Question: Which of the following is NOT a myth?
- Bigfoot lives in the Pacific Northwest.
- The Loch Ness monster inhabits Scotland.
- Employers can control their workers’ compensation costs.
- Employee wellness affects the cost of your workers’ compensation insurance.
OK, so this is a trick question. Both 3 and 4 are correct. Sadly, if you poll a large number of business owners (particularly in the construction industries), the majority will swear they saw Bigfoot last time they vacationed in Oregon.
Why do most employers believe there absolutely is no way to control their workers’ compensation costs, that they are destined to stand by helplessly while it spirals out of control, costing them thousands of dollars in premiums?
Workers’ compensation creates a level of frustration because most employers don’t understand it, because the person who explained it to them – often their insurance agent – doesn’t understand it either. I would not have a hard time believing that 95 percent of property and casualty insurance agents don’t understand workers’ compensation, and they sell this insurance every day. This is why employers often spread misinformation like, “I don’t have any control over my workers’ comp because my home state sets the rules, sets the rates and determines everything.”
That thinking is about as far from the truth as you can get. Yet they have been hearing it from their insurance agents since they started buying workers’ compensation when they started out with five employees in a 2,000-square-foot building. Now they have 100 employees and they still think of it the same way. And it’s incorrect.
What Employers Can Control
You can’t control a tornado hitting your manufacturing plant, but you can control employees’ compliance with corporate rules regarding the wearing of personal protective equipment; that employees are not lifting boxes beyond their physical capabilities; and that they are not walking on floors slipperier than an ice skating rink. You can, for the most part, control your workers’ compensation world by creating a safe environment populated with healthy workers. And that’s where a targeted wellness program should be an integral part of any workplace environment, and a major step in preventing workplace injuries.
Wellness is a relatively new concept to most employers, many of whom still think of it primarily as a feature of their health insurance policy. They don’t think of the impact it has on their workers’ compensation costs, mostly because they don’t perceive it for what it truly is: an employee benefit.
Because workers’ compensation is not thought of as an employee benefit, and wellness programs are instituted with health insurance-related goals in mind, most employers do not consider the impact that a wellness program can have on their workers’ compensation premiums. A wellness program can reduce both the frequency of injuries and the severity of those injuries. The reason is quite simple: Chronically ill or obese employees may suffer more injuries and take longer to return to work when injured.
Health insurance is about helping employees return to a situation of wholeness in the event of illness, injury or disability. Workers’ compensation functions the same way. You have an employee who is injured on the job and it’s not the health insurance that attempts to make them whole – it’s the workers’ compensation insurance.
No two ways around it, a healthier workforce is going to be less prone to injury and, if workers are injured, they’re going to be back to work faster because their recovery times are going to be quicker. They are not going to have additional issues related to being overweight or have some type of an addiction, whether it be to prescription or non-prescription medications, alcohol or cigarettes. With a wellness plan in place, these factors don’t come into play as much.
Furthermore, an employer really doesn’t know if his workforce is well except for the obvious warning signs, such as if somebody smokes or is grossly overweight. But if they suffer from high blood pressure or diabetes, or maybe have musculoskeletal problems like a back that goes out at the drop of a hat (or simply by bending down to pick up a hat), the employer doesn’t really know the potential danger unless there is a wellness program in place to put those missing pieces of the workforce puzzle together for them.
Why Resistance Exists
So if incorporating wellness into the workplace culture of a company obviously is important, then why do so many business owners resist it? First, there is the misconception that a program is expensive to implement. This myth exists because their insurance provider has not dispelled it. Secondly, they also believe that employees won’t participate because they believe their employees don’t want to be told what to do, which means the benefit has never been clearly explained to employees.
Another important step on the wellness ladder is pre-employment testing. To some employers, pre-employment testing is nothing more than filling out a form and checking off some boxes. But what it’s really all about is doing everything possible to avoid hiring a workers’ compensation claim. The pre-employment step should begin with a company aligning itself with an occupational health clinic, or at the very least, a physician familiar with the type of occupational injuries adherent to a particular industry.
This is vital because that medical professional actually will review the employee’s application and know exactly what type of job he is applying for and what the physical limitations are. This isn’t a big expense, particularly in lieu of what the potential impact could be if that employee is off work after suffering an injury. Most employers already drug-test potential employees, so this is just the next logical step. What good is it to hire someone just because they test negative for drug use, but are dangerously obese?
A healthier workforce means fewer injuries and less time off the job should an injury occur. Very often, you can make a positive impact on the injury management side; we found that employers who are willing to take an active role in getting their employees whole as quickly as possible experience much greater positive results in managing their overall workers’ compensation costs. And when that employer actively is engaged in helping that employee get back on the job, even in a limited capacity, the employee sees that the company cares about his or her well-being. This compels the employee to want to get back to work faster, as opposed to sitting at home all day watching commercials for lawyers telling them to “get what’s coming to them.” It’s amazing how human nature works.
The Experience Modification Factor
Both scenarios bring the experience modification factor (EMF) into play. When a company’s EMF is in the high range (anything over 1.0), costs go up and potential revenue goes down because many companies that are part of a bidding process on certain projects find they are shut out from the process because of their EMFs. When our firm works with a company, we address this potential danger by obtaining a copy of the company’s rating worksheet – either from the company or from the rating bureau – and reviewing the paperwork. This way, the analysis shows the company what affects its claims. The analysis either validates it as correct or, more often than not, we assist them in reversing it.
For example, a large construction firm located in northern Indiana was having issues keeping its experience rating below .90, a threshold that was required by several general contractors for whom the firm performs a large amount of work. This resulted in lost contract bids.
The company already had a wellness program in place for health insurance reasons but participation was weak. We put moderate incentives in place and participation quickly increased. The result was a decreasing impact on the company’s workers’ compensation claims, which put it back in the bidding process.
Another case in point is a manufacturing company with over 150 employees that was experiencing a high number of workers’ compensation claims that resulted in lost time. Several initiatives were put in place to help reduce the lost-time incidents. One of the initiatives was a wellness program. As a result, this particular employer has experienced a 70 percent reduction in lost-time injuries from 2011 to 2012.
Wellness programs in relation to workers’ compensation are a relatively new idea. As with any new idea, it takes time to measure the impact, but it takes longer with workers’ compensation because of the method of calculating the experience rating. Employers should consider instituting wellness programs sooner rather than later. This way, they can begin to experience the benefits – sooner rather than later.
Ray Gage is a master workers’ compensation advisor and a principal for Grabill Insurance Center in Leo, Ind. Ray specializes in workers’ compensation insurance and consulting services, including premium audit assistance and EMF review. For more information, contact Gage via email at [email protected].