Assess 12 Areas To Determine Cause Of High Workers’ Comp Costs

An assessment of your workers’ compensation program is the first phase of developing a program meeting your company’s need to reduce insurance costs so the company can remain competitive in its industry.


Solutions and recommendations for changes, upgrades, revisions and current practices must be based on a complete understanding of key cost drivers: those factors which are the root cause of your company’s high costs. Many times, recommendations for change are based on assumption, not facts and therefore may be incorrect.



Analyze Effectiveness & Integration of Work Comp Components


Companies need to review their internal workers’ compensation management systems, their data, their file handling system and as well as vendors like outside medical service providers, investigators and insurance companies. Rather than simply taking an inventory of these items, companies should analyze the effectiveness and integration of these components in their workers’ compensation. program. A company should target its “unique identifiers,” those factors which differentiate its problems from other companies.


A thorough review of the level of understanding and awareness of the company management and the perception and attitude of employees is also critical to an effective assessment. In regard to internal control procedures, consider the consistency with which they are applied and look for procedures which are implemented in a timely manner. For example, delays in referring claims to the insurance company and delays in an employee’s return to work may be causes of higher than normal indemnity costs. Delays in referral of cases to a physician reviewer may result in higher medical costs due to unnecessary requests for medical examinations such as IMEs. Good procedures are only good if they are consistently and timely applied.



Consider Intangible Issues


Information should also be considered about more intangible issues such as internal company reporting relationships and duties of personnel having responsibility for workers’ compensation. Basic information about the company, its industry, number and location of employees, makeup of the work force and type of work is essential to a proper assessment. For example, problems associated with off-site employees are different than those associated with employees who are located on-site. Off-site employees such as delivery people, outside sales forces or seasonal construction crews may have little or no supervision, use different transportation modes or be required to carry more tools or materials than employees working in a manufacturing facility.    This impacts the types of workers’ compensation cases and expenses to the company from these employees.



12 Practices Should Be Reviewed:


  • data analysis
  • safety
  • communication
  • training
  • return to work
  • coordination of medical care
  • medical cost containment
  • investigation
  • file reviews
  • hiring
  • account instructions
  • claim handling standards



Rather than simply taking an “inventory” of these items, companies should analyze the effectiveness and integration of these components in their workers’ compensation program.




For additional information on workers’ compensation cost containment best practices, register as a guest for our next live stream training.


Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment.


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