Employers striving to improve their workers’ compensation programs often find their goals harder to achieve than expected. The root of the issue is not always poor implementation of return-to-work programs but rather hidden policies or procedures sabotaging progress. Identifying and addressing these policies is critical to achieving workers’ compensation reform.
Here are common policies that can undermine success and strategies to overcome them:
1. Ineffective Cost Allocation Systems
Many employers unknowingly adopt cost allocation methods that discourage accountability.
The Problem:
A widespread mistake is using Across-the-Board Cost Allocation, where workers’ compensation costs are distributed evenly among divisions based on employee count or another arbitrary factor. This approach removes accountability for managing workers’ comp outcomes, as division leaders see no direct correlation between their safety decisions and their financial impact.
The Solution:
Adopting a performance-based cost allocation system ties workers’ comp costs directly to the division responsible for the claim. By linking costs to outcomes, division leaders are incentivized to prioritize safety, reduce injuries, and manage claims effectively. Using metrics such as cost-per-FTE can transform workers’ comp into a profit center, while analyzing leading indicators can further improve outcomes.
2. Salary & Wage Continuation
Some employers offer 100% wage continuation for injured employees, bypassing the workers’ compensation process.
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The Problem:
While well-intentioned, this practice often leads to compliance issues. In many jurisdictions, wage loss payments must be made through an insurer. When employers pay wages directly, it can create legal complications and remove visibility into the workers’ comp system, hindering proper case management.
The Solution:
Adjusting wage continuation policies to align with workers’ comp laws can reduce compliance risks while ensuring proper case management. Programs based on the ACOEM three-part return-to-work framework can help improve outcomes for injured employees.
3. Supplemental Income Policies
Employers occasionally “gross-up” indemnity payments to ensure injured employees receive 100% of their pre-injury income.
The Problem:
Because workers’ comp benefits are tax-free, a gross-up can inadvertently provide injured employees with more income than they earned pre-injury. This discourages return-to-work efforts, as employees may have financial incentives to stay out longer.
The Solution:
Implementing a cap on supplemental income ensures that employees’ total earnings (indemnity payments plus supplements) do not exceed their pre-injury wages. Strong communication practices can further support employees’ recovery while maintaining program integrity.
FREE DOWNLOAD: “5 Critical Metrics To Measure Workers’ Comp Success”
Key Takeaway
Employers must routinely review their policies to identify and eliminate practices that sabotage workers’ compensation success. Implementing accountability-based cost allocation, ensuring compliance with wage continuation laws, and capping supplemental income are foundational steps toward an effective, efficient program.
Employers striving to improve their workers’ compensation programs often find their goals harder to achieve than expected. The root of the issue is not always poor implementation of return-to-work programs but rather hidden policies or procedures sabotaging progress. Identifying and addressing these policies is critical to achieving workers’ compensation reform.
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: mstack@reduceyourworkerscomp.com.
Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/
Injury Management Results (IMR) Software: https://imrsoftware.com/
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.
FREE DOWNLOAD: “5 Critical Metrics To Measure Workers’ Comp Success”