Many employers may view safety as a financial burden, but there’s more financial liability without a safety program. When on-the-job injuries occur, the employer is required by law to provide medical care for that injury, and in many cases, monetary payments to compensate for resulting temporary or permanent disabilities.

Workers’ compensation laws date back to 1902 when the state of Maryland passed its state law. By 1949, all states had enacted some type of workers’ compensation regime. Each state has different Workers’ Compensation Laws. In most states, workers’ compensation is provided by private insurance companies.  Twelve states operate a state fund and a handful have state-owned programs. 

In Georgia, for instance, “every employer, individual, firm, association, or corporation, regularly employing three or more persons, part-time or full-time, shall provide workers’ compensation insurance coverage.” Also in Georgia, employers secure their workers’ compensation coverage through a private insurance carrier. Some states, such as Ohio, establish workers’ compensation coverage through the state. In Ohio, employers with one or more employees are required to carry coverage for their employees. To review your state’s requirements, you can search the Internet. Also a site developed by the N.C. Industrial Commission provides information for all 50 states. It is www.comp.state.nc.us/ncic/pages/all50.htm.

So once you’ve determined your requirements as an employer and have secured the appropriate insurance carrier or state fund, how can you control the cost of workers’ compensation? Of course, the first defense is a good safety program so there aren’t any injuries. But people will be people and accidents do happen.  According to the U.S. Department of Labor the rate of non-fatal workplace injuries and illnesses among private-industry employers in 2006 was 4.4 cases per 100 workers. 

Understand how your rate is calculated. The first time you purchase workers’ compensation insurance, the rate will depend on your payroll and your industry.  After a few years, your premiums will be based on the actual experience of your company. You will be assigned an experience modification rating (experience mod) and you need to monitor it regularly as it is a major key to reducing your workers’ compensation costs.

So what is an experience mod? It compares your workers’ compensation claims experience to other employers of similar size operating in the same type of business. It is calculated by the National Council on Compensation Insurance (NCCI) except in some states it is calculated by an independent agency. Ask your insurance agent where your experience mod is calculated. Insurance carriers report to the calculating agency your class codes, payrolls and losses for the last five years. Typically three years of data are used in the formula.

Employers should receive their experience mod each year prior to their policy renewal rate. If you don’t know your experience mod, then ask your insurance agent. It should be on the declarations page of your policy. To simplify it, your experience mod compares your annual losses in insurance claims against your policy premiums over a three-year period, excluding the most current year. So a workplace injury stays with you for three years as far as your experience mod calculation. 

You could say that your experience mod is an indicator of your commitment to safety and management of your safety program. Some states that have state OSHA plans use the experience mod to determine if an employer is required to have a safety committee. North Carolina is an example and companies that have an experience mod of 1.5 must have a safety committee. Most dental laboratories that I’m familiar with stay well under 1.5 so if you find out that you’re over 1, you have some room for improvement.

Another component of workers’ compensation premiums that you need to be aware of is reserves. It’s basically a calculated guess, based on historical data, of what will be spent on a claim. Claims that have not been closed in a policy year will be assigned a dollar amount as a reserve. So in order to reduce reserves, the employer should communicate with the injured employee along with the adjuster and the physician. Getting an injured worker back on the job in a transitional, modified or light-duty role is important to reduce the reserves from one year to the next.

Increase your bottom line by minimizing your workers’ compensation costs. Take advantage of free assessments and consultations offered by federal and state agencies and even your workers’ compensation carrier to create a safer workplace.