Workers’ Compensation Costs; Effect of Claims and Control Measures For Three Separate Farms Safety First Mushroom Farm Safety Second Mushroom Farm Safety Third Mushroom Farm

agenda General Overview of Workers’ Compensation System Financial Impact of Claims Risk Management Strategies Claims Management Accident/Incident Investigation Approach to Safety Management

Workers’ Compensation Definition: Insurance coverage required by state law to provide compensation for workers who are injured on the job in the course & scope of their employment.

Benefits Seven day waiting period Lost wages benefits Retroactive after specified length of disability Generally 66 2/3 of gross wages. Most states have a maximum and minimum weekly benefit. No time limit on benefits Medical Benefits Employer chooses physicians in Pennsylvania Survivor Benefits Rehabilitation Benefits

The Cost of Workplace Accidents Workers’ Compensation premiums are directly related to the cost of workplace injuries Workers’ Compensation insurance is required by state law for workers who are injured on the job in the course & scope of their employment. Premium = rate x payroll/100 x experience mod Rate is set by the state – depends on the nature of the work and hazard class Payroll is a fixed figure Experience Mod – based on your losses over a three-year period compared to your industries’ average losses over that period.

The Experience Modification Factor (EMF) Actual Losses EMF = Expected Losses * Three Years of Losses excluding the most recent year (i.e. 2015 EMF is based on losses in 2013, 2012, 2011) *Developed by State Workers’ Compensation Bureau or NCCI

Three Companies and the EMF *Safety First Mushroom Farm – Effective Program *Safety Second Mushroom Farm- Average Program *Safety Third Mushroom Farm – Ineffective Program Costs First Co. Second Co. Third Co. Manual Prem. $100,000 $100,000 $100,000 EMF (X) .750 1.0 1.25 Standard Prem. $75,000 $100,000 $125,000

Effects of an Injury on Cost Your losses = $30,000 Average industry losses = $30,000 Premium = $100,000 Your EMF = 1.0 So…

Claims Scenario Harvester slips on mushroom debris in mushroom house and falls breaking his arm. Occupational Health Center sets a cast on injured workers arm. No full duty for eight weeks. Cost of medical treatment is $1,800. Cost of lost wages is $3,200 (average wage is $600 per week X 8 weeks X 2/3) Total claim cost is $5,000.

Effects of an Injury on Cost Add a $5,000 claim: $30,000 + $5,000 = 1.10 MOD $30,000 (was 1.0) Cost = $100,000 X 1.10 = $110,000 Additional Cost = $110,000 - $100,000 = $10,000 Calculated into EX Mod for 3 years Total Cost of one $5,000 Claim = $30,000

Safety First Mushroom Farm Offers light duty within 5 days according to medical capabilities provided by treating physician Provides injured worker one or more light duty jobs as follows: Cleaning Sweeping Painting By providing light duty work at full pay ($600 per week) the cost of wages is $4,800 in total. Medical costs remain $2800 raising experience mod to 1.036 or $3600 per year for three years or $10,800 Total financial cost is $4800 (wages) + $10,800 (medical) or $15,600 Safety First Mushroom saves $30,000 - $15,680 or $14,400

Safety Second Mushroom Farm Unaware of light duty savings potential for first four weeks after injury. After four weeks the owner talks to the owner of Safety First. Safety Second Mushroom Farm initiates light duty for the last four weeks of injury. Actual wages paid to the injured worker is 4 weeks X $600 or $2400 Safety Second Mushroom Farm has increase in Experience Mod to 1.075 or $7,500 for 3 years = $22,500 Total cost of claim is $2,400 (wages) plus $22,500 in Experience Mod or $24,900 Safety Second Mushroom Farm still saves $5,100 by offering 4 weeks of light duty

Safety Third Mushroom Farm Unaware of light duty savings potential for duration of claim Injured worker stays home for eight weeks and develops a feeling of malaise After several days back at work the injured worker says he thinks “he reinjured his arm”

Financial Effect of Providing Light Duty Work for Eight Weeks Employer Paid Wages Exp. Mod Savings Net Savings 1st Safety Farm Yes $4,800 $6,400 per year (3 years) $14,400 2nd Safety Farm Partial $2,400 $2,500 per year (3 years) $ 5,100 3rd Safety Farm No $0