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Reduce Workers' Compensation Costs

By Robert W. Seltzer and Steven A. Stramara
June 28, 2007

How do we keep score in Workers' Compensation? Typically, insurance carriers provide 'top-of-the-line measurements,' such as total number of claim dollars spent in a given year, average claims costs for medical-only claims and average claims costs for lost-time claims to employers. They may even break down some injury costs by department.

Not surprisingly, these metrics drive decisions. They become goals and measures of success. In fact, metrics on claims costs have become so predominant that companies often reward their employees based on them. If injury costs go down in a department, it is a good thing ' and supervisors and employees are rewarded. If they go up, it is a bad thing and corrective action is needed.

Unfortunately, this focus on total claims cost from one year to the next is incomplete and shortsighted. It fails to recognize or measure what is driving the claim costs. If the average medical cost per claim increased, was it simply a matter of medical inflation or did it have anything to do with something the employer could control? If it went down was it luck or a result of the employer's actions? What is needed are tangible and measurable metrics of factors driving claims costs. This focus has several advantages. First, it inherently takes a long-term view enabling employers to understand the underlying circumstances and conditions that are driving up work-related injury costs. Second, it isolates measures of the value of the employer's actions. This approach is much more than a difference in semantics; it not only will drive decisions in a different direction but it may also entail significant changes in an organization's management of Workers' Compensation.

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