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Correcting Workers Compensation Billing Errors

Employer premiums for workers comp insurance can be costly, even prohibitive. But fixing some common billing problems can dramatically reduce costs.

Phillip M. Perry (Jun/Jul 08)
(page 2 of 2)
Report Injuries
Because workplace injuries affect workers comp premiums, many employers are tempted to avoid reporting accidents. That's bad. "Failing to report a workplace injury is illegal in virtually every state," warns Ron Peters, a partner in the San Jose office of Littler Mendelson, the nation's largest labor and employment law firm representing management.

There are two reasons for the illegality, says Peters. First, the states feel that injured workers have a right to receive benefits at a level which may be higher than what employers would provide without legislative mandate. Second, the insurance industry needs to have a realistic way of measuring risk for the purpose of setting adequate premiums.

There is an exception, however: You need not report minor injuries that require only first aid.  "If you are in the habit of reporting `first-aid only' injuries, then you may end up paying higher premiums than necessary," says Peters. While such over reporting may seem counterintuitive, the fact is that employers are often tempted to do so out of fear that what appears to be a minor injury may turn into something more serious. "Employers can get nervous because sometimes it's not easy to identify a serious injury," he says.

Shop for a Deal
When it comes to workers compensation insurance, shopping around can make a huge difference in premiums. "One of my clients recently experienced a 30 percent drop in his workers comp premium, even though his payroll had increased by eight percent," says Simmonds. "He had not been shopping around for over six years and didn't realize that new insurance carriers had entered his market offering lower rates. Suddenly his current insurer, afraid of losing a good customer, lowered his rates because of competition."

Your short list of candidates can include carriers who have sold similar goods to others. "Talk with friendly competitors," suggests Simmonds. "Find out who they are doing business with."

Prudent shopping means comparing brokers as well as carriers. "The broker you choose can make a big difference," says Priz. "Some agents give the impression they can access the whole market and get quotes from all kinds of insurance companies, but that may be misleading. Often agents have contracts with only a handful of companies and can really only market to those. As a result, you might not get the best fit. So you need to talk with several different insurance agents to make sure you are thoroughly covering the available options."

There's one last weapon in the cost-cutting arsenal: insurance policies with high deductibles. Not all states allow such policies, however. And even in states that do, not all insurance carriers sell them. Again, shop around.

The cures for high workers comp premiums vary by state. Be sure to check with your local chamber of commerce, which may already be involved in a lobbying program with your state legislature. If workers comp is a continuing irritant, the prudent employer can keep a lid on premiums by taking some rational steps.
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