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Workers’ Comp Costs RX

Protect Your Bottom Line by Protecting Your Employees

By Heather Beers

September 1, 2009

When the bottom line looks like it could hit rock bottom, companies tend to go into triage mode—management teams start diagnosing ways to stop budgets from hemorrhaging. And while company-wide barbecues may be an acceptable loss, there are some things that can’t be cut, like workers’ compensation insurance—by law, companies are required to have it. But what if you could find ways to save on your workers’ comp insurance? The prescription might be simpler than you think. Greg Summerhays, director of public relations for Workers Compensation Fund (WCF), explains there are three primary factors that affect your workers’ compensation premiums. The first is your class code, or what kind of business you’re in. Understandably, the riskier your business, the more your premiums will be. Second, insurance companies factor in the size of your payroll. Finally—and this is where to pay attention—they take into account your e-mod. What’s an e-mod? Summerhays explains it’s an industry term for “experience modification,” a rating based on the frequency and severity of your company’s “losses” (injuries or fatalities). If your losses are lower than average for your business class and size, your e-mod will be lower than 1.00. If they’re higher, your e-mod will be above 1.00. Since the e-mod is a controllable factor, it might benefit you to start controlling it if you haven’t, and the best way to do that is through safety management. On-the-job Safety Just ask Dave Nuttall, safety and security manager for Ultradent Products, Inc., a South Jordan-based dental products manufacturer with more than 800 employees, about safety management. By turning up the heat on Ultradent’s safety strategies, Nuttall has helped the company cool off its e-mod—from as high as 2.92 in 1995 to a low .76 today. WCF recently recognized Ultradent as a 2009 Charles A. Caine Workplace Safety award winner for its efforts. But awards aside, the real rewards have come in improved employee well-being, higher employee morale and real workers’ compensation savings—as much as hundreds of thousands of dollars over the past several years, WCF’s Summerhays estimates. Nuttall explains the company went from a reactive approach 15 years ago to a proactive one today. Currently, Nuttall says, support from Ultradent’s upper management is one of the top reasons for the company’s solid record. Mirroring that commitment are Ultradent employees, who from their first days on the job are trained in safety techniques. He points out other key factors in the company’s success: incident analysis to make sure accidents don’t reoccur; a return-to-work program with light-duty tasks to help injured employees transition back to work; regular hazard inspections from the local fire department; open communication with medical care clinics; strong relationships with WCF adjusters and safety specialists; and an on-site first aid room where Nuttall (an EMT and former firefighter) and other experts can immediately attend to employees’ minor injuries and recommend further care when necessary. In the end, Nuttall says managing safety and workers’ compensation costs is about showing your employees you will do everything you can to protect them. This is no small task for a company of Ultradent’s size and workforce diversity. Ultradent public relations manager Ida Baghoomian says the company’s Utah operations retain employees from all over the world—Latin America, South America, Europe, Africa and Asia—with at least eight different Asian languages spoken on the manufacturing floor alone. But Nuttall says you don’t have to be a huge organization to have a successful safety management program, and he encourages smaller companies to take advantage of resources like Utah Occupational Safety and Health (UOSH) Division’s Consultation Services. Chart a Course Sherrie Hayashi, commissioner of the Utah Labor Commission, supports Nuttall’s recommendation. She explains UOSH’s services enable employers to request an onsite inspection of their premises to identify safety hazards, get help with safety training and more. The service is free for companies that meet the requirements and it comes with assurances that the results will not be reported to UOSH’s compliance division. Your workers’ compensation carriers’ safety and loss personnel can also help. WCF, for example, has an entire team of occupational safety and health experts who support policyholders with on-site safety surveys, one-on-one consultation and regular safety training seminars on a wide range of topics, from forklift safety to ergonomics. Organizations like the Utah Safety Council (USC) and the University of Utah’s Rocky Mountain Center (RMC) for Occupational and Environmental Health also provide safety management training. Connie Crandall, director of continuing education at RMC, explains the center’s courses are designed for everyone from the advanced to the novice. For those just starting out—perhaps a human resources employee recently assigned to watch over safety management—she recommends the RMC’s certificate programs that provide a comprehensive foundation in safety management. Both the USC and RMC offer online courses, and the USC can do onsite training, as well. Surf for Information Dan Hair, senior vice president, chief underwriting and safety officer for WCF, says in addition to help from safety professionals, companies should take advantage of the wealth of information on the Internet. He recommends starting with your insurance company’s Website, as well as national sources like the American National Standards Institute (ANSI). Hair says ANSI’s Z10 has become the gold standard, and it outlines the critical elements of a successful program including support from company leadership, employee involvement and ongoing risk assessment and response. Hair points out that although insurance pricing is cyclical—at times it goes up, at times it goes down—those employers who have effective risk management programs and who document their safety programs always get preferred pricing. So whether it’s a good or bad pricing cycle, they’ll get better rates because of their safety record and their demonstrated approach to risk management. And Summerhays adds that it’s not just the workers’ compensation rates you’ll be saving with better safety management. You’ll also save on the indirect costs related to accidents, such as retraining other workers to fill in for injured employees and replacing damaged equipment. Ultimately, an effective safety management program will not only protect your employees from harm, but it also will protect your bottom line. That’s a remedy anyone can swallow. Facts E-mods are mandatory for any company that qualifies to be rated. E-mods are calculated by NCCI, not by insurance carriers. E-mods include all businesses under common ownership and in all states of operations. E-mods are re-rated once a year, usually at policy renewal time. E-mods are retained when businesses change insurance carriers. E-mods can be transferable to new owners if the business is sold. *Source Workers Compensation Fund of Utah
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