Workers’ Comp Costs Part 2: Getting Control
Ulf Wolf with Steven Ferry
May 2008As mentioned in Part 1 of this article (page XX), the key to lower workers’ comp premiums is to first make very sure that employees are not incorrectly classified to categories with higher-than-necessary rates, and then to do all that you can to gain as low an experience modification factor as possible.
And how do you do that?
Three words: Safety. Safety. Safety.
What is the best way to lower your workers’ comp costs?
When asked this question, Lee Zaretzky, president of Ronsco, Inc. in New York, does not hesitate for an instant: "First and foremost you must proactively prevent work injuries: by training, by supervision and by complete buy-in from the top. And if you do have accidents, thoroughly investigate them so you can prevent them in the future. Also investigate near misses, and stay vigilant.”
Zaretzky’s company is one of the recipients of AWCI’s 2008 Excellence in Construction Safety Award, in the category where the AWCI member contractor’s company logs in fewer than 100,000 annual man-hours. Ronsco also won the award in 2006, so he knows what he is talking about.
The other recipient of AWCI’s Excellence in Construction Safety Award, in the category where the company logs in more than 100,000 annual man-hours, is Precision Walls, Inc. based in Cary, N.C. Precision Walls logged in more than 2.2 million annual worker hours in 2007. Speaking from years of experience, Gerry Golt, Precision Walls’ vice president of safety, could not agree more: "The best way to control workers’ comp costs is to keep work-related injuries at a minimum.”
Why, initially, did he institute and fine tune a safety program at Precision Walls?
His answer boils down to three things. "First of all,” Golt says, "we didn’t want anyone to get injured, simple as that. Injuries affect families. Secondly, we wanted to lower our workers’ comp costs. Thirdly, we wanted to avoid possible OSHA fines.”
What sparked Lee Zaretzky’s safety campaign?
"Workers’ comp costs,” he says. "That’s what set me off in the first place. That’s what started our safety ball rolling.”
There is definite consensus: If safety is to become a company-wide movement, it has to start at the top.
Zaretzky says, "You need buy-in at the highest level. Without that, no one is going to get with the program.”
"And it’s a constant process, an uphill battle,” he adds. "You’re always making sure that your employees are wearing personal protective equipment and that they follow safety procedures. It’s a never-ending process. You cannot afford to relax.”
Safety is something that not only the top brass needs to embrace. It is something everyone must buy into and share responsibility for.
As Golt puts it: "From our owner and president on down, we tell our employees that safety is a shared responsibility; and not only that, we tell each and every employee to look out for one another. If they see another employee doing something wrong, they need to tell them. And if they are ever directed, by anyone, to do something they feel is unsafe, they should refuse to do it—without fear of reprisal.”
"Safety on the job is everybody’s responsibility,” Zaretzky says. "I am a passionate proponent of leading by example, and I make sure everybody, including upper management, wears personal protective equipment on the job.”
It’s more than just equipment, though. Ronsco has implemented a comprehensive safety program that now has resulted in an 80 percent decrease in accidents, and in savings of hundreds of thousands of dollars. Reflecting Zaretzky’s belief in zero tolerance for unsafe practices, the program includes weekly "Toolbox Talks” where employees review selected safety issues with their foremen. And before each payroll is distributed, employees are required to sign off on the subject matter discussed.
Ongoing activities include quarterly foreman safety meetings and bi-annual, company-wide safety training sessions featuring guest speakers who focus on industry-related issues.
Anthony Berardo, Ronsco’s safety coordinator and director of construction, suggests that maintaining safe workplace practices not only reduces accidents, but improves worker loyalty by showing that the company cares about their welfare, not just the bottom line.
Ronsco’s commitment to safety is also well illustrated by the Safety and Health Code of Ethics that Zaretzky makes sure gets into the hands of every new employee:
• Ronsco is committed to Safety and Health Excellence by achieving an injury free workplace.
• We hold safety and health as our highest core value.
• Executive management will lead the safety improvement process.
• Safety is a shared responsibility of everyone in our organization. • Safety performance is a key indicator of organizational excellence and will be incorporated into our business processes.
