Evaluating Your Insurance Options
It’s Time to Take a Closer Look at Workers’ Compensation

By Timothy Salzsieder, CIC, CRM

While the New Year ushers in optimism for an improving economy and increased sales and business activity, it also comes with the reality of increased health, benefit, unemployment and workers’ compensation costs. Business owners and financial and human resource executives need to periodically evaluate their insurance options to mitigate rising costs.

Most business owners are aware of the changing landscape on the group health insurance side, but many are not aware of the 7.8% increase in FL workers’ compensation rates effective January 1st. While a lot of publicity and attention has justifiably been directed towards increasing health insurance rates, Florida’s increasing workers’ compensation rates have gone largely unnoticed.

History
In 2003, Florida had some of the highest workers’ compensation rates in the country which negatively impacted businesses. Florida implemented major changes to the workers’ compensation system to provide relief to business owners. Major changes included revising eligibility standards for disability benefits, setting limits on attorney fees, and revising medical fee schedules. The impact of these changes was a dramatic success with a 63.2% decrease in average rates through January of last year.

The 7.8% increase in workers’ compensation rates effective January 1st is significant from the standpoint that the pendulum now appears poised to swing in the same direction as health insurance rates. Similar to health insurance, medical costs continue to escalate, pressuring loss costs which are measured by NCCI (National Council on Compensation Insurance), the largest provider of workers’ compensation and employee injury data in the nation.

There are several ways to combat increased workers’ compensation insurance costs whether you maintain and manage your own policies or whether they are bundled with other services such as payroll and health insurance through an employee leasing or Professional Employer Organization (PEO) firm.

Loss experience can have a great impact on your premium and is measured in relation to your firm’s peer group via an experience modification factor. A factor of 1.0 is average (unity experience modification factor). A credit or debit factor is applied based upon your individual loss experience.

The control of implementation of a documented safety or drug-free program can provide several benefits for business owners and employees. Aside from the compliance aspect, a documented safety or drug-free program communicated by top management can help to establish positive rapport with employees by showing commitment to maintaining a safe and healthful workplace. Additional credits can be applied to workers’ compensation policies as a reward for having safety and drug-free policies in place.

Are you receiving a dividend from your workers’ compensation carrier as a result of favorable loss experience? The competition for Florida workers’ compensation business is intense with many carriers rewarding clients with favorable loss experience. As an employer with a dividend plan in place, you have the opportunity to recoup a portion of your premiums based on your individual loss experience.

If you are with a PEO or leasing firm, you may not be receiving a dividend, and consideration should be given to separation of the individual components of a bundled program. Separating or breaking out the payroll from the health and workers’ compensation insurance can provide substantial benefits including reduced costs and the opportunity to receive workers’ compensation dividends.

The beginning of the year is an ideal time to evaluate your insurance and payroll options as the impact of wage base limits are muted. Additionally, many workers’ compensation carriers offer “pay as you go” features which can be linked to payroll firms to provide continuity and a seamless administrative program which can provide you with the benefits of maintaining your own workers’ compensation policy.

We encourage you to evaluate your insurance options to mitigate escalation of cost increases.

About the Author
Timothy Salzsieder, CIC, CRM, is Sr. Vice President of Hockman Insurance Agency, Inc.(www.HockmanInsurance.com) a commercial property/casualty insurance agency based in Tampa, FL. Salzsieder works with business leaders to reduce their cost of risk and has almost 20 years experience in the commercial insurance industry with premier national firms on both the carrier and commercial insurance brokerage sides of the business. Hockman Insurance will celebrate 50 years of business success in 2011.