March 2017

Insurance companies use an Experience Modification Rate (EMR) formula to calculate your workers comp premium, based on the cost of past claims and the probability of future accidents. The higher your EMR, the higher your premium– and the converse.

Here’s how the formula works:

1. To set a base premium, the company divides your payroll in each job classification by 100, and then by a “class rate” set by the National Council on Compensation Insurance that reflects the risk in this classification. For example, because structural ironworkers have a much greater risk of injury than receptionists, their class rate is significantly higher.

1. The company compares your claims history during the past policy period to those of similar firms in your industry. The formula factors in the ratio between expected losses in your industry and those you actually incurred, together the frequency and severity of losses. The formula “penalizes” businesses that suffer a single large loss less severely than firms that have many smaller (statistically more likely) losses.

1. The result is the EMR, which the company multiplies against the manual premium rate to set your workers comp premium for the next policy period.

If your business has an EMR of 1.0, your premium would remain unchanged. A rating of 1.2 would mean that might pay as much 20% more than a competitor with an EMR of 1.0 – a difference that you would have to swallow by cutting costs and/or raising prices. Conversely, if your EMR came to .8, you would enjoy a competitive advantage over competitors with higher ratings.

The good news: a comprehensive safety program can lower your EMR by reducing workplace hazards and injuries. We’d be happy to help you design and implement a plan tailored to your needs.

Policy changes in workers’ compensation can be fast and sudden or slow and painful. Every time the goalposts are moved, people have to learn to adapt. With the president’s agenda making headlines everywhere, it’s worth taking the time out to learn more about where this issue might head this year.

Minimum Standards and Health Care 

The Department of Labor called for minimum standards set for each state in terms of workers’ compensation before the inaugeration, yet Trump seems like he won’t be an advocate for this measure. When it comes to the Affordable Care Act (A.K.A. Obamacare), there’s a lot of work ahead to develop a sustainable and worthwhile solution to handling workplace injuries no matter what happens.

Interestingly enough, it may be mental health that’s at the top of the docket for 2017. It’s one of the top reasons employees take short-term disability assistance, and this has prompted more companies to place value on and promote programs that support work-life balance and self-care. Some states don’t allow for mental health as a reason to take disability, however that may change in the future as well.

The Enforcers 

ADA, FMLA and OSHA have all seen more enforcement over the past few years, as rules solidify and expectations are set. Last year saw a rise of ADA suits, including issues related to service animals, allergies and the amount of noise in a workplace. The concept of how much time new parents should be able to take off from work will continue to be widely debated this year too. These types of issues tend to snowball until everyone is forced to confront them. Those who own their own business may want to start addressing these issues now before they’re forced to change them later.

Future Outlook

Prices continue to go up when it comes to medical care. This fact, along with changing rules about what does and does not constitute a claim, makes experts think that this year will only see an increase in rates. California, New York, Illinois and Florida all have workers’ comp on their minds when it comes to legislation. Most are considering pricing reforms as old laws are evaluated under a microscope. There may also be changes when it comes to how marijuana is handled (in light of its growing legality) and how opioids are used (in light of its growing addiction base.) Some experts think this is driving us towards an advocacy-based model, where attorneys are used less and employees typically get back to work faster.

One thing is for certain: the more transparency on both sides of the equation, the more likely it will inspire positive and production interactions and resolutions.

Technology associated with construction has dramatically changed operations. Carefully check the class codes and their descriptions to assure proper premiums.

Years ago, 5606 – contractor supervisors – served to describe on site personnel who actively performed construction activities while managing the site. The rate was equivalent to site carpenters. That code has evolved into the computer carrying, service providing construction managers and executives who document the construction process. The rate is closer to outside sales representatives now.

Even excavation and site work is being dramatically changed by GPS technology. Now computers design a cut and fill pattern with efficiency. Labor is more involved in checking the geotechnical and environmental properties of the soils rather than the actual movement of them.

As production technology improves, new sub-codes develop to reflect the decrease in risk. Painting, carpentry, electrician and other trades now use a selection of eight or ten separate codes to describe exact activities. More components are built in shops and brought to the site. This process can change the class code of the installers and the builders.

The trend is towards more computer driven operations. Less labor, more specialists. As this trend continues, class codes will be added, deleted and the descriptions changed. There are currently over seven hundred class codes. Some are antiquated with new meanings – like a ship chandler is now a hardware store.

It pays to become familiar with the classifications. If your business has been active for many years, the “governing code” may be incorrect. The governing code is the catch-all for your business which best describes the overall operation, more obvious in manufacturing. Corrugated box manufacturing has been reorganized into several class codes. Technology has separated the manufacture of cardboard and corrugated cardboard into laminating processes, cutting and folding processes, and fully integrated operations.

Read your relevant class codes and think about which one reflects your operations. Or ask your agent to do it for

Most people don’t think of hotel workers when they think of hazardous jobs. After all, they’re not working with dangerous equipment for many hours a day, nor are they exposed to toxins. But dangers sometimes lurk where you least expect it, and this may explain why there seems to be an influx in claims related to the industry.

Time and Prevention

Hospitality tends to yield injuries to staff that are otherwise preventable with better training or hiring practices. Some of these protocols are skipped in light of more pressing matters of the day. When tourists cut back, hotels often have no choice but to cut back on their staff as well. When employees aren’t properly supervised or they feel overwhelmed to complete tasks before their shift is over, they’re liable to make a mistake. While most hotel managers and owners understand the preventative measures they’re supposed to take, the evidence suggests that these precautions are being ignored in light of what’s convenient or cheaper.

The Hazards of Hotels

Employees in hospitality are constantly being asked to lift or carry a variety of objects. From the steward unloading supplies or baggage to the waiter picking up huge trays of food to the room attendant turning over a mattress, there’s a lot of ways that an employee may take a shortcut or simply take on more than they’re ready to handle. They’re also often working in precarious situations that demand awkward body positions. Over time, the odds of an injury occurring will increase to the point of certainty if there’s no intervention. One hotel hired a worker who had two knee replacements, who then injured her leg — costing the hotel tens of thousands. Room attendants who work with chemicals all day may develop irritation to them over time, and those who clean floors may find that their backs start to ache after a few weeks.

Tips to Decrease Liability 

The best way to decrease your liability in the hotel industry is to give your staff only what they can handle. This means seeing past the immediate needs to save money, and instead focusing on training and supervision to ensure that everyone understands what safety really means. It may also mean investing in equipment that is ergonomic. For example, a new power scrubber may allow maximum control with minimum body effort on the part of the cleaner. These tips only strengthen the hotel to increase its profits rather than eat into your bottom line. Skipping steps generally results in insurance rates rising or having to pay out of pocket for the cost of an accident.