Magazine article Risk Management

Integrating Your Health Program

Magazine article Risk Management

Integrating Your Health Program

Article excerpt

The least expensive workers compensation claim is the one that never happens. But many injuries occur in the workplace that could be prevented through early detection. The good news is that new methodologies exist for recognizing and addressing human capital risks that increase injury prevention and minimize the human and corporate costs of those injuries.

If hired into appropriate jobs, employees generally begin their employment in a healthy and relatively comfortable state. Sometimes, however, discomfort or aches and pains can occur. These conditions are often not reported, and continue to fester like an untreated wound. Over time, employees avoid reporting, employers continue to push for high productivity and eventually, an injury occurs. The system fails. In these cases, while prevention or inexpensive treatment of the injury might have been possible, the employer is now forced to move into the claims management process, which is certain to be more costly. Employers need a new strategy.

The opportunity to minimize costs is through prevention of injuries. As human and corporate costs of injuries rise, employers are less inclined to accept them as just a cost of doing business and they become more inclined to take action.

The costs of injuries to employers include those that directly and indirectly impact the bottom line. Within the workers compensation system, medical and wage replacement costs are direct costs. For disability claims, direct costs are wage replacement, with medical being covered by the health care system. Indirect costs for both workers compensation and disability claims include lost productivity, employee replacement costs, employee morale (of both the employees experiencing the workers compensation and/or disability management processes and the employees that are left to pick up the slack), recordkeeping costs and other administration costs.

Federal agencies and industry practitioners have estimated indirect costs to be at least three times that of direct costs. In addition, employers may be experiencing unrecognized costs associated with the unreported discomfort and pain experienced before an injury is reported. "Presenteeism" (the phenomena of employees being at work, but not functioning at their full capacity due to the effects of injury or illness) often contributes to decreases in productivity and morale. These costs are significant, but very difficult to measure. Various industry surveys estimate that employers are spending anywhere from 14% to 16% of payroll as direct costs of workers compensation, disability and sick leave. Assuming that indirect costs are indeed at least three times that of direct costs, employers are spending a minimum of 56% of payroll on these programs.

A 2006 survey by the Workplace Productivity Institute of middle managers, senior managers, and C-suite executives suggested that companies that poorly manage their injury prevention efforts, or fail to acknowledge injury prevention as an effective workers compensation cost reduction strategy, will unnecessarily expend resources on costly work-related injury claims. This contributes to nearly $350 billion spent annually by employers on worker-injury costs. According to the survey, the majority of respondents believe injury prevention can reduce their direct incurred costs by greater than 20%.

Similarly a 2006 survey on disability, absence and health, conducted by Spring Consulting Group, points to prevention as one of their most important strategies, but acknowledges there is an opportunity to more adequately incorporate it into existing integrated workers compensation and/or disability programs. These findings suggest that employers are taking action by integrating injury prevention strategies and processes with workers compensation and disability programs and processes. The costs of not taking action are just too high.

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