Top 5 Workers’ Compensation Expense Reduction Strategies

“An Ounce of Prevention is worth a Pound of Cure.” Benjamin Franklin’s words from more than two centuries ago are just as relevant today. Thanks to current market conditions, employers have a prime opportunity to apply Ben’s principle to their workers’ compensation and risk management programs.

The national workers’ compensation rate trend that began in 2013 will continue its gradual decline in 2016. This is evidenced by the 1.9 percent average decrease in loss costs (pure rates) approved by the Colorado Division of Insurance for 2016. While this is certainly good news, it is a trend worth monitoring as medical inflation and wages are expected to continue rising. A relatively soft workers’ compensation market is an ideal time to re-evaluate risk management best practices to ensure your business is capitalizing on the favorable market conditions that exist, while preparing for the market shift that will eventually occur.

There are many direct and indirect factors contributing to an employer’s workers’ compensation total-cost-of-risk. This article is intended to provide a high-level overview of the top five industry best practice strategies that produce the most impactful expense reduction outcomes when developed, implemented, and monitored effectively.

  1. Risk Control
  • Maintain and Effectively Communicate Organization’s Safety Program
  • Establish Safety Committee and Coordinator
  • Conduct Effective Accident Investigations
  • Provide Relevant Safety Training and Employee Education
  • Perform Regular Safety Program Audits
  • Initiate Proactive Compliance Preparation
  1. Claims Management
  • Vet and Partner with Medical Providers
  • Establish Injury Handling Practices
  • Ensure Timely Claims Reporting and Investigations
  • Develop Efficient and Effective Return to Work Program
  • Conduct Regular Claim Reviews and Trend Analysis
  1. Risk Analytics
  • Complete Annual Experience Modification Factor Audits
  • Perform Deductible/Retention Optimization Study
  • Explore the ROI and NPV Results of Various Alternative Risk Financing Options
  • Evaluate Various Program Design Elements
  • Consider Premium, Claim, Deductible/Retention and Return Allocation Modeling
  1. Program Design
  • Conduct Annual Classification Code Audits and Payroll Reviews
  • Require an Annual Review of Program Structure Optimization
  • Achieve & Maintain Cost Containment Certification
  • Ensure Carrier Discount and Credit Maximization
  • Participate in Periodic Broker, Carrier, and Third-Party Vendor Partnership Selection Process
  1. Human Resources
  • Maintain Consistent Hiring, Onboarding and Termination Procedures
  • Develop Job Descriptions and Specific Job Tasks
  • Perform Ongoing Employee Training and Education
  • Assemble An Effective Internal and External Risk Management Team
  • Implement Claim Reporting Best Practices
  • Actively Control Medical Costs
  • Engage in Regular and Effective Employee Communication

The above should not be considered in isolation, but interconnected and deployed in concert to achieve superior results.

For support with your organization’s workers’ compensation, safety, or risk management needs, the MSEC Risk Management team is here to help. In addition, MSEC’s discounted workers’ compensation dividend program is specifically designed to assist our members with reducing costs, improving safety and providing superior claim outcomes. For additional information visit, or contact us at