Using Job Classification Codes to Save Work Comp Costs

Employers are  confronted every day by ever-increasing workers’ compensation costs and are often at a loss as how to control these costs, believing cost control is out of their hands. However, employers must come to the realization costs can be controlled by implementing safety and workers’ comp management methods.

Many states  offer employers and insurers certain incentives to help cope with up-front costs of work comp insurance premiums. States don’t set the premiums, but some states do set a more favorable base rate if the employer has a proven record of safety and workers’ compensation management practices. And, the base rate is what insurers use to set their premium price.

The State Side
Premium calculations  are based on the rates states allocate to more than 700 jobs, known as “job classification codes.” The codes are based on the type of work done at your company. To be sure your employees are classified correctly, consult http://www.ncci.com National Council on Compensation Insurance for a complete listing

A certain level  of risk is assigned by each state to each job classification. That means workers such as writers, secretaries, office clerks, or clergy are assigned a lower rate of risk for injury than construction workers, miners, or offshore drillers where the risk of injury is much, much higher.

When you  first apply for workers’ comp insurance, your premium is primarily determined by what portion of your payroll is allocated to each of the classifications vis-a-vis company averages. If your work force is primarily in higher risk job classifications, the base rate is higher and your premium is higher.

Cost Cutters
Once an  employer reaches a certain premium level and the company achieves a proven record of safety and workers’ comp management practices – resulting in fewer, shorter WC claims, you may be eligible for state mandated credit programs.

Companies with  strong safety and workers’ comp management programs might have premiums calculated using a lower base rate than the state average. In some states, employers can get up to a 15% credit on their premiums, aside from experience mod, for evidence of good safety and workers’ comp management programs.

Insurers also  take other factors besides experience mod into account when calculating work comp premiums. They look at things like company growth, safety, workers’ compensation management. If these factors predict good future loss control, premiums may be less. Some companies use a preferred policyholder tier system. Companies with strong track records in safety and workers’ comp management may earn a “preferred policy” holder designation.

Some insurers  give a dividend or a premium refund at year’s end if the company shows strong safety and workers’ comp management resulting in fewer, shorter claims. Of course, if your losses are high, you won’t receive a refund, so it is a strong incentive for employers to pay attention to the importance of safety and workers’ comp management. (workersxzcompxzkit)

The rewards  are employers maintaining strong safety and workers’ compensation management programs experience future lower premiums. Then, with a record of safety and workers’ comp management, they can pick and choose their insurer(s) and are eligible for many state and insurance perks not otherwise available.
 

Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers' Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

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