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Don't Let Workers' Compensation Issues Hurt Your Bottom Line

June 4, 2013
There's no two ways about it, the agricultural industry can be a perilous place for workers. Aside from quicksand-like grain, it's an environment where employees constantly encounter mechanisms that chop, cut, grind and slice.

Every day, hundreds of agricultural workers suffer a lost-time work injury. Five percent of these injuries result in permanent impairment. As a matter of fact, 2010 was a record year for grain bin entrapment accidents, a tragic reminder of the dangerous nature of grain bins. 

See Also: Workplace Safety Management Best Practices

According to Bill Field of Purdue University, who tracks grain bin accidents, a typical year in the United States produces 35 grain-entrapment accidents with the majority being fatal. In 2010, 51 people were injured in grain bin accidents, and 26 of them lost their lives. According to Field, although there are fewer farmers today, grain bin entrapments are increasing because of factors like more on-farm storage; farmers hanging on to grain longer, which can lead to crusting; and bigger bins, which unload much faster, creating a stronger flow.

A grain bin nearly took the life of Josh Blankenship, a bin worker in Advance, Mo.

Near Fatal Incident

Last December, Blankenship and a co-worker were busy cleaning an emptied grain bin. A sweep auger was in use, with the auger turning and collecting the last of the bin's grain through three holes in the floor. Blankenship stepped back while sweeping and his left leg went into one of the holes. The auger blades locked on his left leg in four places. They chewed into his upper leg, severed his femur, and tore through bone, muscle, nerves and tissue. His foot was nearly severed.

During five subsequent surgeries over a 2-week period, surgeons worked to save Blankenship's leg. Bones were reconnected by screws. Metal plates were put into place up and down the leg. The femur was reattached and screwed into position. His foot, literally snapped in half, required extensive reconstruction involving bone, nerves and muscle reattachments. Several inches of muscle in his leg were gone. Skin was grafted from one part of the leg to another.

Not surprisingly, Josh Blankenship has not returned to work. But he is only one of the many employees in the agricultural industry who have been injured on the job and are collecting workers' compensation. Costs associated with injuries are skyrocketing and impacting employers throughout the region. 

Controlling Costs

Some agricultural industry workers will fall victim to the inherent dangers of their jobs, but there are ways agricultural business owners can start to control their costs.  

First and foremost, employers should manage both their on-site injuries and their experience mod worksheets. Employee injuries and experience mod worksheets go hand in hand, directly impacting both profit and loss and the cost of workers' compensation insurance.  

For example, we recently reviewed an experience mod worksheet for a feed manufacturer in Iowa. We reviewed the employee injuries listed on the worksheet and then calculated what their employees' injuries actually cost the company. We noted an employee injury where the insurance company paid out $897, while the employer's experience mod cost an additional $2,150. Simply put, this employer is paying the insurance company $2,150 in additional premium because of an $897 claim the insurance company paid on behalf of the injured worker. At the same company, a different injury cost the insurance company $1,999 in medical bills and lost wages. However, the employer paid back $4,800 in increased premiums because of the $1,999 the insurance company paid out.

You now see how expenses for employee injuries drive the experience mod up, guaranteeing the insurance company gets their money back. 

So, how can business owners manage employee injuries to avoid this financial nightmare? Many states, including Missouri, Illinois, Kansas and Iowa, utilize an experience rating adjustment. This adjustment allows a 70 percent reduction from medical expenses paid on behalf of the injured worker if these injured employees come back to work before the insurance company makes a payment to them for lost wages (known as an indemnity payment). If the insurance company pays for lost-time, all medical expenses as well as the total cost of wages hit the employer's experience mod. If no lost-time wages are paid, then the medical expenses that hit the mod are reduced by 70 percent.

Sometimes employers are their own worst enemy. Remember the $897 claim previously mentioned? When I discussed the claim with that employer, he mentioned the injured employee could have come back to work that afternoon. Instead the employer let him go home to take some time off, not realizing the financial impact it would have on his workers' compensation costs. Needless to say, educating employers in the rules of workers' compensation, particularly when it impacts their bottom line, should be foremost on any insurance agent's mind.  

Return to Work

As for getting employees to return to work as soon as possible, each state has different rules on how long an injured employee can be out of work before lost wages kick in. In some states, lost wages begin after the injured employee is out of work for 7 consecutive days. In other states, it's 3 consecutive days. A few states have different waiting periods.

This is when having a well-thought-out return-to-work program in place is imperative. The only reason you shouldn't bring an injured worker back to work immediately is if he is hospitalized, medicated or contagious. However, many employers believe that if they have to bring an injured employee back on alternate or transitional duty, the employee won't get the full benefit. So the mindset is to send the injured worker home and let the insurance company pay. But in reality, it's the company's money paying the medical bills and lost wages, not the insurance company's money.

Let's dig deeper into transitional duty. Transitional duty can be any type of work that's meaningful to the employee. As an employer, you can't bring injured workers back to work and have them do nothing. The transitional duty work does not have to be on the premises. For instance, the injured employee can work at home on safety issues, creating safety talks. He or she can come to the office and answer the phone and file. 

The end game is to have the injured worker do meaningful work and prevent the insurance company from paying the indemnity payment. The employer should do everything possible to reduce the cost of an injury that impacts their experience mod by 70 percent.

It's important to remember that the experience mod is the heart of each employer's workers' compensation program. Think of it as the employer's injury report card.  I often run into employers who feel that because their experience mod is a 1.0 that they are in good shape. But on that injury report card, that means they are a C, or "average." Employers should strive to be more than that.    

We calculate what the minimum experience mod is, so employers know the dollars that are at stake in their workers' compensation program, dollars that could be used to help their business grow. It's a very simple calculation, but one that lets business owners know where they stand. To be at your minimum mod, your company cannot have experienced any employee injuries that show on your experience mod worksheet over the past 3 years.

Alcoa's Experience

When Alcoa, the giant aluminum processing company, hired Paul O'Neill as CEO many years ago, he stunned his first stockholder's meeting by saying his top priority wasn't the company's bottom-line, it was tracking lost-time injuries of all employees. As you might imagine, it was not a well-received speech. Alcoa created a policy that every plant manager had to report every injury to O'Neil within 24 hours of its occurrence. 

Each Friday, a report was sent to the home office of what injuries occurred during the week and what corrective action was planned. This report was distributed company-wide. In a very short amount of time, Alcoa became much more profitable and experienced an enviable record in paying dividends to its shareholders.

Alcoa's CEO developed what he called a "keystone habit." Safety was his keystone habit. When management gets a keystone habit engrained in employees' minds, other habits change and these habits change positively. Alcoa discovered that often, the most productive and the most efficient processes were the ones that were the safest. So every time Alcoa made a safety upgrade, it added to its profitability because the company operated that more efficiently.   

We run into many employers who think that safety is an expense, but Paul O'Neill and Alcoa showed how safety can become a true profit maker for the company. This works for companies the size of Alcoa, or ones with just five employees.  

So the question is: What will be the keystone habit for your company?

Steve Tade is a producer for the Winter-Dent Agency in Jefferson City, Mo. Growing up on a family farm in Missouri and working in the family's agriculture and feed supply business, Tade majored in agriculture at the University of Missouri, making it easy for him to focus on agricultural-type businesses when he got into insurance. Tade specializes in educating owners and management of feed companies, seed companies, co-ops, fertilizer dealers, implement dealers and others on controlling workers' compensation costs.

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