2012 4th Quarter SAFe-mail
Quarterly newsletter to inform policyholders and potential policyholders with worker's compensation related information.
Safe-mail Fourth Quarter 2012 How Accidents Affect Your Bottom Line WCF Update Publication; Volume 11; Fall 2011; www.wcfgroup.com fourth Quarter 2012 Table of Contents W hen a workplace injury occurs, how much does that injury truly cost your organization? Typically, actual injury costs are between 5 to 50 times the size of the obvious direct costs of medical expenses and salary for the injured worker. An organization may also be surprised to realize how much revenue is necessary to recover the costs associated with a workplace injury. According to the Occupational Safety and Health Administration, costs associated with occupational injuries and illness can comprise as much as 5% of a company's total costs. These costs include direct and indirect costs. Direct Costs Direct costs of an injury include medical costs, lost wages and higher insurance premiums. Insurance costs increase based on the rise in claims frequency and severity, which will directly influence an organization's experience modifier, or e-mod. Your organization’s e-mod is calculated by the National Council on Compensation Insurance and is based on your payroll and claims costs history compared to other similar organizations in your industry. If your organization’s claims frequency and severity is above the average, your e -mod will be above a 1.00. If your claims frequency and severity is below average, your e-mod will be less than 1.00. The following chart illustrates the increased cost associated with a rise in claims. Indirect Costs Similar to the unseen portion of an iceberg, there are a number of indirect costs associated with accidents that are not as easily seen. These indirect costs have been estimated to be from 5 to 50 times the size of the direct costs. Indirect costs include money spent on things such as repairing damaged equipment, time to fill out accident reports, time and money spent on hiring and training replacement personnel and lost productivity and quality because less experienced employees replace key injured employees. Revenue Required to Recover Costs Few employers understand the additional sales and productivity efforts required to make up for lost profits associated with accidents. The two following examples show how a company can calculate the revenues needed to maintain profit margins and cover the cost of accidents. To calculate how much a company would have to make up in sales to pay for a claim, complete the formula below. How to Lower Costs An effective safety program can help prevent injuries, reduce costs and make a substantial contribution to your bottom line. The most effective safety program is one that is fully integrated into the way your company conducts its business. You should focus your safety program on the systems and processes that have the greatest potential to cause injury. How Accidents Affect Your Bottom Line 1 NCCI Releases New Study on Effects of Obesity 2 Winter Holiday Safety 3 Why Premium Audits are Performed 4 Requirements of a Compensable Claim 5 “Actual injury costs are between 5 to 50 times the size of the obvious direct costs of medical expenses and salary for the injured worker.” State Accident Fund Safe-mail Fourth Quarter 2012 NCCI Releases New Study on Effects of Obesity in Workers’ Compensation June 20, 2012 - WorkCompWire NCCI Study on Effect of Obesity in Workers Comp T here is mounting evidence of obesity contributing to the cost of workers compensation. Longitudinal studies by Duke University of its own employees—and by Johns Hopkins University of employees of a multi-site U.S. aluminum manufacturing company—point to substantially higher odds of injury for workers in the highest obesity category. Further, a 2011 Gallup survey found that obese employees account for a disproportionately high number of missed workdays, thus causing a significant loss in economic output. Finally, earlier NCCI research of workers compensation claims found that claimants with a comorbidity code indicating obesity experience medical costs that are a multiple of what is observed for comparable non-obese claimants. This new NCCI study confirms that obesity contributes in significant ways to the length of time during which claimants receive indemnity benefits. Indemnity duration was measured based on Temporary Total and Permanent Total indemnity benefit payments; in a sensitivity analysis, Permanent Partial benefits were counted toward indemnity benefit duration as well. Two concepts of aggregating observed indemnity benefit transactions into duration were employed, with little difference in the results. The statistical analysis shows that claimants with a comorbidity indicator pointing to obesity have an indemnity benefit duration that is more than five times the value of claimants who do not have this comorbidity indicator but are otherwise comparable. Inclusive of Permanent Partial indemnity payments, this multiple climbs to more than six. The results obtained for the effect of obesity on indemnity duration are close to what has been established by Duke University for the morbidly obese. Based on the reported means in the Duke University study, for the morbidly obese, the number of lost workdays per claim amounts to 6.4 times the value observed for claimants of recommended weight. “This new NCCI study confirms that obesity contributes in significant ways to the length of time during which claimants receive indemnity benefits.” 