Workers’ compensation insurance has a long tail. In other words, if one of your employees gets injured, the insurance company must set aside or “reserve” a certain amount of money to cover a workers’ comp claim until it is closed. How an insurance company reserves is a question staffing companies frequently asks me. It matters because a serious injury to one of your employees will require a higher reserve and will probably increase your rates or cause you to be cancelled by the company. Remember it may take a couple of years to settle the claim so while the claim in “open” your rates will be negatively impacted. Here are some factors carriers consider when evaluating claim reserves:
- Fee schedules and ceilings on care. Some states have fee schedules and limits on types of care, such as chiropractic. This tends to make the cost more predictable. Other states do not.
- Permanent and temporary disability and lifetime medical. These are expensive items for which to reserve. Some states are more generous than others for disability and formulas vary. Future medical is affected by a number of factors including age.
- Vocational rehabilitation. Depending on the severity of the injury, some kind of rehabilitation may be required, so an injured worker can return back to work. This requires expenses associated with accommodating the employee in the workplace or assistance in finding new employment.
- By knowing these factors, a professional employer organization (PEO) can give you an estimate on how much an injury will affect your experience modification.
Since Professional Employer Organizations (PEO) tend to work with you as a business partner (versus simply as an account on a profit loss statement) they will work hard with you to keep reserves to a minimum, and get your claims closed as soon as possible.
Please call us for a FREE workers’ compensation quote at 202-302-1212. Or visit us as www.StaffingCompSolutions.com.
All the best
President-Work Comp Staffing Solutions