Issue link: https://read.dmtmag.com/i/59042
58 • APRIL 2012 • WORLD FENCE NEWS Employers are grappling with a spike in workers' compensation premi- ums after years of virtually level costs. Increasing accident rates and higher medical costs are contributing to the problem. Business owners can help temper the damage by improving safety programs and informing em- ployees about the shared costs of ac- cidents. Workers' compensation insurance, long a burr under the employer's sad- dle, is gaining new prominence in the drive to protect profits. Business own- ers are getting hit with premium in- creases for the first time after years of virtually level costs for the nation's Controlling workers' compensation costs BY PHILLIP M. PERRY oldest social program. "We are entering a new environ- ment of rising workers' compensation costs," says Peter Burton, senior divi- sion executive for state relations at the National Council on Compensation In- surance, Boca Raton, Fla. (ncci.com). "It is estimated that employers are see- ing premium increases in the two to five percent range as their renewals come up." Why the increase? More workers are having accidents and it's costing more to return them to health. "Most states have experienced 'loss cost' increases over the past year," says Burton. "That's a change from the virtu- ally flat or decreasing environment of previous years." The term "loss cost" refers to the average state-wide cost of lost wages and medical payments resulting from injured workers. Higher loss costs translate into higher insurance premi- ums. Premiums rise A rising accident rate may seem surprising, given the many safety pro- grams instituted by employers in re- cent years. "Workplaces are safer than they were 50 years ago," notes Daniel C. Free, president and general counsel of insurance audit & inspection, Indi- anapolis, Ind. (insuranceaudit.com). And that's good because – at least until recently – controlling the number of accidents has gone a long way to- ward capping premiums. Unfortunately, a number of factors have come together to reverse the fa- vorable trend. Among them is a popu- lation that's getting older, heavier, and thus subject to more injury. "People used to retire in their 50s or 60s," says Free. "Now they often stay in the workforce longer. Studies show that people who are older and overweight are more prone to slips and falls and lifting accidents, and take longer to heal." Other cost drivers abound: Injured workers today are treated with more sophisticated medical procedures and more costly prescription drugs. And as the economy emerges slowly from the recession, employers are beginning to hire new workers who are not as cog- nizant of security procedures, and whose lower experience levels lead to more job injuries. Finally, states are bringing more conditions under the workers' comp umbrella. "Some procedures, such as knee replacements, might not have been covered a few years ago but are now common," says Free. "And a growing number of states are covering non- physical injuries such as mental stress." It's all coming together to boost the doctor's share of the workers' comp bill. "Historically the indemnity por- tion of workers' comp costs [the re- placement of a portion of lost wages] was higher than the medical portion," says Free. "Now the reverse is true: Rising medical costs are driving the in- crease in workers' compensation pre- miums." Get safe Rising insurance costs are unwel- come to employers already under pres- sure to produce more with less. Workplace injuries affect far more than insurance premiums. An absent worker, after all, no longer contributes to profitable operations. "Your em- ployees are your most important busi- ness asset," says Free. "You can replace computers if you have to. But your employees are hand picked." contin ued on pa g e 60