The Only Two Levers That Control Workers’ Comp Costs

When it comes to controlling workers’ compensation costs, most employers fall into the same trap: they try to do everything at once. Safety programs, claims reviews, triage vendors, return-to-work lists — all good ideas, all useful tools. But without a clear framework to organize them, these efforts can feel scattered and overwhelming.

Here’s the truth: there are only two levers you can pull to reduce your workers’ comp costs.

1. Reduce the number of claims.

2. Reduce the cost per claim.

Everything else — every policy, meeting, vendor, and procedure — supports one of these two outcomes.

At its core, every workers’ compensation program is built on this simple structure. When both levers are managed strategically, total costs drop significantly. When either one is ignored, costs rise fast.

Lever 1: Reduce the Number of Claims

The first lever belongs to the safety and prevention side of your program. Every injury that never occurs is a direct savings — not only in medical and indemnity costs, but in productivity, overtime, morale, and management time.

Key drivers of this lever include:

• Effective safety systems. Regular training, clear procedures, and a strong safety culture supported by leadership.

• Employee engagement. When employees participate in hazard identification and own their safety performance, incident rates fall.

• Early intervention. Tracking near misses and correcting hazards before they lead to injuries.

• Integration with OSHA data. Monitoring your Total Recordable Incident Rate (TRIR) alongside your claims rate provides a clear view of safety effectiveness.

Reducing the number of claims isn’t about pushing for “zero injuries” through pressure or fear. It’s about building a system that prevents incidents naturally — through training, accountability, and consistent attention to risk.

Even in the safest organizations, injuries will still happen. That’s where the second lever comes in.

Lever 2: Reduce the Cost per Claim

If the first lever is about prevention, the second lever is about response. Once a claim occurs, the goal is to manage it skillfully — to control medical costs, minimize lost time, and guide the employee back to full duty safely and efficiently.

Several key practices influence this lever:

• Timely reporting. Lag time — the delay between injury and claim reporting — is one of the strongest predictors of total claim cost and litigation likelihood.

• Clear communication. Injured workers who feel informed and supported are far less likely to seek legal representation.

• Return-to-work programs. Well-designed transitional duty keeps employees productive and connected, while dramatically reducing indemnity exposure.

• Coordinated medical care. Prompt, quality medical attention and consistent employer follow-up prevent unnecessary treatment delays or complications.

Reducing cost per claim means doing the basics fast and well: report immediately, respond consistently, and stay engaged until resolution. It’s not about micromanaging adjusters — it’s about removing friction points that turn minor injuries into expensive claims.

The Two Sides of the Same Coin

These two levers — safety and injury management — are opposite sides of the same coin. One focuses on preventing incidents; the other focuses on minimizing their impact when they occur. Together, they determine your total cost per full-time equivalent (FTE) — the clearest, apples-to-apples measure of your organization’s workers’ comp performance.

If you cut your claim count in half while average costs remain the same, your total losses drop 50%.
If claim frequency stays flat but your average cost per claim drops by half, your losses also drop 50%.
Improve both, and the results compound exponentially.

That’s the power of managing both sides of the coin at once.

Why Simplicity Wins

Many organizations today are, in effect, drowning in data but starving for meaning. Reports and dashboards often overwhelm rather than inform.

Focusing on the two primary levers — number of claims and cost per claim — cuts through the clutter. These two numbers tell you everything you need to know:

• If the number of claims is high, focus on prevention and safety culture.

• If the cost per claim is high, focus on injury management and return-to-work performance.

• If both are high, you likely need a coordinated improvement effort across safety, communication, and claims handling.

Clarity drives action. Once you know which lever is responsible for rising costs, you can direct your energy — and your budget — toward the solutions that matter most.

Turning Data Into Action

The real value of metrics lies in their ability to tell a story. When you can explain to executives how each safety or injury management initiative directly moves one of these two levers, you transform abstract data into financial impact.

Control the number of claims.
Control the cost per claim.
Everything else is a method for moving one of those levers in the right direction.

Once you master that simple framework, workers’ compensation stops being “just a cost of doing business.” It becomes a strategic system — one that protects employees, strengthens culture, and directly contributes to profitability.

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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