Keeping Workers' Comp Costs Down

The cost of workers' compensation insurance is within yourcontrol. If you take some time to understand how the system works,how your premiums are calculated, and what options are available,you will be able to keep your payments low.

Here are eight cost-saving moves to investigate with yourworkers' compensation insurance agent.

1. Make sure your classification is correct

Check that your company and employees are properly classified.Misclassification is one of the most common reasons for overpayingon workers' comp. Non-hazardous jobs have much lower rates thanhazardous ones. If you misclassify even one worker into a highhazard job, your total premium can increase significantly.

If you believe your classification is wrong, call yourstate's workers' compensation rating bureau and review yourcase with the department that handles classification.

To do independent research on classifications and rates, lookfor a copy of "The Scopes Manual" (formerly "TheScopes of Basic Manual Classifications") published by theNational Council on Compensation Insurance, Boca Raton, FL. Thismanual gives descriptions of what operations are handled by themore than 700 different classifications. Most states use thismanual as the basis for their classification schedules.

2. Get out of the pool

If your company's workers' compensation is providedthrough your state's assigned-risk pool...get out. Chances areyou may be penalized with higher premiums and poorer service.

To leave the assigned-risk pool, the first thing you need to dois figure out why you were put there in the first place. Yourinsurance agent should be able to answer that question for you.

• If it's because your company has a high number of claims,you should immediately begin to institute safety programs to reduceaccidents. Don't expect to leave the pool immediately. You willprobably have to demonstrate several years of reduced claims beforeanything can happen.
• If it's because you're a company that insurersdon't like to cover, look to join a self-insured workers'comp purchasing pool. Check with your industry association to seeif one is available for groups of companies like yours.

3. Conduct a payroll audit

Your workers' comp premiums are usually based on yourregular payroll figures, excluding overtime. Many states may allowyou to deduct overtime pay to straight time for the purpose offiguring your payroll, but you may need to keep special records todo so. Check with your state office of employment for yourstate's guidelines.

4. Use a deductible

Thirty-one states permit employers to reduce their workers'comp premiums by paying a deductible - usually somewhere between$100 and $5,000. Contact your state insurance office or yourinsurance broker to find out if you can use this money-saver.

5. Make sure your experience rating is correct

An experience rating compares your company's claims historyto that of other firms in your industry. The higher your claims,the more risky you are to insure, and the higher your premiums.Make sure your insurance company is calculating your experiencerating correctly. You can analyze your rating using worksheetsavailable from the National Council on Compensation Insurance(NCCI), Boca Raton, FL.

6. Use managed care to reduce your medical costs

Talk with your insurance agent about finding a workers' compinsurance plan that uses managed medical care to treat injuredworkers. Most states allow HMOs, PPOs and other managed-careproviders to handle workers' comp claims.

7. Get injured workers back to work

The quicker an injured worker returns to work, the lower yourdisability claims costs may be. You may need to modify the injuredworker's assignment, or put him or her on light duty. Butthat's a small price to pay for returning to work.Early-return-to-work programs can also be big morale boosters -injured workers are often afraid of being displaced orforgotten.

8. Institute safety programs

A company-wide safety program that reduces the number ofworkers' comp claims can pay off in lower premiums. Make sureyour employees have and use appropriate safety equipment likegoggles and hard-hats. Inspect your facilities for safety hazards,and look for other ways to stop accidents before they happen. Trainpeople in the correct way to lift (back injuries are a commonworkers' comp claim) and the right way to use their computers(to reduce claims for repetitive stress injuries).

The viewsand opinions contained herein are not necessarily those of AmericanExpress and are intended as a reference and for informationalpurposes only. Please contact your attorney, accountant or otherbusiness professional for advice specific to yourbusiness.

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