BY: Mike Barnum, CIC, President’s Club
Risk Advisor – Business Insurance
mbarnum@bankersinsurance.net | (757) 589-9493
Firms with lower EMRs run leaner, more efficiently, more competitively, and with higher profit margins. Lowering your business’s workers compensation experience modification rating is not only one of the most impactful ways to increase profit, but also a means to strengthen business competitiveness long term. Controlling your experience modification rating goes well beyond saving money on insurance costs, but is a part of a wholistic approach to risk management. A well-managed, healthy EMR doesn’t just mean lower costs, but can translate into higher revenue. Yes, several of my clients successfully manage their insurance program such that it brings them additional revenue. Read on to learn how.
Most business owners understand the foundational role of an experience modification rating. Anything below a 1.0 means workers compensation claims are lower than other businesses in the same industry and therefore receives a proportional discount on their workers compensation costs, whereas anything above is the opposite and means higher pricing. I meet with business owners daily who want to lower costs by simply shopping insurance companies. However, this traditional approach misses the largest opportunities. Businesses can save more in future insurance cost with any insurance company by considering their cost drivers through the use of predictive analytics.
Predictive Analytics
Insurance companies utilize predictive analytics to forecast claim costs for each client and price their workers compensation accordingly. Predictive analytics consider several cost drivers, past claims only being one of them. By understanding predictive analytics, businesses gain insight into how insurance companies view them, and which variables drive workers compensation pricing. They can then focus on each of those cost drivers to better control work comp expense. These cost drivers break down into two main categories, claim prevention and claim containment.
Claim Prevention
Insurance companies consider all the claim prevention strategies employed by a business, even those recently added. The more serious the business takes claims prevention, the better the pricing. Here are a few claim prevention strategies that will strengthen your standing with insurance companies and lower long term work comp costs. Others exist as well, and they differ by industry.
Safety Program
A current, written, and documented safety program, specific to the operations of the business. Safety programs vary widely by industry. Each of our clients is offered a subscription to MyWave where they can obtain safety program templates for most industries.
Safety Manager
An employee assigned to organize and manage safety for the business. Depending upon business size, this may be an additional duty for one, or full-time jobs for a team.
New Hire Screening
Not only does proper screening ensure qualified candidates are hired, but it also helps prevent lawsuits claiming negligent hiring should those employees damage the property of others or cause injury to third parties.
Employee Onboarding & Training Program
Onboarding and training on job tasks and equipment operation, properly documented, means lower work comp claims.
Recurring Employee Training
Evidence that training extends beyond onboarding as a recurring event means a business cultivates a culture of safety, thereby preventing claims.
Drug Testing Program
Random and post-accident testing is crucial to lower claims and workers compensation costs.
Claim Containment
No matter how we try to prevent claims, they occasionally will occur. However, how a business handles a claim greatly impacts its longevity and cost. Each business should assign a claims manager to oversee the claim process from start to finish. In fact, assignment of claims manager duties is another cost driver insurance companies consider. If businesses leave this unmanaged, insurance companies will not provide best pricing. Other claim containment strategies include utilizing a return to work program, nurse triage, and a preapproved doctor network.
Return To Work Program
One of most critical components of strong claim containment is a formalized Return-to-Work (RTW) process which accommodates light duty options for injured employees. Many businesses share with me that, for some employees, other options don’t exist. Others say that doctor-imposed limitations prevent any light duty. While these objections are fair, my clients that implement creative options reap returns through exponentially lower claim cost. Here are a few RTW options to get creative ideas flowing.
Traditional Roles
Receptionist, reorganize files, admin tasks, cleaning, etc.
Review Safety Manuals and Procedures
This is one of my clients’ favorites. This can be short or long-term and requires they summarize, revise, and offer suggestions to improve safety policies. This doesn’t mean they become a safety expert, but helps strengthen the safety mindset of that employee while modernizing business safety culture. MyWave can be a great resource in this project as well.
