Secondary and Tertiary Costs of Workplace Injuries CopperPoint

Agenda: Workers’ compensation insurance The cost of accidents How accidents affect your insurance Managing claims costs Creating a safety culture

Workers’ Compensation Law requires all employers to provide insurance If injured, workers’ compensation will pay 66 and 2/3% of worker’s salary* Must miss more than 7 days to receive compensation *maximums apply

Compensability Personal injury by accident arising out of and in the course of employment One year to file a claim The longer you wait, the more difficult the process

Medical Benefits Injured worker receives all medical treatment reasonably required to treat the injury and restore the worker to pre-injury condition The attending physician may be chosen by the injured worker

Accident Reporting “Employer’s Report of Industrial Injury” (form ) Must be completed within 10 days Verify facts concerning the accident and nature of injury Mail – Original to: Industrial Commission of Arizona – One copy: CopperPoint – Maintain a copy for your records May be filed online at

Initial Report of Injury A form to document the initial injury Supervisor’s Report Of Industrial Injury

What Do Accidents Really Cost?

Losses to Health Problems

Costs of Job Related Accidents 8,240 workers suffered a nonfatal injury/illness daily Over 12 workers die each day These injuries cost U.S. employers $142 billion Over 120 million workdays lost Source: Bureau of Labor Statistics

Impact of Accidents on Profits and Sales Both direct and indirect accident costs are paid with dollars from the profit margin The more accidents in your company, the lower the profit margin on each product unit sold

The Cost of Claims Direct (Insured) Costs: – Medical – Compensation

The Indirect Cost of Claims Time lost by the injured Time lost by fellow workers Administrative reporting time Production stoppage/slow-down Damaged equipment and products Hiring and training a new employee

Ratio of Indirect to Direct Costs Source:

To Recover the Expense of a $500 Accident... A soft drink bottler would have to bottle and sell over 61,000 cans of soda A food packer would have to can and sell over 110,000 cans of corn A bakery would have to bake and sell over 60,000 donuts A butcher would have to process and sell nearly 21,000 pounds of hamburger

Sales Required to Pay for an Accident If your company profit margin is:

The Impact of Accidents on Profits & Sales Total value of claim = Direct Cost Direct Cost x *Multiplier = Indirect Cost Direct Cost + Indirect Cost = Total Cost * Multiplier is based on Direct Costs Source:

Impact on Profitability Calculate an accident’s impact on profitability Total profits = Profit Margin Total sales Total Cost Of Accident = Sales required to pay for the Injury Profitaccident Margin Source:

How Workers’ Compensation Insurance is Affected by an Accident

Experience Modification Rating Determined by NCCI Based on loss history over a 4-year period Higher losses = higher premium Medical only claims are calculated at a 30% loss factor

Experience Modification Rating The higher your EMOD, the more you will pay for Workers’ Compensation Insurance – Upward (debit EMOD) any factor > 1.00 – Downward (credit EMOD) any factor < 1.00

The standard of comparison used to determine premiums. This rating system averages claim costs over a 3-year period. Experience Modification Rating 2015Current policy year 2014Past policy year 2013, 2011, 2012EMOD rating period

Experience Modification Rating Company Class Manual Premium EMOD Modified Premium A Carpentry$50, $37,500 B Carpentry$50, $50,000 C Carpentry$50, $62,500 D Carpentry$50, $75,000

Frequency vs. Severity  The EMOD system penalizes more for accident frequency than total accident cost (severity)  Evidence shows that frequency rather than severity is a better predictor of losses

Frequency vs. Severity Here is an example:  Employer A: One loss of $50,000  Employer B: Similarly sized employer with 15 accidents, each costing $3,000 per claim, for a total of $45,000  Employer B pays less in total claims, but can be expected to develop more future claims, which results in a higher EMOD and higher premiums down the road

Experience Modification Rating General Contractors may request your EMOD history when accepting bids An EMOD 1.0 or greater may not be considered for the job

OSHA inspections and penalties Legal implications Increase in Incident Rates Business Reputation Additional Costs to Your Business

