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The trucking industry can benefit from addressing ways to lower these costs, especially in the current economic environment. Simply relying on lower Workers' Comp rates isn't enough. Complacency will lead to higher Workers' Compensation costs and any savings employers thought they were accruing will be lost when injuries go up and their Experience Modification Factor goes up right along with it.
The higher rates can be attributed in part to several factors. Because of the nature of their work, many drivers are out of shape, eat badly, smoke too much, don't exercise and rarely get enough sleep. As a result, they find themselves susceptible to heart attacks and diabetes, as well as a myriad of strains, sprains and various other muscular-skeletal injuries. This not only makes truckers a danger on the road but also a danger to themselves, to the point that more and more of them are finding themselves mired in the Workers' Compensation system, and driving up employer's costs.
Still, there are steps the trucking companies can take to keep their Workers' Compensation costs in line. Here are six ways that can point them in the right direction.
1. Make sure the insurance agent knows how Workers' Compensation works. Although many brokers and insurance agents view themselves as “experts” in the trucking industry, very often they don't understand the ways in which a trucking company can lower and control Workers' Compensation costs. Workers' Compensation insurance is extremely controllable, yet employers pay for the policy and little or nothing is done by the insurance agent over the policy year to help the organization lower those costs.
An insurance professional trained in Workers' Compensation can assist with injury management, return-to-work programs, open claim reserve reviews, audit reviews, loss control and safety practices and offer OSHA assistance. All require expertise and careful monitoring but are proven practices in reducing costs.
2. Watch for Misclassification. Time and again, I come across instances where employees have been misclassified by the ratings boards. I see trucking companies that drive strictly short haul, but have all their drivers classified as long haul, which drives up costs considerably. Recently, a trucking company was overcharged $15,000 because the broker failed to make sure the proper Workers' Compensation class codes had been assigned to the company's employees. Employers need to make sure the agent reviews the National Council on Compensation Insurance (NCCI) codes to avoid overpaying for their Workers' Compensation insurance.
3. Understand how the Experience Modification Factor works. One of the most confusing components of an employer's Workers' Compensation policy is the Experience Modification Factor.
The Experience Modification Factor is an adjustment that's made to the Workers' Compensation premiums based on the company's prior three years payroll and incurred losses. In effect, it compares a company's losses with other companies of a similar size in the same industry (in this case, the trucking industry). For instance, if the Experience Modification Factor is over 1, the company's losses are more than expected and they will pay more; if it is under 1; they have fewer losses and will pay less.
Most employers understand that if they have a lot of injuries, their Experience Mod will go up. And if they reduce or eliminate injuries, their costs will go down. At a basic level, this is correct. But there's still more that can be done to control the Experience Modification Factor.
It is crucial that management and supervisors understand that insurance companies don't pay for workplace injuries, their company does, and the Experience Modification Factor influences what their company pays. It is amazing how many trucking companies have no idea what workplace injuries are associated with which employees, the number of modification points attributed to each injury, the annual increase in premiums due to specific injuries, or even what the cumulative increased premium cost is over a three-year period, which is how long a claim impacts the Experience Modification Factor.
It should be every employer's goal to strive for the lowest possible Experience Modification Factor. The agent's responsibility is to show the company how much lower their Experience Mod could be and how to attain it.
4. Open claims impact your company. Every open claim counts against the Experience Mod, as if they were actually paid out. It's important that once claims are closed that they be reported immediately to the governing agent. If this isn't being done, chances are very good the Experience Mod is higher than it should be.
5. The trucking industry needs to get itself as healthy as possible. Study after study shows that obesity leads to a higher frequency of Workers' Compensation claims in every industry, with the trucking industry among the leaders.
According to the 2006 Large Truck Crash Causation Study, 88% of the critical reasons for accidents are attributed to drivers as opposed to vehicle failure, weather, and other conditions. And of that number, 15% fell into the category of “non-performance” issues, which are drivers falling asleep, having a heart attack, or being disabled by some other physical impairment. According to a recent Associated Press story by Emily Fredrix, the answer is quite simple; “Many truckers are obese, and only about one in 10 gets regular aerobic exercise. Sleep apnea, which is linked to obesity, is rampant, too.”
Ultimately, the burden falls on the employer to be more pro-active in taking part in the wellness of their drivers, to make sure they get proper medical treatment and to help keep their drivers in shape. If employers implement work-based wellness programs that address such issues as sleep apnea, high-cholesterol, high-blood pressure, and weight-loss programs, the result will be a drop in Workers' Compensation claims.
6. Implement pre-employment testing. According to the latest regulations from the Federal Motor Carrier Safety Administration, a driver must not operate a commercial motor vehicle unless he or she is medically certified as physically qualified to do so. So how do you know if they are fit, or aren't coming on board with a pre-determined condition or injury?
Each state addresses the aggravation or exacerbation of a pre-existing condition differently. In most states, if the on-the-job injury (a driver injures his back climbing into a cab) aggravates a pre-existing condition, it is considered to be a part of the payable injury, based on a physician stating it's within a “reasonable medical probability” that the pre-existing condition was aggravated by the driver getting into the truck.
But some states have adopted a different way of determining on-the-job injuries from pre-existing conditions by incorporating a provision called major contributing factor. This means that for an accident or aggravation of a pre-existing condition to be payable, the condition being treated by a doctor has to be at least 51% related to the on-the-job injury.
Another tricky area of pre-employment screening is determining if the job applicant has a history of filing Workers' Compensation claims. Under the Federal Americans with Disabilities Acts (ADA), employers cannot inquire about past Workers' Compensation claims, nor can they refuse to employ someone who has filed past claims or whose disability or impairment has no bearing on whether or not they can perform the essential tasks of the job. This means that someone can't be denied a job to drive a truck just because his or her left leg is two inches shorter than the right. The job interview can only determine if the person can perform essential job functions, with or without reasonable accommodation.
In the end, it's important for the employer to take all steps necessary to make sure they hire the right person for the job. Once companies understand that they, and not the insurance companies, are paying the freight on employee injuries, then driving down injury-related costs will take on increased importance.
But before that happens there has to first be a drastic shift in the “accidents happen-- that's why we have insurance” mentality that permeates most trucking companies. From the supervisors on down to the employees, it's critical that everyone in the organization be aware that it's the employer's money being spent, not the insurance company's.
Carl Zeutzius is a Certified Work Comp Advisor (CWCA) and Director of Sales and Marketing for UNICO Group, an independent insurance, risk management and financial services group based in Lincoln, Nebraska.
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