Medical Costs are High. One Carolina Newspaper Explains How Employers May Lower Workers' Comp Costs

workers comp costsThe below referenced article was written by a South Carolina newspaper about companies in their state. Since they are our neighbors, it is important to know what legislation changes occur elsewhere that may eventually influence lawmakers here in North Carolina.

Employer costs for workers' compensation reportedly rose at the time of this writing. When cost analyses were released, the finding were worse than anticipated. Company executives blame the medical industry, saying insurance costs are prohibitively high. Medical industry executives counter by saying products are expensive. Expenses for doctors, specialists, laboratory testing, radiology and magnetic resonance imaging are not cheap, they contend. While the blaming free-for-all continues and pockets empty, one Carolina newspaper says employers can control costs.

In July 2005 the National Council on Compensation Insurance (NCCI) proposed a 32.9% average rate increase for employers in South Carolina, citing high medical claims costs, slow settlement of cases, a large number of medical and personal injury lawsuits, and the Second Injury Fund assessments.

Workers' Compensation Costs Strap Employers

It was the third straight year NCCI called for double-digit increases in South Carolina, according to the June 17 issue of the Times & Democrat newspaper. At the same time, Florida, Virginia and California saw declining rates. Second Injury Fund assessments from 1997 to 2005 rose from $57.8 to $253 million in South Carolina, causing insurance companies to lose money and vacate the state.

A state judge dropped the rate increase almost in half to 18.4%, effective December 2006. For many employers this was a temporary fix. Claim cost and expenses vs. the premium paid by employers caused the NCCI to recommend another increase of 23.6% the following year.

The editorial says the state should abolish the Second Injury Fund, which would help retain insurance companies. But employers need to focus on what they can do to lower costs.

In the February 2006 issue of the Charleston Regional Business Journal, an article stated, “According to NCCI, the number one issue is escalating medical costs.” Studies show while the total number of workplace injuries has decreased for a decade, the total cost of workplace injuries increased.

The solution to the medical cost problem is not for medical providers to lower prices. The primary responsibility for cost control rests with employers. Following are ways employers can reduce costs:

Cost-Cutting Tips for Employers

  1. Establish a relationship with a medical clinic in occupational medicine. Acquaint clinic staff with your employees’ job descriptions and physical job requirements. Then, clinic staff can prescribe a recovery regimen that fits the injured worker.
  2. Develop a protocol for when someone is injured on the job. Don’t assume an employee knows how to deal with a health provider for personal treatment and extended care.
  3. Train supervisors to work with and monitor the injured employee throughout the physical rehabilitation process to include regular participation in physical therapy.
  4. Implement a “recovery-at-work” program. Have clinic staff prescribe specific job duties an employee can perform at different stages of his or her recovery period.

Another issue spiking workers compensation costs according to the newspaper is the Experience Modification Factor. This implement measures one company against its industry peers in terms of loss data. In South Carolina many employers have seen their Experience Mods rising, which in turn, increases premiums. Rising Experience Mods indicates a company’s workers’ compensation account is not managed properly, signaling companies have not established effective cost-control measures.