WC O

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Workers Compensation Basics
Disclaimer These safety materials, resources and
PowerPoint presentations are not intended to
replace your company's health and safety policies
or to substitute for specific state and federal
standards. We do not guarantee the absolute
accuracy of the material contained within these
resources. Please refer to applicable state and
federal standards for regulatory compliance.
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Workers Compensation Overview

• Brief history
• Purpose
• Structure of policy
• Premium components
• Experience rating
• Controlling costs

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History

• Spindletop erupted in 1901
• Transformed Texas economy
• System created in 1913
• Employers can opt out

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History

• System declared broken in 1987
• Texas Workers Compensation Act passed in 1989
• System revised in 2005
• Networks authorized

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Workers Comp Today

• State-regulated
• No-fault
• Protects employers, employees

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Policy Structure

• Workers compensation coverage
• Pays benefits to injured workers
• Provides for lifetime benefits if necessary
• Employers liability coverage
• Protects employers from lawsuits
• Gross negligence exception

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Premium Considerations

• Exposure
• Safety program
• Loss experience
• Experience modifier (E-Mod)

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Purpose of E-Mod

• Adjust premium to reflect loss experience
• Reward good experience
• Penalize bad experience
• Incentive to encourage return-to-work
• Incentive to reduce losses

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Basic E-Mod Formula

• Actual Losses (Anytown Drillers)
• Expected Losses (all drillers)

E-Mod
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Base Premium
Class code Description Rate Payroll Base premium
6216 Drill site prep 8.64 500,000 43,200 (8.64 x 5,000)
8810 Clerical 0.29 250,000 725 (0.29 x 2,500)
Base premium 43,925 (43,200 725)
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Impact of E-Mod on Premium
Company Base Premium E-Mod Final Premium
A 43,925 1.00 43,925
B 43,925 .70 30,747
C 43,925 2.00 87,850
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Reduce Your Costs Prevent Accidents

• Identify and control hazards
• Conduct a thorough review
• Use job safety analyses
• Secure management commitment
• Establish employee accountability

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Reduce Your Costs Prevent Accidents

• Teach safe behaviors
• Start day 1
• Follow up
• Take a walk
• Stress accountability

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Reduce Your Costs Prevent Accidents

• Track trends
• Work toward constant evolution
• Watch for problem areas
• Remember near misses

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Reduce Your Costs Prevent Accidents

• Identify and address root causes
• Investigate accidents and near misses
• Dont mistake symptoms for root causes
• Remember the goal

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Reduce Your Costs Manage Claims

• Direct costs paid by carrier
• Benefits paid to injured worker
• Other costs associated with handling and
  processing claim

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Reduce Your Costs Manage Claims

• Indirect costs paid by employer
• Repairing damaged equipment
• Hiring extra help
• Lost production
• 2x direct costs (2/1)

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Direct costs
Indirect costs
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Reduce Your Costs Manage Claims
Direct cost 5,000
Indirect cost 10,000 (2/1)
Total cost 15,000
At a 4 profit margin, additional sales necessary to cover At a 4 profit margin, additional sales necessary to cover
Indirect costs 250,000
Total costs 375,000
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Reduce Your Costs Manage Claims

• Reduced revenue reduced operating capital
• Delay in equipment updates
• Reduction in salaries
• Lack of raises
• Elimination/reduction in safety incentives

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Reduce Your Costs Return-to-Work

• Whats in it for employers?
• Reduce costs
• Maintain production
• Promote employee morale

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Reduce Your Costs Return-to-Work

• Whats in it for injured workers?
• Make more money
• Recover faster
• Steer clear of the disability mindset
• Maintain job skills

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Reduce Your Costs Networks

• Network goals
• Improve care
• Focus on return-to-work
• Control medical costs

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Reduce Your Costs Safety Groups

• Safety groups offer
• Specialized safety programs
• Dividend potential
• Premium discounts

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Workers Compensation Recap

• Workers compensation basics
• Covers injured workers medical expenses
• Replaces a portion of lost wages
• Protects employers from unlimited liability
  exposure

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Recap

• Remember
• Loss experience affects cost
• Employers can control costs
• Report all accidents

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Questions?
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