Two Main Reasons Why Workers’ Compensation Costs Skyrocket

One of the most significant challenges for employers today is managing the rising costs of workers’ compensation claims. The price tag associated with these claims can severely impact a company’s bottom line if not controlled effectively.

This post will dive into the two primary reasons why workers’ compensation costs are often higher than they should be, and how employers can take charge of the process to reduce those expenses.

Why Workers’ Compensation Costs Are High

There are two main reasons why workers’ compensation costs skyrocket:

1. Excessive Claims That Last Too Long
2. Lack of Employer Control in the Process

Let’s unpack these factors to understand why they contribute so heavily to unnecessary expenses and how they can be managed to achieve significant cost savings.

1. Too Many Claims Last Too Long

One of the leading contributors to high workers’ compensation costs is the sheer volume of claims that linger for extended periods. When claims remain unresolved or open for too long, medical costs, wage replacements, and other related expenses continue to pile up. These lingering claims are often the result of delays in processing, insufficient follow-ups, and inefficient return-to-work strategies.

Return-to-Work Strategy: Implementing a strong return-to-work (RTW) program can help reduce the duration of claims. By facilitating transitional duties, or modified roles, employers can help injured employees return to the workplace sooner, even if they are not fully recovered. This not only helps reduce the claim duration but also keeps employees engaged with the company, which can improve morale and reduce the likelihood of litigation.

2. Lack of Employer Control

When employers fail to take control of the workers’ compensation process, the employee or external parties tend to dictate the direction of the claim. This often results in extended leave, unnecessary medical treatments, and increased costs that could have been avoided with proper oversight and management.

The following example illustrates the problem when employers don’t take control: A disability certificate, also referred to as a doctor’s note, provided by the employee might contain incomplete or insufficient information. If this form lacks critical details—such as whether the worker can return to work in a transitional duty capacity—the employer is left in the dark. Without actionable information, employers cannot make informed decisions about the employee’s work capacity, leading to longer absences and higher costs.

Taking Charge: Best Practices for Cost Control

Employers can significantly reduce workers’ compensation costs by adopting certain best practices and taking an active role in the claims process.

1. Implement Clear Communication Channels

Establishing clear lines of communication with injured employees is crucial. Weekly check-ins, updates on medical progress, and discussions about return-to-work plans can help employees feel supported while also keeping employers informed. These efforts show the employee that the company cares about their recovery, which can reduce the likelihood of extended claims or litigation.

Moreover, employers should make it clear to employees that they are expected to return to work in some capacity as soon as it is medically safe. This expectation, coupled with support from the employer, can prevent unnecessary claim extensions.

2. Require Detailed Medical Documentation

As illustrated in the example of the incomplete disability certificate, documentation is vital. Employers should ensure that any medical documentation they receive includes information that helps them make decisions about the employee’s capacity to work. This means:

• Confirming whether the employee can perform transitional duties.
• Requesting estimated recovery times.
• Clarifying any restrictions on the employee’s activities.

By ensuring that the documentation serves the needs of both the employee and the employer, the claim can be handled more efficiently.

3. Create a Robust Return-to-Work Program

A well-structured return-to-work (RTW) program can reduce the duration of claims significantly. RTW programs allow employees to return to work in a modified capacity while they continue to recover. This approach offers several benefits:

• Reduces wage replacement costs.
• Keeps employees engaged with their workplace.
• Helps employees transition back to full duties more smoothly.

These programs should be tailored to each employee’s capabilities and should align with medical advice to prevent further injury. Employers should work closely with healthcare providers to estimate the duration of the injury and how long the employee will need to remain on transitional duty.

4. Set Expectations Early

From the moment an injury occurs, employers should communicate their expectations to both the employee and the medical provider. This means making it clear that transitional duties are available and that the company is willing to accommodate the employee’s recovery needs. When both the employee and the healthcare provider understand that returning to work in some capacity is the goal, it sets the claim on the right track from the beginning.

Conclusion

The key to containing workers’ compensation costs lies in taking control of the process from the outset. By focusing on clear communication, requiring complete documentation, and implementing a return-to-work program, employers can significantly reduce claim durations and lower overall costs.

Too often, workers’ compensation claims spiral out of control because employers are passive in their approach. However, by being proactive—engaging with employees, maintaining oversight of the claims process, and working with medical providers—employers can transform their approach to workers’ compensation and achieve substantial savings.

At Amaxx LLC, we specialize in helping companies reduce their workers’ compensation costs by 20-50%. Our comprehensive training systems, including tools like the Injury Management Results (IMR) software, streamline the implementation of best practices, making it easier for employers to take control and see real cost reductions. Visit Amaxx Workers’ Comp Training Center for more insights and resources on effective workers’ compensation management.

Michael Stack, CEO of Amaxx LLC, is an expert in workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employers and ties results to a Critical Metrics Dashboard.

Contact: [email protected].

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Injury Management Results (IMR) Software: https://imrsoftware.com/

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