workers’ compensation basics disclaimer: these safety materials, resources and powerpoint ®...
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Workers’ Compensation Basics
Disclaimer: These safety materials, resources and PowerPoint® presentations are not intended to replace your company's health and safety policies or to substitute for specific state and federal standards. We do not guarantee the absolute accuracy of the material contained within these resources. Please refer to applicable state and federal standards for regulatory compliance.
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Brief history
Purpose
Structure of policy
Premium components
Experience rating
Controlling costs
Workers’ Compensation Overview
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History
Spindletop erupted in 1901
Transformed Texas economy
System created in 1913
Employers can opt out
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History
System declared broken in 1987
Texas Workers’ Compensation Act
passed in 1989
System revised in 2005
Networks authorized
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Workers’ Comp Today
State-regulated
No-fault
Protects employers, employees
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Workers’ compensation coverage:
Pays benefits to injured workers
Provides for lifetime benefits if necessary
Employers’ liability coverage:
Protects employers from lawsuits
Gross negligence exception
Policy Structure
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Exposure
Safety program
Loss experience
Experience modifier (E-Mod)
Premium Considerations
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Adjust premium to reflect loss
experience
Reward good experience
Penalize bad experience
Incentive to encourage return-to-work
Incentive to reduce losses
Purpose of E-Mod
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Actual Losses (Anytown Drillers)
Expected Losses (all drillers)
Basic E-Mod Formula
= E-Mod
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Base Premium
Class code
Description Rate Payroll Base premium
6216 Drill site prep $8.64 $500,000 $43,200($8.64 x $5,000)
8810 Clerical $0.29 $250,000 $725 (0.29 x $2,500)
Base premium = $43,925 ($43,200 + $725)
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Company Base
Premium
E-Mod Final
Premium
A $43,925 1.00 $43,925
B $43,925 .70 $30,747
C $43,925 2.00 $87,850
Impact of E-Mod on Premium
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Identify and control hazards:
Conduct a thorough review
Use job safety analyses
Secure management commitment
Establish employee accountability
Reduce Your Costs: Prevent Accidents
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Teach safe behaviors:
Start day 1
Follow up
Take a walk
Stress accountability
Reduce Your Costs: Prevent Accidents
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Track trends:
Work toward constant evolution
Watch for problem areas
Remember near misses
Reduce Your Costs: Prevent Accidents
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Identify and address root causes:
Investigate accidents and near misses
Don’t mistake symptoms for root causes
Remember the goal
Reduce Your Costs: Prevent Accidents
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Direct costs – paid by carrier
Benefits paid to injured workerOther costs associated with
handling and processing claim
Reduce Your Costs: Manage Claims
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Reduce Your Costs: Manage Claims
Indirect costs – paid by employer
Repairing damaged equipment
Hiring extra help
Lost production
2x direct costs ($2/$1)
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Direct costs
Indirect costs
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Reduce Your Costs: Manage Claims
Direct cost $5,000
Indirect cost $10,000 ($2/$1)
Total cost $15,000
At a 4% profit margin, additional sales necessary to cover:
Indirect costs $250,000
Total costs $375,000
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Reduced revenue = reduced operating capital
Delay in equipment updates
Reduction in salaries
Lack of raises
Elimination/reduction in safety incentives
Reduce Your Costs: Manage Claims
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Reduce Your Costs: Return-to-Work
What’s in it for employers?
Reduce costs
Maintain production
Promote employee morale
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Reduce Your Costs: Return-to-Work
What’s in it for injured workers?
Make more money
Recover faster
Steer clear of the disability mindset
Maintain job skills
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Network goals:
Improve care
Focus on return-to-work
Control medical costs
Reduce Your Costs: Networks
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Reduce Your Costs:Safety Groups
Safety groups offer:
Specialized safety programs
Dividend potential
Premium discounts
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Workers’ compensation basics:
Covers injured workers’ medical expenses
Replaces a portion of lost wages
Protects employers from unlimited liability
exposure
Workers’ Compensation Recap
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Recap
Remember:
Loss experience affects cost
Employers can control costs
Report all accidents
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Questions?
Return to table of contentsGo to next presentation
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