Right now the kids are in bed and I’m eating dinner;  a bacon and blue-cheese burger from Wendy’s.  Pretty good!  Of the four bucks I spent, I can’t help but wonder how much of it the owner must hand over in Work-Comp premiums.  I know – weird thing to wonder – right?  Maybe it’s just that today I ended up helping a local restaurant owner save big money on Work-Comp.  It got me thinking I should share a few tips on how to fight back and slash premiums.

1. Shop Top Companies
The State Insurance Fund is NOT the only competative option.  If your agent tells you otherwise - get a 2nd and 3rd opinion!  There are a number of companies that are HOT in Idaho with Work-Comp.  Each company has Pros and Cons and keep in mind there are variables outside of the rate to consider.  (Such as required deposit amount, dividends, and their ability to help you reduce costs going into the future.)  If your agent can’t or won’t shop mulitple companies – call around until you find someone who will!

2. Get those CREDITS
Ask and ye shall receive!  Find out about all the credits you aren’t receiving now and what you need to do to qualify for them.  Most agents and companies are happy letting you go without credits – because it’s more money in their pockets!  Typically, the bigger credits come from demonstrating you have a formal safety program.  Don’t have one yet?  Ask your agent to help you put one together!  Another big credit can come from having a formal Drug-Free Workplace program.  For years, the expense associated with the required random drug testing was cost prohibitive to small organizations.  However, I’ve discovered a little hidden gem called Idaho WorkCare right here in Idaho Falls that is so aggressive on their pricing, they seem to be able to make it pencil out for about any business.  (The other benefits that come from this can add up too!)  If you’re interested, click here for their information.

3. Experience Modification Factor
This is applied to policies with average annual premiums of about 3,000 dollars or more.  An experience modification factor (e-mod) of 1.0 indicates your business has incurred losses equal to what is expected in a business of your size doing the same type of work.  This would result in no change to your premium.  If your losses are less than is expected over a period of time (3-4 years), the e-mod factor would drop below 1.0.  For example, it might be .89 meaning the premium would be discounted about 11%.  However, if your losses are greater than expected over a 3-4 year period, the factor can be greater than 1 and therefore ADD premium.  So, know what your “e-Mod” is and work to get it to drop.  Caution:  ALWAYS report accidents and have your Work-Comp provider pay!  If you pay, you likely take on the liability for that incident.  What if that cut you paid to get stiched up gets infected and your worker loses a limb?  You’ll probably find yourself spending big defense dollars in court worried about how it’s all going to end.  Besides, every dollar spent is not equal.  Medical payments often do not affect your e-Mod at all.  The way the formula works, it’s payments for loss of work time that are more important to watch. 

Note:  I’m all for outsourcing payroll processing if it pencils out given your unique circumstances, but be very cautious about how they plan to handle your workers compensation.  In general, you are best to maintain your own policy – and not lump your employees into some “master” policy where others’ losses can hurt your rates.  Be sure to get a second opinion before you just go along with their recommendations.

4. Get “Dividends”
Not ALL companies offer this.  The idea behind this is that if a company has a year where losses are low, they will send qualifying insured some of their money back in the form of a check or credit on their account.  There are only a couple of companies in Idaho that offer this.  One company in particular has about 10 years of history in awarding large dividends to large accounts – up to 40% of the premium amount!  I mention this because it is very important not to just look at the rate they are charging you up front – but also consider things like this when determining the true bottom line cost to your business.

5. Break Out Class Codes
Often, companies and agents will set your policy up so that ALL of your payroll is reported under one Class Code (identifying what type of work is done).  This might be the correct way to do it depending on the business you are in and what each of your employees are doing.  But get a second and third opinion on this!  Sometimes, you might be able to get a lower rate on a portion of your payroll by showing the company that it should be under a less risky Class Code.  It’s possible to even split up the payroll from an individual employee among several Class Codes.  For example, a roofing company might have a salaried employee that spends half his/her time on bookkeeping.  You’d want to convince the company to only charge the smaller bookkeeping rate on half of his/her payroll.  Know, understand, and break out your payroll in the appropriate Class Codes!

