A common misconception among Florida business owners is to think that because the state of Florida sets the rates, there is nothing a business can do to control the cost of Workers’ Compensation coverage. The purpose of this article is to show that controlling your Workers’ Compensation costs is not only possible, but it can be incredibly beneficial to your company’s bottom line.
1. Discounts- I’m consistently surprised to find seasoned business owners who have not been made aware of the discounts available to them on their Workers’ Compensation policies. The most common discount is the Workplace Safety Credit, which is worth a 2 percent up-front credit. To qualify, employers need to submit an annual application to their carrier for the credit and show proof of a written safety program. Most employers qualify without much, if any, additional costs to their company. Also, employers who implement a Drug Free Workplace can claim an additional 5 percent up-credit off of their premium. Again, this credit must be applied for annually, and, although there is a cost associated with testing new hires and injured employees, oftentimes the credit exceeds these expenses. More importantly, both credits tend to lead to improved workplace safety and claims experience that — wait for it — can mean greater savings!
2. Experience Modifier- The National Council on Compensation Insurance (NCCI) assigns an Experience Modifier to most employers paying $10,000 or more in annual premium (there are exceptions for those who pay less but have averaged over $5,000 per year). This “experience rating” formula can yield significant savings to those employers with better-than-average claims experience and, conversely, penalize those whose claims histories have not been positive. As recently as 2013, the NCCI amended the formula so that going forward, larger claims will carry more weight in future experience rating calculations. It is imperative that an employer who is interested in controlling workers’ compensation costs be aware of how the Experience Modifier is calculated and the related importance of implementing sound loss prevention and mitigation strategies.
3. Safety Rewards and Dividends- For those employers paying substantial annual premiums, some insurance carriers offer Safety Rewards (commonly referred to as “Dividends”) as a means of sharing in the profits of a good claims year. These rewards are based on an employer’s claims in a given year and are almost always paid several months after a policy expires. However, it is important to note that these rewards are almost never guaranteed and are dependent on the insurance carrier’s overall profitability. That said, these payments are excellent retrospective rewards for conscientious employers. They can also be an excellent source of employee bonuses for those serving on a company’s safety committee.
4. Claims Response- Insurers, employers, attorneys and medical providers are not created equal when it comes to workers’ compensation claims. We have found that the clients who are most engaged in communications between their injured employees, medical providers and insurance adjusters consistently achieve the best outcomes on a year-to-year basis. Training your supervisors and HR staff on the importance of remaining in touch with the injured employee, coupled with a relationship with outstanding local medical providers is absolutely key to delivering the best possible care, returning that employee back to work and controlling the costs of any workers’ compensation claim.
5. Hiring Practices- It is imperative to make sure that new hires are physically qualified to perform the normal activities of their job. Unfortunately, in the absence of clearly written job descriptions or pre-employment physicals, this can prove difficult. While neither practice is simple to implement, both can pay huge dividends in terms of avoiding claims before they arise.
Workers’ Compensation is a financial fact of life for most companies, but you don’t have to be stuck with the “sticker price” in terms of the rates set forth by the state. With a little work and the right commercial insurance professional on the team, employers can exert a large amount of control in driving savings to their bottom line.