When it comes to workers’ comp this is one of the most common questions employers ask. Employers see their premium increase and often they don’t understand why. Michael Simpson, manager of workers’ compensation claims management company OccCorp shows us how focusing on return to work is the best way to save money in the long run.

The steps include:

• Using early reporting and early intervention to avoid high claim costs;
• Following evidence-based return to work processes to get workers back sooner; and
• Ensuring management understands why this works.

Control claim costs, control premium cost.

Increases in claim costs are the number one cause of premium increases.

“The most important area you can affect is your claim costs,” says Michael. “This is because in calculating your premium your claims experience is compared with the claims experience of your industry.

“If you are performing better than your industry, your rate will be lower. However, if you are worse than your industry you will be penalised with a much higher rate,” Michael explains. “This is a way to encourage employers to continue employers in return to work.”

This doesn’t mean employers should try to restrict workers’ access to claims. Instead, you need to understand what factors contribute to high claims costs. Michael calls this the “anatomy” of claim costs.

“Claim costs are made up of expended costs and future estimated costs on each claim. These costs can be broken up into two broad areas: medical expenses and wage replacement expenses. The wage replacement component is by far the largest component, as well as the most important to control.”

Wage replacement costs are those you’ll be paying if a worker is away from work. So if wage replacement costs are a direct influence over premium costs, how do you control them? Return injured workers to work sooner.

Early intervention = claim cost prevention.

Michael estimates that approximately 5% of claims become complex, and complex cases are what cost businesses money. The key to reducing the number and cost of complex cases is by developing strong, evidence-based return to work and early intervention processes in your workplace.

“Early intervention means the injured employee gets the right medical treatment at the right time,” Michael says. “Combined with a commitment to find suitable alternate duties, this ensures a rapid return to work and ultimately a rapid return to pre-injury duties.”

Michael points out that even if employers are hesitant to spend “too much” money on treating injuries as they happen, this is by far the cheapest way to avoid a future complex claim in the long run.

Aside from the increase in premium costs associated with the number and duration of injury claims, the indirect costs of not returning an injured worker to work promptly and durably are even higher. These costs include re-staffing expenses, lowered productivity and staff morale, and are estimated at four times the direct costs such as the premium.

Another way to get an idea of this cost is to double the injured employee’s wage for every day they are absent. If employers are hesitant to bring an injured worker back on reduced tasks, they would do well to keep this cost of absence in mind.

“Having dealt with well over 18,000 cases” Michael says, “I know that early intervention and early return to work is the most effective method to control the wage replacement costs associated with a claim. The consistent application of these two things will bring down your claim costs and ultimately your premium.”

Case studies

1. OccCorp commenced working with a Construction Company in early 2002. At that time the coh5r;s premium rate was 7.65% of payroll, translating to a premium of almost $2 million dollars. The company had no solid, evidence-based systems for injury management and return to work, so Michael introduced:

• An early reporting line – a system of injury reporting and early intervention;
• Education for all staff on the importance of return to work and care for employees; and
• Injury consultants to assist with the return to work process.

“We continued to reinforce these methods until they became part of the company culture” Michael said. “The company had steady reductions in their premium rate over the ensuing years and now have a premium rate of 1.7%.” Considering the scale of the company, this translates into substantial real-dollars.

“With ongoing growth of the company, if they had remained at their initial premium rate their premium would now be over $5.5 million instead of the current $1.4 million,” said Michael.

2. A not-for-profit social welfare organisation was concerned with the 50 per cent rise in their premium cost one year. Due to the nature of their work, the organisation was dealing with occupational violence through which employees were undergoing increasingly complex claims and protracted time away from work.

Again Michael found the organisation had no return to work management program or early intervention strategy, which was why claim and wage replacement costs were increasing.

After implementing Michael’s recommendations wholeheartedly, the company reduced its premium as a percentage of total wage expense from 7.54 per cent to 3.73 per cent. Michael clarifies that this big change was a result of management understanding the importance of the cultural shift and adopting it with open arms.

“The change needs to come from the top down,” explained Michael. “This organisation understood the relevance of proper injury management and return to work programs to workplace health and financial success, so they undertook it with open minds and real effort.”

Lead by example

Michael was once hired by a large company who recognised that they had a rising premium problem, but failed to address the fact that an attitude change was needed. “A regional manufacturer who is a large employer was having problems with high premiums and numbers of injured workers not returning to work successfully” Michael said.

“While the management identified the problem and hired us to implement an injury prevention and return to work management program, staff on the floor and other sections of management actively sabotaged our work, to the point where we just couldn’t help create change.” Unlike the not-for-profit organisation, management of this company failed to lead by example.

When employers understand the effect that simple, evidence-based return to work systems has on their WorkCover premiums, they will benefit enormously. But one final word of warning from Michael, “Changing the culture of a workplace must come from the top down."