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Workers' compensation costs were once a static budget line item. CFOs, risk managers, and human-resources executives accepted it as simply the cost of doing business. Times have changed.
Costs have risen dramatically. For example, the average workers' compensation medical costs per lost-time claim rose 27 percent in the last four years, according to Marsh's Dimensions™ database. Additionally, Mercer Oliver Wyman estimates U.S. workers' compensation exposure to be $64 to $104 billion.
As costs continue to soar and negatively impact the financial bottom line, workers' compensation is fast becoming a C-suite issue.
What Is Driving the Cost Increases?
Nationally, the number of workers' compensation injuries continues to decline. Work environments are safer than ever before. Inflation has remained low and medical fee schedules have remained stable. Rising costs can primarily be attributed to an increased use of medical benefits and duration of disability. The longer employees remain out of work, the more wage replacement and medical services are required.
To manage this costly trend, companies must take a more aggressive approach to managing workers' compensation procedures.
What Will You Say When They Ask What Happened?
Executives who want to control their workers' compensation costs should be asking several questions:
- Aside from my insurance programs, what proactive steps can I take to lower costs and reduce the number and severity of injuries? Do we have an effective cost containment program in place?
- How do our workers' compensation costs compare to those of our peers?
- Is there a pattern to our claims? Are some locations performing better than others?
- How do we allocate workers’ compensation costs? How are accountabilities for safety and workers' compensation incorporated into management's performance metrics?
- Have we audited our workers' compensation service vendors to ensure they are meeting service quality standards? Have we confirmed their compliance with operating procedures?
- Do we encourage and reinforce safe working behaviors?
- Do we conduct pre-loss and post-injury assessments to target and control workers' compensation cost drivers?
Who's Looking Our for You?
Employers can control workers' compensation claims and lower related costs through the creation and vigorous support of both pre- and post-loss programs. In the pre-loss phase, employers should begin by creating a culture of safety and implementing effective new hire selection programs. Emphasis on employee education and management accountability will help mitigate workplace risks, thus preventing accidents before they happen.
In the post-loss phase, employers should focus on the injury and claims management processes. This may include ensuring that consistent internal policies as well as medical referral procedures are in place. A critical element in any post-loss program is the implementation of a return-to-work program that provides employees with an opportunity to begin working on a modified schedule with the goal of transitioning back to their regular jobs.
Marsh can bring a broad spectrum of solutions for both pre- and post-loss programs in to the equation.
Workers' Compensation Diagnostic/Benchmarking — Analyze and compare workers' compensation data using Dimensions™, a proprietary system that helps measure the total cost of risk and validates the effectiveness of loss control and claim handling interventions.
Workers' Compensation Gap Analysis — understand the primary workers’ compensation cost drivers in the workplace, identify potential gaps in processes, compare financial performance against peers’, benchmark against industry standards, and prioritize efforts to lower costs.
Behavior Risk Improvement — Help eliminate employee risk taking and minimize injuries through a behavior-based process that is economical, efficient, and sustainable.
Ergonomics Risk Assessment — Identify and prioritize ergonomics exposures and define actions to help mitigate these risks.
Training and Communications — Provide online workers’ compensation training courses to help ensure a consistent approach to the workers’ compensation process — particularly if there is high employee turnover and/or multiple locations.
Claims Management Process Reengineering — Evaluate current processes for reporting, administering, medically managing, and closing workers' compensation claims, both internally and externally, and determine more efficient and cost-effective workflows.
Vendor Evaluations — Conduct audits and develop metrics and performance scorecards for claims administrators and service vendors to measure compliance with special handling instructions.
Managed Care Impact Assessment — Set up a clinically-based audit to assist in measuring and improving the medical treatment and case management protocols. Studies have shown that targeted early intervention is key to reducing claim costs.
Employee Management Program — Build an effective return-to-work program that encourages operational management ownership. The program can also help boost employee morale by demonstrating concern for employees' well being.
Learn how Marsh and Paradigm help clients to reduce the costliest workers compensation expenses: catastrophic injuries.
If you have any questions or would like additional information, please contact us.
If you are seeking information about insurance and related services, please visit marsh.com.
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