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April 10, 2013
Reduce your costs before, during, and after claims

When Governor Brown signed a sweeping overhaul of California's workers' compensation system in September 2012, one of his goals was to control employers' workers' compensation costs, which had climbed precipitously in recent years.

Those changes may make a significant difference, but employers can also implement their own measures to help reduce costs.

Before a claim is ever filed

To reduce upfront spending on workers' compensation, employers should:

Implement an effective safety program. This reduces your workers' comp costs in at least two ways. First, it lessens the likelihood of a claim by reducing the chances that workers will be injured. Second, it makes you more attractive to insurers and third-party administrators, giving you the opportunity to shop around for the best price.

Make sure your insurer is legit. Most employers focus tightly on claimant fraud (workers filing false workers' comp claims), but claimant fraud accounts for less than 2 percent of all fraud cases in the workers' compensation system. Far more common—and more costly—is insurer fraud.

The most common type of insurer fraud, according to the California Department of Insurance, is premium theft (or embezzlement). Some agents pocket premiums and then provide false certificates of insurance. Other times, companies are set up to look legitimate and collect premiums—but never pay on claims.

To guard against premium theft, make sure your insurer is on the California Department of Insurance list of disability reinsurers.

Another type of insurer fraud is insider fraud, which occurs when claims managers, claims administrators, outside investigators, and agents manipulate policies and claims for personal gain. As a control against this type of fraud, you can check with the state to make sure that accurate data are being reported about your company.

You should also review your reserves regularly to make sure they're not being "padded." They should be set no higher than 10 percent of the amount actually paid at the time the claim is closed.

During the initial claims process

Once a worker has an injury claim, take these steps to minimize costs:

Provide prompt medical attention. Delayed medical attention for work-related injuries and illnesses can result in increased severity and complications, increasing the ultimate cost of a claim.

For example, if a worker suffers a relatively minor back injury, it is better to treat that injury appropriately—sending the worker to the doctor and providing time off and restricted duty, if necessary, to ensure the worker's full recovery. If you instead ignore the injury, you delay treatment and could end up creating a more serious back injury requiring surgery, extended recovery time, and possibly permanent disability.

Actively manage claims. The sooner a claim is closed, the better off you'll be. Maintain clear and frequent communication with your insurer, keeping on top of open claims and making sure the process does not stall.

Practice tip

Employers should look out for medical provider fraud—when providers submit claims for work they did not perform. Actively managing your open cases can help catch this kind of fraud.

Bringing the claim to a close

As things get "back to normal," you need to tie up all loose ends:

Get employees back to work. It can sometimes be difficult to find restricted or light-duty options for workers returning from an injury, but it's important to try. Getting workers back on the job reduces your wage-replacement and medical costs.

Maintain contact with workers who are out and their medical providers. And try to locate rehabilitation in the workplace. Employees who see themselves as productive and connected to their jobs, rather than as patients, are more likely to make a successful return to work.

Correct the problem that caused the injury. To prevent future injuries—and future claims—address the hazard that caused the injury. Especially be aware of "smaller" claims, like slip, trip, and fall claims, which account for as many as one in five workers' comp claims. These claims may not seem significant individually, but if they continue to occur, they can add up quickly.

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