Nonprofit Partnerships
Consider local nonprofits. Could your business help them with administrative tasks? Some of my clients, when their employee could not travel to the nonprofit, worked remotely and made a certain number of dials per day, or took over their on-call work. Nonprofits always need light-duty help in some manner.
Business Growth
Some of my clients keep a list of business growth ideas, outstanding tasks, and similar projects they use for light duty work. An example is to call a list of prospects and set up appointments for salespeople.
These may not work for your business, but my point is to think creatively to make your RTW program most effective. In the end, it could be what saves your business, not insurance. An effective RTW program can discount the impact of a claim on your EMR by 70% immediately. Injured employees that return to work within seven days means the insurance company only pays for medical treatment, not lost wages. As a result, that claim’s cost is discounted by 70% within the EMR formula. Read more on this topic at Reduce Effect of Work Comp Claims by 70% | Return to Work Program.
Nurse Triage
Nurse Triage is where, after a work-related injury, the business calls a hotline to speak with a medical professional immediately. The hotline advises regarding an appropriate and cost-effective treatment plan. Medcor is one such nurse triage provider. Many of my clients now utilize this strategy, and the cost is nominal compared to savings. Some work comp insurance companies even pay for these programs, a key factor when considering the right workers compensation partner for your business.
Approved Network
A business should maintain a list of trusted medical professionals to reference after a work injury, including urgent care and specialty practices. Take a few minutes to interview these doctors and share your vision of treatment and cost containment. Unfortunately, it is too common for doctors to specify work restriction according to the request of the injured worker. Upfront communication with your network can help avoid overprescribing treatments and unnecessary work limitations.
Increase Revenue with Your EMR
Those are examples of strategies to control your EMR which lead to lower cost, but how can they also increase revenue? Optimizing an experience rating modification opens new revenue opportunities for your company.
Win More Contracts
Bidding certain contracts requires disclosure of your EMR. The lower it is, the more competitive your bid. Several of my clients have found this to be true, particularly those involved with government bids.
Resume Builder
Having a lower experience modification rating is great to share with other companies you are looking to grow with. A low EMR represents a business with an excellent safety culture, that consistently does things the right way, and that doesn’t carry the inefficiencies of claims.
Increased Production
A lower EMR correlates with more productive workers. The soft costs of work comp claims are real and significant. Lower claims rates build a culture of safety. Furthermore, statistics show an injured employee that gets back to work within seven days, even doing light duty tasks, returns to normal work significantly quicker than those paid to sit at home while they recover.
Improved Work Quality
Out-of-work employees need to be backfilled, often by those lesser experienced. This can lead to a decrease in work quality.
While revenue opportunities exist, the opposite can also be true. A high experience modification rating can not only mean increased insurance costs, but also lower revenue. As an example, I have one client with a major contract that requires their EMR remain 1.0 or lower. If it ventures above that mark, they will lose the contract. And since claims affect EMR for three years, a single bad incident could take a long time to recover.
Our View
Controlling your experience modification rating means lower insurance costs and can even open the door for new revenue opportunities. Each client should implement appropriate claim prevention and claim containment strategies to minimize their EMR. Consider the following:
Does your business utilize claim containment processes such as investigation (thorough data gathering) and root cause analysis (what caused the claim)? Do you emphasize clear communication with your internal claim management team, your workforce, your risk advisors, your insurance company, and your medical professionals, all to reduce waste and abuse?
How effective is your return-to-work program at getting injured employees performing at least light duty within seven days?
What are uninsurable factors that affect your EMR or other business aspects that could destroy your business? Have you worked with your risk advisor to explore risk mitigation strategies to address them?
Questions regarding your experience modification rating or workers compensation insurance? Contact your Bankers Insurance agent. Not a client of ours? Let us earn your business! Each of our clients is assigned a personal insurance agent and provided their email address as well as a phone number that rings right on their desk.
BY: Mike Barnum, CIC, President’s Club
Risk Advisor – Business Insurance
mbarnum@bankersinsurance.net | (757) 589-9493
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