2 South Carolina State Accident Fund “At Work Since 1943.” State Accident Fund W Safe-mail Fourth Quarter 2012 inter holidays are a time for families and friends to get together. But that also means a greater risk for fire. Following a few simple tips will ensure a happy and fire-safe holiday season. HOLIDAY DECORATING Be careful with holiday decorations. Choose decorations that are flame resistant or flame retardant. Keep lit candles away from decorations and other things that can burn. Some lights are only for indoor or outdoor use, but not both. Replace any string of lights with worn or broken cords or loose bulb connections. Connect no more than three strands of mini light sets and a maximum of 50 bulbs for Winter Holiday Safety screw-in bulbs. Read manufacturer’s instructions for number of LED strands to connect. Use clips, not nails, to hang lights so the cords do not get damaged. Keep decorations away from windows and doors. HOLIDAY ENTERTAINING Test your smoke alarms and tell guests about your home fire escape plan. Keep children and pets away from lit candles. Keep matches and lighters up high in a locked cabinet. Stay in the kitchen when cooking on the stovetop. Ask smokers to smoke outside. Remind smokers to keep their smoking materials with them so young children do not touch them. Provide large, deep ashtrays for smokers. Wet cigarette butts with water before discarding. BEFORE HEADING OUT OR TO BED Blow out lit candles when you leave the room or go to bed. Turn off all light strings and decorations before leaving home or going to bed. “Following a few simple tips will ensure a happy and firesafe holiday season. ” 3 South Carolina State Accident Fund “At Work Since 1943.” State Accident Fund Safe-mail Fourth Quarter 2012 Why Premium Audits are Performed Theresa Simmons, Premium Auditor Kirk Adair, Premium Auditor T his quarter is the last one for the year of 2012. Many of you will have annual policy renewals starting on January 1, 2013. After the January renewals, the premium audit forms for 2012 will be mailed the first week of January 2013. Now, the word “Audit” usually strikes fear in the hearts of those who hear it. So let’s review the purpose of the “Workers Compensation Premium Audit” to make it less scary. Why is a Premium Audit Performed? The purpose of the premium audit is to compare the estimated payrolls with the actual payrolls incurred in 2012. The premiums paid in 2012 are estimated premiums based on estimated payrolls. The audit determines the actual payrolls and adjusts the premium accordingly. The higher the payroll amount, the more risk the State Accident Fund handles for you. The lower the payroll, the less risk that the State Accident Fund handles for you. If the actual payroll is higher than the estimated payroll, your account will be billed for the difference. However, if the actual payroll is lower than the estimated payroll, a credit is reflected on your account. Get a jump on this year’s audit by reviewing the information below. The more complete your audit information is, the easier the audit process is going to be. See the following Premium Audit Highlights below. Having these items complete will speed up the processing of your audit and will maximize your premium discounts. 1. Total Gross payroll for 2012. This amount is the total payroll incurred during 2012. This number is the total payroll amount before any deductions such as pre taxed items, insurance etc. 2. Payroll Verification Documents. These documents are, frequently, forgotten which slows down the processing of your audit. The most common verification document is the Federal W-3 Form for 2012. This form lists your total payroll amount for 2012. 3. Overtime Paid. One-third of overtime payments can be deducted from your gross payroll before the premium calculation is made. If you paid overtime in 2012, be sure to list the amount on the audit form. There is a column on the form labeled “Overtime”. 4. Drug and Alcohol Free workplace credit form. If you have a policy preventing the use of drugs and alcohol in your workplace, be sure to complete the drug free workplace form. It can save you an additional 5% in workers’ comp costs. Be sure to have the form notarized and returned with your audit information or this discount will not be applied. (This form will be mailed to you along with the other audit documents) 5. All audit forms will be available on our website at www.saf.sc.gov under “Reports & Forms/Payroll Report” 6. The website provides copies of the blank forms that you can print along with directions on how to complete the Payroll Report. 7. Have Questions? Contact your SAF premium auditor at 803-8965800. The name of your premium auditor will be listed on the audit forms mailed to you in January. “The purpose of the premium audit is to compare the estimated payrolls with the actual payrolls.” 4 South Carolina State Accident Fund “At Work Since 1943.” State Accident Fund Safe-mail Fourth Quarter 2012 Requirements of a Compensable Claim: Injury by Accident by Ellen Goodwin A s was last discussed here, in order to be compensable, a workers’ compensation claim must be the result of an injury by accident. This accident must arise out of the claimant’s employment. S.C. Code Ann. § 42-1-160. Generally, the accident arises out of the employment where there can be said to be a causal connection between the conditions under which the work is required to be performed and the resulting injury. Houston v. DeLoach & DeLoach, 378 S.C. 543m 663 S.E.2d 85 (S.C. App. 2008). The accident ‘arises out of the employment’ when the employment is a contributing proximate cause. Beam v. State Workmen’s Compensation Fund, 261 S.C. 327, 200 S.E.2d 83 (1973). An injury that arises from a hazard to which the injured employee would have been equally exposed if not for the employment is not compensable. Sharpe v. Case Produce Co., 329 S.C. 534, 495 S.E.2d 790 (S.C. App. 1997), rev’d on other grounds, 336 S.C. 154, 519 S.E.2d 102 (1999). An example of this is a recent case in which the claimant alleged her position as a receptionist exposed her to perfumes brought in by the public, which exacerbated her preexisting asthma. The Court of Appeals denied benefits because claimant could not show she was more exposed to perfumes in her employment than at the grocery store, dentist office, or church. Ervin v. Richland Memorial Hospital, 386 S.C. 245, 687 S.E.2d 337 (S.C. App. 2009). Thus, in evaluating the compensability of a claim, it is wise to examine the causal connection (or lack thereof) between the claimant’s injury and his or her employment. “In evaluating the compensability of a claim, it is wise to examine the causal connection (or lack thereof) between the claimant’s injury and his or her employment.” 5 South Carolina State Accident Fund “At Work Since 1943.” Safe-mail Fourth Quarter 2012