Harry Featherstone, chief executive of Will-Burt, an industrial manufacturer in Orville, Ohio, credits an early-return-to-work program with cutting his workers' comp claims dramatically. In 1985 he persuaded a plant worker who had been declared totally and permanently disabled by a back injury to work for an hour a day on an office project. Featherstone's interest was purely personal -- he just wanted to see the man involved in life again. Gradually, the employee worked his way up to a regular workday, applied for a sales job within the company, and is now, Featherstone says, "one of the best salespeople we've ever had." That experience spawned a decision. Every hurt worker, whether injured at work or at home, would be drawn back into Will-Burt. Featherstone says his workers' comp claims dropped from around $175,000 per year to $20,000 in 1990, and to $7,200 in 1991; the projection for 1992 claims is $3,000.
There are other ways to show your interest as well. Yeoman Services, in Wilsonville, Oreg., is a private company the Associated General Contractors of America has hired to further train or educate member companies' workers who are too badly hurt to return to work immediately. Construction workers from a variety of contracting companies are paid regular wages while they learn about safety, punctuality, workplace attitude, and first aid at Yeoman's day-long classes. "We believe we can almost eliminate all time-loss claims, except the most severe," declares Steve Cooper, Yeoman's president.
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Reevaluate Your Policy
If your revamped safety and injury policies do what they're supposed to, losses will begin to fall. That's when you should begin shopping for a new insurance policy. If you're in the state-assigned risk pool (comprising companies covered by a state-managed insurance plan because private carriers won't take them), your goal is to get into the voluntary market, because you'll have more options there. If you're too small to be insurable, search for groups of small companies that have banded together to self-insure. You can find out about such groups from trade associations, health-care providers, and large carriers.
If you're already in the voluntary market, consider two strategies to reduce premium costs. The first is getting a deductible. Some 20 states now allow carriers to offer plans with deductibles. At first blush those plans make tremendous sense. You save money on the premiums because you're shouldering a portion of the risk. And, in fact, that's exactly how they can work. But probe deeper. Thirteen of those 20 states require insurance carriers to count all the injuries paid for by the company -- even those under the deductible ceiling -- in calculating the company's experience modifier. In those cases, the insurer is essentially penalizing you for claims it didn't have to pay.
The second cost-cutting device to evaluate is a retroactive plan, in which each year's premium is subject to revision once the year's costs are clear. Thus, if your claims come in lower than estimated, you could be due a refund under a retroactive policy. On the other hand, you might owe the carrier money if you had a year full of banana peels. The appeal of this alternative is that it is responsive to a company's actual efforts to reduce workers' injuries.
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Oatman and Augustine's Faye Chapman, former claims adjuster for Frontier, had a bad case of the jitters when the company decided to drop out of the state workers' comp program. "When we went into it, our biggest concern was, What about that claim where the employee takes you to court?" Oatman recalls. "But if you take care of your employees, if you follow your plan documents and are not negligent, you don't have much to worry about." Actually, you may have less to worry about than before. Here are the results of the workers' comp transformation at Frontier.
During 1989-90, its last year as an insured company, Frontier's premiums were $470,000, and its claims totaled $522,500. Based on market trends and Frontier's accident experience, John Augustine, president of Augustine & Associates, estimates that the company's premiums would have been $798,800 for the year that ended June 1992 if it had continued to be insured.
Instead, Frontier's medical and lost-wages costs came to $156,300. It also had other expenses to add in. Augustine's claims-management services came to $24,500 for the year. Frontier also bought a liability policy -- to cover any truly catastrophic injuries -- providing coverage of between $250,000 and $5 million. The premium for that was $89,900. In all, Frontier's new self-pay program came to $270,700 -- about a third of what it would be shelling out as an insured company.
Of course, there's no mystery to Frontier's success. The current workers' comp system robs employers of their natural initiative to provide for their workers while curtailing excessive medical costs. If a company can manage to reintroduce a mind-set of accountability, whether by becoming self-insured, switching to a retroactive policy, instituting a deductible, or mustering sheer determination, it will discover that workers' comp isn't so untamable after all. Frontier's experience, in fact, proves just how meek a beast it can be.
