Moore: A Few Suggestions for Post-Pandemic Workers' Comp Budgeting

Thursday, December 21, 2023 | 0

In a Zoom meeting with a client, the CFO had thought about the best way to set the company’s workers' comp budget. The CFO had set the budget for pre-pandemic numbers (2019) with an added percentage for increases in wages. The client was in a large-deductible program.

James Moore

From that conversation, I decided to list a few suggestions on how to adjust workers' comp budgets. These suggestions are not state-specific. Some of the suggestions will also apply to self-insureds.

In 2009-2011, during the beginning of the financial crisis recovery, some of the same questions were popular.

Workers' comp budgets in a new era

Employment and wage forecasts are now super-critical.

If your company grows/recovers quickly, then be prepared for a large workers' comp bill at the end of the policy year. A balancing act may be necessary. Do not let your company experience a huge premium audit bill that is due soon without the funds available to at least enter into a payment agreement with the carrier.

Alternatives are always available.

Alternative programs such as PEOs, rent-a-captives, large deductibles, self-insurance and other viable options are out there if your company wishes to explore them. Hearing that an employer has found its “one” best option always makes me ask if it explored all the options.

Always keep searching, even if you have recently renewed your workers' comp policy or third-party administrator agreement.

Safety still rules all workers' comp budgets

Two large companies that were very committed to safety each have experience mods of .85 or lower. Two major developments are caused by great safety programs when searching for a policy:

• .85 or lower means more carriers are interested in covering your company.
• 15% discount built into your program.

Any insurance carrier, TPA, risk management, rating bureau, etc., personnel will always say that safety is key — because it is. Some insureds decided to roll back their safety budgets during and just after the pandemic. I am reviewing their claims loss runs online due to a spate of injuries.

Many of the injuries were caused by a worker’s unfamiliarity with the job function he is now performing, or a new task assignment. The adage "90% of accidents happen the first time you use something new" looks very familiar when reviewing the accident reports in the claims loss run/reserving review.

Resources for assistance in reducing your comp budget

Many times, I am asked about where the employer can receive help in reducing its budget. I always list:

• Many agents, carriers and TPAs have resources such as loss prevention and other free services.
• Industrial commissions, state departments of labor and ombudsman offices.
• Associations that your company has joined can be great for finding policy sources.
• Some rating bureaus have two-minute explanation videos or provide teleconferences at least monthly.

Also, I may not know the answer, but I can refer you to someone who does.

Workers' comp budgets may not always be on the front burner until the premium audit bills arrive from the carrier or the TPA.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.