6. Double Check Payroll Reports
All of the best laid plans can be foiled by the person reporting payroll to the Work-Comp provider.  If you under-report, they’ll get you on an audit!  If you over-report, it doesn’t take long before you just can NOT get that money back EVEN IF you catch it later!  Math errors, reporting payroll on excluded persons (like owners, members, etc.), and reporting extra payroll from time and 1/2 (don’t report the 1/2!) all mean you’ll be paying more than you should.  Don’t just HOPE it’s getting reported accurately.  Set up a system where these figures are DOUBLE checked often by someone outside the person filing the payroll reports with the company.

7, Loss Prevention
You don’t want your “E-Mod” to cost you money!  The goal is to have less losses than is expected from a company your size doing the same work (class codes).  This is PROVEN to happen with good loss prevention.  If you haven’t already, ask your agent what he can do to help you with this.  Often, he has access to loss prevention teams that can help you customize a plan based on proven industry specific methods and practices.  Most, if not ALL of this help should come at no cost to you.  One of my favorite Work-Comp companies has a library chuck full of training material/videos that they encourage their clients to “check-out.”  IMPORTANT:  DO NOT pay for claims out of your pocket.  This can sink your business as I point out in #3.

8. Manage Open Claims
One thing that can seriously effect your E-Mod is reserves on open claims.  Reserves are monies they think they “might” spend on a case in the future – but they’ll count against you today.  You may be able to get them to lower reserve amounts on large open claims.  I suggest asking for a “loss run” from your company at least once a year.  Review it for accuracy and use it to identify problem areas in your company that you might fix to avoid similar losses going into the future.  IMPORTANT:  As I mentioned earlier, Medical bills do not hurt your E-Mod as mush as money spent compensating them for lost wages.  Do all you can to help them get back to work.  Offer light-duty work.  Refer all cases to state rehabilitation workers that are paid by the state to get them working again.

9. Extra Services from Provider
I work with 4 or 5 companies that offer Workers Compensation (including the State Insurance Fund).  Each of them offer extra services to their clients; some more than others.  One company I work with quite a bit offers online payroll reporting and has an incredible loss prevention team.  Call up your agent and have him tell you want “extras” you can get from the company (and also from you agent for that matter!).

10. Get your Deposit Back!
Many companies require a deposit to get started.  If you are with the State Insurance Fund, chances are you’ve forgotten you actually have 25-50% of your annual premium tied up in a deposit.  So if you pay 5,000 a year – you actually paid around 7,500 the first year.  That extra money is just sitting there.  Ask your agent about companies that do NOT require a deposit.  That extra money might as well be in YOUR account as long as you can get at least an equivelent deal somewhere else.  If you don’t want to switch companies right now, have your agent work to lower the deposit that is required.  Perhaps the company can be talked into releasing some of your deposit – freeing up a little more of your money!

11. Understand the game agents play . . .
Most agents play a game called: make lots of promises, sign ‘em up, and move on.  A good agent can save you huge amounts of money over your lifetime IF he or she is really good.  Often, those that are the slickest looking before you switch are the ones that perform the poorest after the switch.  You want to find someone that actually cares enough to give you and your policy attention at least once a year.  This agent should make a great effort to ensure all the things you’ve read about in this blog entry are happening for you.  Every year your agent makes a commission.  Some continue to “earn” the commission they are paid - and some don’t.  If you can’t name very many specific things your agent has done for you THIS YEAR to EARN the commission, maybe it’s time to look at options.  Find an agent that will make keeping on top of all of things EASY and hassle-free for you.

If you’d like more information or have any questions, I’d be happy to help.  Just send me an email or give me a call at 522-5151.

Ben Page