Author, Sam Brown, Account Executive, Rancho Mesa Insurance Services, Inc.
As non-profits and leaders of human service organizations navigate important business decisions in the face of inflation, it’s important to consider measures that can reduce inflation’s impact to an organization’s operating budget. Today, we look at inflation’s effect on workers’ compensation insurance and strategies to reduce future costs.
In August 2022, the U.S. Bureau of Labor Statistics published data reflecting an 8.3% increase to the Consumer Price Index for All Urban Consumers over the previous 12 months. If medical costs are the largest expenditure in workers’ compensation claims, how is the recent inflationary trends affecting worker’s compensation medical and claim costs?
Medical costs per workers’ compensation claim increased almost 18% between 2012 and 2021 according to a study by the National Council on Compensation Insurance (NCCI). Moving forward, the Office of the Actuary at the Centers for Medicare and Medicaid Services projects an index closely related to medical costs in worker’s compensation will increase 2.5% to 3% beyond 2022. Inflation has impacted many segments of the economy, including workers’ compensation insurance.
Strategies to reduce inflation’s impact to workers’ compensation insurance premiums, include:
Offer modified duty to all injured workers.
Offering modified duty to employees with work restrictions is widely known to reduce the likelihood of workers’ compensation litigation and reduces the overall cost and duration of the claim. In addition, if an injured employee rejects the offer, then the individual can no longer receive temporary disability benefits. These positive outcomes may help explain why at least one insurance company offers a 10% rate discount to employers that offer modified duty to all injured workers.
Consider on-call medical technician and telephonic nurse triage services.
Rancho Mesa has published articles about the benefits of on-site medical evaluations and nurse-triage services, but they deserve a fresh look. Both services can advise the injured workers on proper self-care, thereby providing the employee with helpful treatment options while avoiding a costly workers’ compensation claim. The employer will also avoid paying the injured worker’s wages while they travel to and wait inside a medical provider’s office.
The nurse-triage service will continue to manage the injury and help the employee determine if further medical care is necessary. Of course, employers should always report the incident to the workers’ compensation carrier.
Consider an alternative workers’ compensation plan to gain more control over claim and insurance premiums.
It’s true that self-insured worker’s compensation plans are typically reserved for very large organizations, but options exist that replicate some of the most beneficial features. The available options depend on the size of the employer.
Small to medium sized employers can explore self-insured groups (SIG) to potentially split payroll between class codes and receive dividends. SIGs are very motivated to help members avoid workers’ compensation claims, but also closely manage open claims. A member vote is typically required after a review of an applicant’s safety plan, safety record, and operations.
Medium to large organizations may consider loss-sensitive plans. The policy will typically offer reduced annual premium if the employer can control claim frequency and claim costs. There may also be an opportunity to share in the underwriting profit following a plan year. Of course, the insured may also need to share in the claim costs in a poor performing year.
Another alternative, workers’ compensation deductible plans, can also offer a premium savings if the employer is willing to pay a deductible on each claim. Deductibles can range from $10,000 to $100,000 or more, depending on the employer’s risk tolerance.
Looking at alternative workers’ compensation strategies and plans can help employers navigate the current pattern of inflation. The information above can reduce claim frequency, claim cost, and also inform nonprofit and human service leaders about potential insurance premium savings available.
To discuss your organization’s options, contact me at (619) 937-0175 or sbrown@ranchomesa.com.