MYTH: Once implemented, your workers’ compensation premiums will immediately go down.
REALITY: The loss costs (as distinguished from the premium) will fall immediately, but the premiums take several years to fall because they are based on a company’s experience modification which is a 3-year rolling average. As one good year “rolls” into your experience, a bad year drops out so it takes three years for the full benefit of a workers’ compensation cost containment program to be reflected in your premiums.
However, the full value of every dollar you save on each claim that is within your deductible, will be a dollar you save immediately. For companies with high deductibles of $250,000 to 2 Million dollars, every claim dollar is saved immediately. Actually, because you save that money off the bottom line, the real value of the savings is much greater.
For example, if you bring an employee back 30 days earlier, and that employee’s pay is $80/day, and the replacement employee is paid $2,000, the total amount the company will save by bringing the employee back in a Transitional Duty position is $67,692.31 assuming a 6.5% profit margin. Try an example for your company TD Calculator.
For more cost-saving tips go to WC Cost Reduction Tips.
Show the REAL cost of workers’ comp with the Real Cost Calculator.
Workers’ Comp Kit® is a web-based online Assessment, Benchmarking and Cost Containment system for employers. It provides all the materials needed to reduce your costs significantly in 85% less time than if you designed a program from scratch.
Do not use this information without independent verification. All state laws are different. Consult with your corporate legal counsel before implementing any cost containment programs.
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