Academic journal article Risk Management and Insurance Review

Loss Reduction through Worker Satisfaction: The Case of Workers' Compensation

Academic journal article Risk Management and Insurance Review

Loss Reduction through Worker Satisfaction: The Case of Workers' Compensation

Article excerpt

ABSTRACT

A prospective study of occupational low back pain (LBP) indicates loss reduction efforts in workers' compensation that improve workers satisfaction with the treatment of their claim significantly improves levels of recovery (reduces losses) and lowers workers' compensation insurance costs. The improved outcomes associated with greater worker satisfaction with the firm's treatment of their injury claim, as well as with the treatment from their health care provider, are robust to five alternative measures of back problems, including leg pain and back pain scales, measures of functional limitation, and quality of life scales. Satisfaction with effectiveness of the health care is more important in recovery than satisfaction with the provider's bedside manner. While satisfaction with health care provider significantly improves back pain and functionality at 6 months, satisfaction with the employer's treatment of the claim is equally important at 6 months and grows in quantitative importance at 1 year. Overall, higher satisfaction with claim treatment reduces the likelihood that an injury becomes an indemnity claim and results in almost a 30 percent reduction in claim costs.

INTRODUCTION

Loss reduction, or decreasing the impact of adverse outcomes, is one of the principal techniques employed in risk management and insurance (Williams et al., 1998; MacMinn, 2000), and yet little is known empirically about how human resource policy and practice affect workplace risks through loss reduction efforts. The nearest exceptions are a few studies that find employee involvement in firm decision making and financial returns tends to lower workers' compensation costs (Hunt et al., 1993; Habeck et al, 1998; Butler and Park, 2005). Even in these studies, there is no attempt to identify the mechanism through which workers' compensation costs are lowered - whether risk avoidance, risk prevention, or loss reduction.

This study quantifies how loss reduction, as measured by the firm's efforts to improve employee satisfaction with the treatment of their insurance claim, affects the perceived loss and cost of the claim. In particular, we examine how a firm's treatment of workers' low back pain (LBP) claims directly affect back problems and workers' compensation costs. As "being fair" with a worker's claim is likely to be relatively costless, a finding of significant benefits from worker satisfaction would suggest that it is a cost beneficial form of loss reduction.

We choose to examine occupational back problems because they account for about a third of all workers' compensation costs in the United States. Except for relatively rare instances involving cancer or fractures, the primary symptoms of back problems are patients' reports of pain and physical limitations. The severity of pain and the effect of pain on the ability to continue to work or to return to work depend, therefore, on individual perceptions of their working environment and responses to pain that are difficult to measure or to compare among individuals.

Among workers with back pain, the traditional criteria used to measure recovery are the end of a work absence, sometimes accompanied by measures of the extent to which a worker returns to his pre-onset job, hours of work, or by the completion of medical care. Return to work measures are also used as outcomes in the evaluation of the effectiveness or cost effectiveness of health care for back pain. The need to rely on self-reported symptoms and the influence of !inobservable attitudes and perceptions among the victims of back pain make it extremely difficult to evaluate the effectiveness of health care for back pain.

While health care is one of several significant influences on returns to work, workers' perceptions of their health status and of their relationships with their employers are among the most important influences (Gardner and Butler, 1996; Turk, 1996; Liosel, 2005). …

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