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HOUSTON -- If you want to get management's attention about high workers compensation costs, try telling them they're paying employees not to work.
That strategy worked at TOTAL America Inc., a Houston-based holding company parent for the North American units of French oil company TOTAL.
Given the responsibility in 1994 of handling insurance duties for the 14 diversified manufacturing units in North America, Patti E. Carroll says part of her charge was to bring down rising workers comp costs.
When some of the reasons for those high costs became clear, the statement that made management sit up a little straighter in their chairs was, "We're paying our employees not to work for us," Ms. Carroll said.
That set TOTAL America on the road that led to a consultant who showed the company how to focus on several critical areas where workers comp dollars were falling through the cracks.
Speaking at the I-Day meeting earlier this month sponsored by the Houston Chapter of the Risk & Insurance Management Society Inc., Ms. Carroll said she first enlisted her broker to help identify areas where TOTAL companies were bleeding workers comp money.
"We did realize pretty readily that we had a problem," said Fran Neahusan, vp with Aon Risk Services of Texas Inc. in Houston and a panelist at the conference session. Workers comp expenditures were "much higher than they needed to be or we wanted them to be, and we began looking for a solution," she said.
Together with TOTAL America, the broker developed a list of criteria for finding a consultant to develop a comprehensive program that would bring down costs for all the diversified operating companies.
They settled on The Guilford Group, a workers comp management services firm
based in Baltimore. Guilford's approach was to find ways to lower indemnity costs in areas the consulting firm believed the employer had the best chance of saving money.
Betty Noble, chief operating officer at Guilford, pointed out that 45 cents of each workers comp dollar spent goes to providing care to injured workers. The biggest chunk -- 55 cents -- "goes to pay them not to work," she added, "regardless of the type of insurance program you have."
Where self-insurance is allowed, the workers comp costs may be "right out of your pocket," Ms. Noble pointed out. With commercial insurance, the payments come from the insurer. But "some way or another, these costs are hitting you, either directly or indirectly," she added.
"On the indemnity side. . .that's where we believe the employer has the most control," Ms. Noble said. That philosophy is a little contrarian, she said, with conventional wisdom in recent years emphasizing holding down medical costs associated with workers comp.
In TOTAL America's case, Guilford and TOTAL America determined that indemnity costs could be controlled if the problems of lost-time days, open cases, repeat injuries by the same workers and late reporting were addressed. They are problems common to many other companies, according to Ms. Noble.
"You would really be surprised," she said, "at how many companies have scores and scores of open cases" of which they are not aware. In some cases, workers have been terminated months after an injury and still continue to receive workers comp payments, Ms. Noble noted.
Guilford offered to TOTAL America the advice it gives other clients who want to bring down costs related to lost-time days. Lowering lost-time days means staying close to workers after an accident and getting them back to work quickly, according to Ms. Noble.
She pointed out that Guilford research shows that an injured worker who is off the job for 12 weeks has only a 50% chance of ever returning. "Life becomes very easy, especially if you're getting paid while you're home. . . .We really believe you need to catch people in that first week or two" to get them thinking about returning to work in some capacity, Ms. Noble said.
She also pointed out that Guilford works with health care providers to make sure they see injured workers quickly and focus on returning them to work.
If a worker is injured and needs to see a doctor right away, Guilford asks physicians to see the worker within 20 minutes of arrival at the doctor's office. "If you send a guy from your facility over to a medical center to get his hand stitched, wouldn't you like him to be back at work in an hour and a half? Fairly reasonable. Sometimes they go over there and sit in the waiting room for three hours, then they're finally stitched up and they go to Burger King on the way back. They see you for the last 15 minutes of the shift."
If a worker needs a specialist, Guilford asks that the worker get medical attention within 24 hours. Without such a stipulation, it's not uncommon for appointments to take up to four weeks, Ms. Noble said. During that time, an employee is being paid to sit home and wait to see a doctor, she pointed out.
Persuading TOTAL America companies to make the changes Guilford suggested was no easy task, according to Ms. Carroll. While she was given the responsibility to suggest the changes, she had no real authority to demand that the companies adopt them.
That meant she had to assure each company the idea was to enhance what it was doing, not replace it. For example, while the companies professed to have return-to-work programs, all the programs needed fine-tuning, Ms. Carroll said. Some weren't creative about how to bring workers back before they were totally recovered from their injuries, she said.
"So be prepared," Ms. Carroll warned. "This is not an easy task but certainly a worthwhile one."
For TOTAL America, the payoff came after the program had been in place for a year. The companies as a whole -- excluding one that is still being addressed -- have seen a 60% reduction in the number of lost days. Tracking repeat injuries and making changes so they don't happen again has reduced by 30% the number of those repeat mishaps. Workers comp reserves have been lowered by 15%.
"Paid losses are up a little bit because we've been aggressive about closing the claims," Ms. Carroll said. "But the long-term liability is coming down."