What's the ROI on RTW?

It’s no surprise that claims-people like to use acronyms and abbreviations.  It’s as if we’ve got our own language…TTD, IME, PPD, IRE, RTW, ABC…just kidding with that last one, but it’s plausible.

The knee-jerk response of any business owner when asked to bring someone back to modified duty is typically, what’s this going to cost me?  It is important that employers understand what their potential return on investment is with a return to wellness (or, as others call it, return to work) program, but that is only part of the picture.  Examining the opportunity costs associated with modified duty will help an employer/business owner make the best decision, for their business and their employees.

What’s the return on RTW programs?
A 1993 study conducted by Crawford & Company estimated returns ranging from $8-10 for every $1 invested in a RTW program.  This same study noted an overall reduction in WC costs of 54%.

Roto Rooter Services Co. experienced a reduction in incurred WC losses from $1.4 million to $356,000 in one year, which was largely attributed to their RTW program¹. 

Gibson Greetings’ RTW program reportedly reduced their incurred WC losses from $400,000 to less than $50,000 the following year¹.

The RAND Institute (2010) published a working paper which examines the effectiveness of RTW programs.  The study suggests that for large employers, RTW programs are highly effective at reducing duration of absences due to work injuries, resulting in about a 3.6 week reduction in the median number of weeks away from work for an injured worker.²

Obviously, individual companies will experience varying results.  These statistics represent case studies that are likely not applicable to every industry nor every employer. 

What is the cost of doing nothing?
Without going into the nitty-gritty of calculating experience modification factors (if you’re a glutton for punishment, you can learn more on this by going visiting your state’s compensation rating bureau), the higher your experience mod is, the higher your premium calculation will be.  A credit score is used to assess a creditor’s risk when lending you money.  Similarly, an experience modification factor is used, among many other factors, to determine an insurer’s risk of insuring your company for workers’ compensation insurance.

The impact of a RTW program, or not having one, will depend on what type of policy you have.  If you’re an employer with a large deductible, you will see more “immediate” savings than someone on a guaranteed cost policy.  If you’re an employer who has a retrospective rating plan, then you have an incentive to lower your claims – a dividend! 

These are the direct costs associated with insurance premiums.  Consider your profit margin.  Think about how much more you would have to sell to offset a WC premium increase of $10,000.  Now, reconsider the cost of offering a few hours of modified work per day for 6 weeks.  There’s an opportunity for even greater savings in some states when a claim remains medical only as opposed to becoming a lost-time claim in regards to your experience modification factor.

We haven’t even discussed the indirect costs associated with having an injured worker out of work…lost productivity, decreased employee morale, increased potential of illegitimate claims, increased turnover, increased injury rates, increased costs of overtime, increased health insurance costs…  We’ll save that for another post.     

References:
1.   Friedman, S. (May 8, 1995).  Back-to-work WC programs pay big dividends.  National Underwriter, 99(19), 3;26.
2.   McLaren, C., Reville, & Seabury, S. A. (March, 2010). How effective are employer return to work programs? (Working Paper No. WC-745-CHSWC).  Retrieved from RAND http://www.rand.org/content/dam/rand/pubs/working_papers/2010/RAND_WR745.pdf.

Hold your fire!

Things to consider before you terminate an injured worker who is receiving workers' compensation benefits.

Please note, we are not employment/labor law specialists, nor do I play one on tv -- this post should not be construed or used as legal advice on how to handle employee terminations, it is simply an attempt to make employers aware of the impact a termination may have on their workers' compensation program.  Now we've got that covered...

Don't terminate an injured worker simply because you [think you] can't accommodate their restrictions

Often times an injured worker is given challenging restrictions that an employer believes they cannot accommodate.  The employer sees no possible way of bringing the injured worker back to work, but somehow temporary restrictions result in a long-term action.  The injured worker served a key role in their operations, and they need to replace him. 

I see two problems with this line of thinking.  Problem #1:  The employer has assumed that the injured worker can do nothing.  That is contradicted by their release to return to work -- the doctor is stating that they can do something, albeit not their pre-injury job.  I implore employers to take 45 minutes (not even an hour) to sit in a room and come up with 5 examples of modified duty work the injured employee could perform.  Act as if your livelihood depended on it, because in some cases it does.

Example:  The employer values the employee's contributions, but needs someone to help pick up the slack.  So, while you have Joe working to make up for Maria's work, can't you have Maria help out with some of Joe's duties?  Or, perhaps you need to bring in a temporary worker -- there is a learning curve which equates to lost production, increased hours, increased error rates or declining piece rates -- use Maria's skills and knowledge to help train her temporary replacement. 

To push oneself or self-protect oneself, that is the question...

...asked by many older workers.  Many of us have asked ourselves the same question, whether it's a choice between taking the stairs or the elevator, doing that extra set of reps at the gym, or getting out of bed after pulling a back muscle.  It is also likely that the decision you would have made at age 20 is not the same decision that you would make at age 45. 

What factors go into making these decisions?  More importantly, how can employers and insurers use their understanding of this decision making process to improve the outcomes of WC claims for their older employers?

Permanent Restrictions - the ultimate challenge

Cartoon Source:  Safety.BLR.com

SCENARIO:  As an employer, you've been cooperating with providing modified duty within the injured employee's work restrictions.  Despite the challenges, you've made it work.  And then you receive notice that the injured employee's work restrictions are permanent.  What is a mason who cannot lift cinder blocks all day going to do?  What could a dietary aide worker do who cannot feed patients possibly do?  How about the delivery truck driver who has never done anything but deliver auto parts?

Consider the following ideas as options to resolving your most challenging RTW opportunities:

Why offer RTW in a "Permanency" state?

A permanency state is a jurisdiction (state) that awards monetary compensation which reflects a functional loss of a particular body part (or parts).  Each state has a pre-determined method for calculating the amount (typically in weeks) of which a particular body part is valued.  In most instances, permanency evaluation is based on a percentage, or a number of degrees, of impairment.  Permanency is not valued until an injured worker is at maximum medical improvement (MMI). This is determined by a physician, who opines that the injured worker (IW) will no longer improve with additional medical intervention.

In permanency states, it is often assumed that the goal is to get the injured worker to MMI, get their rating, and get it resolved.  This is not always the best way to go.

The benefits of offering work as a therapeutic tool are illustrated by the following scenario:

IW sustains a shoulder injury requiring surgery.  MMI is projected 3-6 months from the surgery date.  The employer wants to hurry the claim along and get the IW's rating to close the claim.  The claim representative realizes that the IW's rating after 12 weeks post-op will be significantly impacted by the IW's inability to lift more than 25 lbs. overhead. The employer states they cannot permanently accommodate these restrictions. The claim representative has a discussion with the employer about bringing the IW back to work modified duty.  The IW returns to modified duty and receives the benefits of being physically active at work (within the prescribed restrictions).  As the IW continues to work, their restrictions become less stringent.

After working for another 3 months, the IW is deemed at MMI and receives their permanency rating, which is now based on the IW's ability to lift 50 lbs. overhead.  The increased lifting ability significantly reduces the amount of the IW's permanency rating.  This also reduces the Employer's claim costs, provides a productive employee, and increases morale around the workplace.  The IW improves physically, returns to earning their pre-injury wages, is motivated by their increased physical abilities and feels like a valued member of the workplace.

How is this not a win-win for everyone involved? 

Need to start a Return to Wellness program in your workplace?  Visit Eastern Alliance Insurance Group's website to download a RTW program or a guide to build your own.