1. 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

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

3. 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.

4. 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

5. 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.

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

7. 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)
Standard Prem. $75,000 $100,000 $125,000

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

9. 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.

10. Effects of an Injury on Cost
Add a $5,000 claim: $30,000 + $5,000 = 1.10
MOD
$30, (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

11. 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 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

12. 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 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

13. 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”

14. 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