• We will communicate safety performance openly with employees, clients and the public.
• All employees will be given the knowledge and skills necessary to safely perform their jobs.
• We will extend our safety efforts beyond the workplace to include transportation, homes and our communities.
• We will continually strive to improve our safety and health processes.
Incident & Injury Free Safety
Golt ascribes much of his success in lowering the injury rate at Precision Walls—their last loss claim was in July 2007—to his involvement with Incident and Injury Free, a program launched by JMJ Associates out of Austin, Texas, some 12 years ago, and which works with individuals, teams and organizations to achieve excellence in safety performance. The program has been embraced by area general contractors such as Bovis Lend Lease and Skanska, and Golt says Precision Walls participates in the program because it helps "control our workers’ comp costs.”
IIF’s approach is based on creating individual responsibility for safety along with establishing a culture of commitment to achieve incident and injury free performance on both capital projects and in ongoing operations.
"Our aim is to unite our employees as a family—one where everyone is responsible for his co-worker, and we work to make our employees understand the ramifications of injury, how it would affect their friends and families. We ask them if they can envision their daughters not having a father coming home at night, or if they can see their wives taking over as breadwinners.
"This personal approach is really getting through to our folks. We’ve been doing it for the last 18 months, and it has definitely helped. This program is making safety real to our people, and I think our safety record over the last year and a half speaks for itself.”
Other Cost Control Measures
Safety is number one. There is no possible way around that one. But there are other ways to help control workers’ comp costs.
Safety Groups. Contractors fortunate enough to work out of New York should take advantage of the New York Safety Group concept, which can save you 30 to 40 percent on your workers’ comp costs.
This is a New York State–only program sponsored by the New York State Insurance Fund.
As Zaretzky tells it: "We pay our group—managed by Hamond Safety Management—an annual 10 percent fee, which right out of the gate entitles us to a 25 percent discount on our premiums with the New York State Insurance Fund, our underwriter and carrier.
"Our safety group proactively manages our claims, our policies, any audits, and they review our experience modifier to ensure we are getting the best possible deal. And apart from the 25 percent upfront discount, they also pay us an annual dividend in the 20 to 30 percent range.
To which Rick Mege of Hamond Safety Management adds, "The New York State assessment charge for the safety group is 6.6 percent whereas all other New York carriers charge 15.5 percent; that’s a further savings of almost 10 percent.
He then goes on to say: "And, of course, whether you are part of a safety group or not, safety is the key. That’s how you improve your own individual experience modification factor.
"You have to make sure your guys wear protective equipment; that you conduct safety meetings and training; that you’re certified for forklift usage if you deploy them; and that you’re well versed as to scaffold safety if you climb a lot.”
Choosing an Insurance Company. There are many criteria on which to select the best insurance company, competitive rates being one of them.
But while rates matter, Golt of Precision Walls has another take on carrier selection: "For me, it all comes down to the adjuster you’re going to end up with, and whether that adjuster is responsive. I don’t care where they work; if you get a good adjuster—someone who is experienced, who knows the right questions to ask, someone who does all he can to communicate with both employer and employee—that’s the carrier we’re looking for.
"You don’t want to get yourself into a situation where, even though the rates look great at first, you then come to find out that you can’t even get hold of your adjuster. You can’t get him do anything, let alone respond to you on a timely basis. That will lose you money in the long run. The adjuster we look for will always maintain constant contact with you.”
"I also suggest that anyone looking for a good insurance company should go through an agency that understands construction because, as they say, you get what you pay for.
Managing Insurance Reserves. When a loss claim is filed with the insurance carrier, the carrier immediately sets aside a reserve against which to draw funds to manage the claim. The size of this reserve, and how long it’s kept on the books, has great bearing on future premiums.
Joe O’Connor of INTEC explains: "Say I break my leg. The insurance company will then put, say, $200,000 in reserve for medical bills, lost wages, rehabilitation, etc., and as I recuperate and the claim progresses, they will draw money from that reserve to pay my costs.”
