Eight Steps To Controlling Workers’ Compensation Costs: Conclusion

June 2nd, 2017 by Tom Lynch

This is part 3 in a 3-part series. Here are parts 1 and 2.

Step 6 – Establish a partnership with your claim service provider

It is not the job of the insurer or third party administrator (TPA) to solve your workers’ compensation problems. That is something you do together. The insurer or TPA administers and manages your company’s claims according to relevant law and brings a diverse array of claims-related services to the table, including utilization reviews, intensive case management for catastrophic injuries and investigation of dubious claims. Your goal should be to develop a close working partnership. On your side, you need to report claims immediately, establish good documentation to serve as the basis for the insurer’s work and work with your adjusters and medical providers to bring injured workers back to work in any medically appropriate capacity as soon as possible.

Together, you and your insurer or TPA should maintain a steady and consistent focus on every open claim. Use all the tools and resources available to return your injured workers to the job; where this is not possible, work diligently to reach agreement on the appropriate way to achieve closure on the case.

Step 7 – Measure and track results

You know the drill – what you measure becomes important.

Be sure to establish clear objectives for what you want to accomplish and communicate them in concrete terms.

Here are three simple, but effective, ways to measure performance. These are measurements that senior management can readily understand and track on a monthly basis (we wrote about the need for simplicity in performance measurement recently here).

First, measure the total costs of losses per full-time-equivalent (FTE) employee (divide the total number of hours worked by 2,000 to get the number of FTEs). Doing so factors out both overtime and part time employment.

Second, measure the cost of losses per hundred dollars of payroll. Compare this to the premium classification rate at the time of the injury to find out if your loss costs are excessive.

Third, measure days lost due to injury per every 200,000 hours worked (equivalent to one hundred employees working 2,000 hours per year). This is the OSHA Severity Rate and is an excellent way to measure lost time.

With this data in hand, ask your insurance broker or carrier what the averages are for these metrics in your industry. They should be able to tell you. Then, benchmark yourself against your industry and yourself.

Track results and report them just as you would track and report production or quality objectives. Moreover, discuss the results with employees. If senior management pays consistent attention to the organization’s loss reduction performance, everyone else will, too.

Another measurement factor focuses on accountability: make support of and participation in your injury management system an ongoing part of performance reviews for management and supervisory staff. Not doing this sends a subtle message – safety and injury management are really not that important at your company.

Step 8 – Define and communicate responsibilities

In a well-coordinated injury management system, everyone knows his or her proper role and responsibilities. Each person must understand how to respond. Injured workers must immediately notify supervisors of any injury. Supervisors must respond in a caring manner and make sure that workers who sustain injuries are escorted quickly from the work site to the right medical provider. Supervisors also are charged with analyzing accidents and taking steps to ensure they don’t happen again. Supervisors should thoroughly document accidents and injuries with the assistance of injured workers. And senior management should follow through by making sure that corrective action identified actually does occur.
It is a truism of business that well-defined responsibilities go a long way toward assuring that objectives are met or exceeded. Workers’ compensation cost control is no different.

We recommend that, among other program documentation, you create a simple brochure that might be called, “What to do when you’re injured on the job.” The brochure should say what employees should do and what management will do. It should describe your Modified Duty Program and accident investigation protocols. It should hammer home the need for every injury to be reported during the shift on which it occurs.


Workers’ compensation is not an insurance problem. It is a management problem. Employers committed to taking control can reduce costs significantly. At the same time, their companies will benefit from improved morale and productivity. Like so many of life’s thorny issues, workers’ compensation can be managed if you only have the will to do it.