gallon barrels, working with large equipment, driving heavy trucks to multiple locations – the employees experienced a lot of repetitive motion and heavy lifting tasks. These resulted in an extremely high injury rate, particularly in that murky area of joint and back injuries, which typically are very hard to accurately diagnose. With no return-to-work program in place, the injured workers simply never returned to work.
As a result of the high number of injured workers, the experience mod continued to rise at an alarming rate. At one point it reached as high as 1.4, which was costing the company approximately $60,000 in additional premiums. The collateral damage to all this was that his less-than-stellar accident history and his mod being over 1.0 was causing my client to be ineligible for new job opportunities. His losses were showing that his company was not safe and potential clients did not want him working at their locations.
He now was seeing the reality; the negative culture that had infested itself in his company not only was causing money to go out of the business, but also preventing money – profit – from coming into the business.
Changing the Culture
The first thing the employer did was look at the employees who were getting injured. At that point, he faced the realization that he was hiring the wrong people for the job, and that perhaps his pre-employment screening was too relaxed. It got to the point where he was hiring what we call "a workers' comp claim" to fill a position. He made the decision to consolidate these claims-prone operations to one of his plants in Missouri and make a more concerted effort to hire the right people for the job, and to spend time and money training them. He also determined to hold them accountable for using protective measures (such as PPE), and to focus on job safety and how to avoid injury.
As a result, the company lowered its experience mod to .80 (much better than "average") and saw its premium costs drop from $100,000 to $40,000. But just as importantly, the company's owner finally realized his workers' compensation program was a profit center, and that potential profits were flying out the window every time a competitor with a "better-than-average" experience mod acquired new jobs over him. Now, instead of losing business and paying his injured employees to stay at home watching lawyer ads on TV ("Are you hurt? Are your medical bills piling up? Call us today!"), he is back on a level playing field and securing new business.
Darren Freese is with the Winter-Dent Insurance Agency in Columbia, Mo. He is a certified work comp advisor through the Institute of Work Comp Professionals and specializes in educating owners and management on controlling workers' compensation costs. Darren has worked in the environmental service industry for 18 years. He can be reached at [email protected].