OSHA Inspections Planned or programmed investigations – Inspections aimed at specific high-hazard industries or individual workplaces that have experienced high rates of injuries and illnesses also receive priority

OSHA Penalties Other Than Serious – Max penalty of $7,000 Serious – Max penalty of $7,000 Willful – Max penalty of $70,000 – Minimum $5,000 Repeat - Max penalty of $70,000 Failure to Abate - Max penalty of $7,000 per day

Legal Implications In addition to OSHA fines, increased costs and decreased profits, a company and/or individual can be held accountable for safety

Incidence rates are a metric used to compare your company’s safety performance against a national or state average Information available from BLS permits detailed comparisons by industry and size of firm Incident Rates

Incidence rates take on more meaning for an employer when the injury and illness experience is compared with that of other employers doing similar work with workforces of similar size Over reporting of injuries will increase your incident rate Incident Rates

Reputation News articles Word of mouth Attracting and retaining employees

Managing Claim Costs

What Can You Do? Control claims costs Develop a safety culture Implement an effective safety program Make safety everybody’s responsibility – Remember, employees are the most important asset in your company

Cost Containment Programs Preferred Connection Network (PCN) Return to Work (RTW)

Preferred Connection Network Employer’s right under Arizona workers’ compensation law Use an industrial clinic or a doctor in CopperPoint’s Preferred Connection Network – Cost savings – Control of medical treatment

Preferred Connection Network CopperPoint Web Site PCN Directory – Comprehensive directory (Detailed by county) – Statewide listing – Updated on a regular basis

Return to Work Purpose – Assist in rehabilitation and early return to work – Reduce costs of injury and illness

RTW/SAW What can it do for you? – Lower the overall cost of claim – Reduce the amount of the permanent award – Allows you to retain an experienced employee

Return to Work Benefits to injured worker: – Places injury in back of mind – Association with co-workers – Form of rehabilitation – Able to earn income

Return to Work When you offer modified work you should: – Put the offer in writing – Describe the type of work available – State the wage to be paid – Identify the date and time employee is to report for work – Indicate the number of hours to be worked per day

What if Claimant Refuses Work? Communicate to claims adjuster in writing State the RTW offer, potential earnings, etc CopperPoint may be able to apply a credit for potential earnings against compensation benefits, therefore reducing total compensation losses

Develop a Safety Culture All individuals within the organization believe they have a right to a safe and healthy workplace Each person accepts personal responsibility for ensuring his or her own safety and health Everyone believes he or she has a duty to protect the safety and health of others

A Company Safety Culture The atmosphere or “way of working” within the company that influences behavior A culture can – Socialize newcomers – Define influence – Determine values

Management Commitment Workplace safety starts with commitment from the top. – Management policy statement – Written safety policy – Lead by example – Accountability

Safety Policy Management Policy Statement – Used to convey management commitment to a safe workplace Written Policy – Emphasizes what safety and health means to the business – Conveys to employees the company’s safety rules and what is expected of them

Safety Policy No single policy will fit all organizations If using a “Canned” Safety Policy make sure it applies to your company – Change names and titles – Use company letterhead – Remove items that do not apply and add items that are needed Review the policy on a regular basis

Suggested Topics At a minimum your policy should contain: – Safety goals – Basic safety rules and procedures – Identification of key personnel and responsibilities – Accident reporting procedures – Disciplinary procedures – Safety training

Additional Topics Specific safety policies (Fall Protection, Lockout/Tagout, HAZCOM, Forklift, etc.) Return to Work Policy Drug Testing Policy Role of Safety Committee Inspection procedures and checklists Emergency Action Plan

Lead by Example Showing a commitment to a safe workplace is just as important as any other crucial part of the business. Employees will follow your lead – If eye protection is required – wear eye protection – Attend safety meetings – Correct employees not following safety rules

Accountability Hold employees accountable for safety and health rules – Include safety and health responsibilities in job descriptions and performance evaluations – Make it a condition of employment – Assign the authority and training to fulfill their responsibilities

