The cost of doing business – and life in general – is on the rise. And unfortunately, so is the severity and cost of workplace injuries. Everyone is looking for ways to cut costs. As a result, workplace safety might be an area employers look to when trimming their budget. It’s important not to cut corners when it comes to safety. How can business owners rein in these expenses, and improve claim outcomes?
On this episode of the WorkSAFE Podcast, we sit down with Kelli Lucas, Director of Claims at Missouri Employers Mutual. She has more than eleven years of experience in handling claims. She keeps a close eye on claim severity, and how and where costs are rising.
First, we’ll explain what severity means when it comes to work comp claims. Then, we’ll discuss why claims costs are on the rise. Finally, we’ll share steps business owners can take to help control costs.
Listen to this episode of the WorkSAFE Podcast, or read the show notes below.
Determining the severity of a claim
Deciding a claim’s severity starts with an analysis of a workplace incident. “Severity is defined as the total expected value of loss based on the injury type,” Lucas began. “But that’s just part of the equation that goes into determining the level of severity.” Each state has their own case law, or rules around which claims can be compensated or not. Several factors go into each decision, including:
- Loss details. Did the injured worker have any pre-existing health conditions? Will these conditions make it harder for them to recover?
- Subrogation. Was a third party involved in the incident? Are they responsible in any way?
- Red flags. Did anything unusual come up in the incident investigation?
Other deciding factors
There are other factors to consider when calculating how severe a claim is. “We’re also evaluating employment barriers,” Lucas explained. It’s important to determine how and when an injured worker might be able to get back to the job. “Are there transferable skills that make it possible for someone to return to work in another department? Is there a light duty program that may minimize the indemnity spend?”
In addition, the location of an incident plays a role. For example, incidents in rural areas can present different challenges. How far does an injured worker need to go to access the right medical care? “Every single case requires us to you know, individually evaluate all of the factors involved in order to determine that level of severity.”
Why are claims costs going up?
We know more about how to prevent injuries than ever before. However, their severity continues to rise, bringing costs along with them. Lucas points to the three reasons for these increased expenses.
First, inflation affects the price of medical care and healthcare wages. “Medical and wage inflation is a driver for the cost,” Lucas explained. We also have more innovations available to us when it comes to medicine – often with higher price tags attached. These changes mean that care and treatment for the same workplace injury is costing more over time.
Second, acquisition in the healthcare field is affecting options. “There’s a lot less competition for lower pricing or better services amongst a lot of facilities,” Lucas added. In the past, more options existed for medical providers, like doctors, orthopedists or physical therapists. Those options still exist. But many have consolidated under the same network – and higher standard prices.
A changing workforce
Lastly, changes in the workforce have a hand in claim costs. Labor shortages and COVID have changed the economic landscape. Older workers are staying in the job longer, and tend to need longer to recover from injuries. Without careful guidance, new hires are more at risk for injuries. Some employees are now paid more to do their jobs. Consequently, when they are injured, their temporary total disability (TTD) rates are higher.
The role of comorbidities
Comorbidities impact medical care and claim costs. A comorbidity happens when a person has more than one mental or physical condition at the same time. For instance, someone who has diabetes and is also a smoker experiences comorbidity. If they are injured on the job, then their health conditions would affect their treatment. A doctor must consider their history as a smoker and a diabetic before treating them.
In some cases, a comorbidity can delay or change treatment. As a result, a claim may cost more or take longer. “We are seeing more and more injured workers coming to us with a comorbidity,” Lucas explained. “And that’s going to impact how long they take to heal, and possibly longer time that they’re away from work.”
7 ways to reduce risk and costs
Both the cost and severity of claims are on the rise. It’s important for employers to be proactive. But how can they do this? “What I think a business could do would be to establish a culture of safety within the organization,” Lucas shared. Preparing for potential workplace incidents helps reduce claims and lower overall costs. “You know, have a safety plan and injury procedures in place, so that if something does happen then you can effectively manage those.” She suggests that employers:
- Look for trends. What are the most common injuries in the workplace? Are they caused by certain processes or machines?
- Identify training opportunities. Are some injuries common during certain seasons? Like slips or falls during the winter months, when floors are wet and sidewalks are icy? First, train employees on these hazards. Then, plan regular safety training for employees.
- Create a clear communication plan. This ensures an injured worker gets medical treatment as soon as possible. Injuries that aren’t treated in a timely manner can increase a claim’s cost.
- Promote a drug- and alcohol free workplace. Substance misuse puts employees and others at risk. Put a policy in place to guide employees.
- Review your hiring process. Are you hiring the right people for the job? Look carefully at each role, as well as how you choose potential candidates for it.
- Put a return to work program in place. These programs help employees get back to work, stay active and stay engaged.
- Recognize safe behaviors. Recognize and reward employees for maintaining safety guidelines.
So how can employers keep risk – and costs – low? “For me, I would say making sure that your safety starts throughout the entire organization. From the top to the bottom, from the bottom to the top, that everyone is engaged in that. And doing what you can to bring people back to work, and partnering with us if there are situations where you’re not able to. We can make sure that we try to get people back to health.”