"To the extent that you can—and this depends on your working relationship with your insurer—you want to make sure the insurance company does not put aside too much in reserve, because this amount will go against your losses, whether they’ve used all of it or not come the annual premium assessment time.
"Your new rates are normally based on your previous three years, so if the reserve stays in place for more than a year and the claim isn’t closed, then it will be included when calculating the new experience modification factor, whether they’ve used any or all of that reserve or not. So, if you have the ability, you want to monitor your insurance company and the sizes of those reserves.”
Golt agrees: "We manage our claims very, very aggressively. We look at the insurance numbers once a month, and if there’s any change in our cases, we do whatever we can to get the insurance company to reduce those reserves.”
Zaretzky keeps on eye on the reserves as well, through his safety group: "Our group manages our claims very proactively. They constantly monitor the reserves, and they analyze and diligently work to reduce our experience modification factor.”
Managing Medical Providers. Another important factor in keeping your losses at a minimum is to return the injured employee to work as soon as possible, even if that means coming back to light duty until the injury is fully rehabilitated.
One way to effect this is to work closely with medical providers.
As Golt reports: "We have eight different branch locations in North Carolina, South Carolina and Kentucky, and we partner with the clinics and doctors in all those places to make sure they know that we want to bring our people back to work as soon as possible, even if they are not fully rehabilitated yet. We always will have light duty work available for them to do that is within their restrictions.”
"This is very important, because if you let the clinic suggest when the employee should return to work, the employee might see this as paid vacation and put up his feet and watch Oprah for a month or two. This is a good way to push and bring closure to the claim and keep our experience modification factor low.
O’Connor says, "Pennsylvania, as an example, has a five doctor rule. This means that if we post a list of five doctors, those are the doctors our employees must see if they have a workers’ comp claim. You want to be very selective about that list. You want to think this through.
"Let’s say one of the major problems you’re going to have with a drywaller is falling off the scaffolding. Now, you want to post a doctor who is very good at setting bones. So, one of your five doctors should be a good orthopedic surgeon who is pro-rehabilitation and gets the employee back to work quickly.
"The point of this exercise is to get the employee fixed up and back to work as quickly as possible, even if you initially have to give them light duty. Get them off of workers’ comp.”
First Aid Training. Even with the best safety programs in place, injuries will happen, if only by complete freak. The thing is, you have to be prepared for them. You can minimize the impact of an injury by treating it correctly and quickly, and the way to accomplish this is to have your crew trained in first aid.
Golt shares his experience: "There will be accidents at some point or another. One of the things you want ensure, however, is that you have people around to take care of it, that you have first aid trained individuals to reduce the severity of the injury.”
"If someone gets cut, the more blood he loses, the more subsequent care he’s likely to need. If someone on your crew knows how to slow or stop the bleeding, you will—apart from making sure the guy will make it—have reduced your workers’ comp significantly.
"The same is true if someone breaks a leg. If this is managed properly at the scene, before the ambulance arrives, you will probably have prevented a more severe injury, and so reduced your workers’ comp losses as well.
"Of course you put safety measures in place to prevent the accident. But you must also be prepared for the ones that will happen by having selected first aid and CPR trained individuals on your crew.”
Play It Safe
The bottom line is that when it comes to workers’ comp, job one is to make safety more than a catch phrase or a PR slogan. An employer’s first goal is to achieve an injury free workplace.
And it works. As Golt reports, "Two years ago we instituted mandatory 100 percent hand and eye protection, with dramatic results. Since then we have eliminated two-thirds of those types of injuries.”
He goes on to warn: "The most important thing to realize is that safety is not something that you can relax on. Ever. It’s every single day; it’s always being aware, always being vigilant as to what is going on, and never letting your guard down, not for a second.”
Zaretzky concurs: "It’s constant diligence. It’s never letting up.”
But with that mission accomplished—and each worker taking responsibility both for himself and his coworkers—other things, like productivity and job satisfaction, tend to reach new heights, too.
Well worth it.
Los Angeles-based Ulf Wolf and Clearwater, Fla.–based Steven Ferry write for the construction industry as Words & Images.