Accountability How are employees held accountable? – Verbal Warning – Written Warning – Suspension – Termination Employee Performance Reports

Safety Training To have an effective accident prevention plan, all employees must know how to perform their jobs properly You must ensure all employees have a knowledge of the materials and equipment they work with – Operating procedures – The hazards and ways to control the hazards – The limitations

Developing a Training Program Analyze the job and identify hazards Develop or assemble training materials Conduct training Document training and maintain records Measure program effectiveness

Safety Meetings Safety meetings are a key component of a effective safety program – Communicate the safety rules – Review job hazards – Train employees in safe work practices – Places the employees in the right frame of mind

Benefits of Safety Meetings Encourage safety awareness Get employees actively involved Motivate employees to work safely Identify hazards Provide vital information on the types and causes of accidents

Safety Meetings Focus discussion on a few key points – Recent injuries – Near misses – Up-coming work (associated hazards) Ask workers for their input End on a positive point

Types of Safety Meetings New Employee Orientation Formal Safety Meetings – Monthly safety meetings – Annual safety training Jobsite meetings – Toolbox talks

New Employee Orientation It is important to train employees on company’s rules and policies prior to starting work It shows the employee safety is an integral part of the culture Use this time to review the safety manual with the employee

New Employee Orientation Should be conducted as soon as possible Suggested topics – Safety and health philosophy Safety and health as a condition of employment Safety and health rules and responsibilities Safety organization and enforcement

New Employee Orientation Additional topics – Injury reporting procedures – Location of emergency exits, extinguishers, etc. – Required Personal Protective Equipment – Specific job hazards

Formal Safety Meetings Held monthly, quarterly or on an annual basis Used to update employees on changes to the safety program or to satisfy OSHA’s annual training requirements Provides an opportunity for upper management to meet with all employees at one time

Jobsite Safety Meetings Regular scheduled meetings (usually daily/weekly) Conducted by site supervisor or production manager Focus discussion on a few key points – Recent injuries – Near misses – Up-coming work (associated hazards) – General safety topics Brief employees on changes to the work site

Accident Investigation An effective program provides for investigations of and “near miss” incidents, so their causes and the means to prevent future incidents are identified All accidents, whether they result in an injury or not, should be properly investigated

Accident Investigation Unsafe acts/conditions which we can see often resulting in accidents – careless operation of a forklift truck – oil on the floor – standing on top cap of ladder – improper lifting technique – not wearing eye protection

Accident Investigation Root causes Underlying reasons for accidents which we can’t see: – only identified by investigation inadequate employee training ineffective employee motivation lack of accountability poor maintenance of facilities or equipment

Hazard Inspection and Control Used to identify existing hazards Identify conditions or operations where changes might occur to create additional hazards Types of inspections – Hazard Survey – Scheduled workplace inspections – Job Hazard Analysis (JHA) – Special inspections

Conducting the Hazard Surveys Conducted by individuals with knowledge of the equipment and operations – Mangers/supervisors – Employees – Safety committee members Third party specialists may assist – OSHA Consultation – Workers’ Compensation Loss Control Consultants

Controlling the Hazard Engineering controls Administrative controls Personal Protective Equipment (PPE) Enforcing safety rules Housekeeping

Record Keeping Written Safety Programs Safety inspections Disciplinary program Safety meetings Safety training OSHA 300 Log Posters

Summary There are many benefits from having a safety culture: – Workers’ Compensation costs will likely be reduced – Indirect (uninsured) costs will likely be reduced – Productivity will likely improve when accidents are prevented – Profit margins will likely increase – Job security, satisfaction, personal health, and the quality of life for all employees will likely improve

References OSHA - American Society of Safety Engineers – CopperPoint Insurance – Bureau of Labor Statistics –

Questions About Safety? Call your Loss Control Consultant – Arizona Division of Occupational Safety and Health Consultation (ADOSH) – –

Secondary and Tertiary Costs of Workplace Injuries CopperPoint