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Trend of cutting benefits for part-time workers may add to workers comp costs

Trend of cutting benefits for part-time workers may add to workers comp costs

With employers such as Wal-Mart Stores Inc. reducing their costs by cutting health insurance for part-time workers, workers compensation and safety experts worry that uninsured part-time workers may drive a spike in the frequency of comp claims and reduce the savings on group health plans.

Experts say employers should provide adequate safety training and support to help part-time workers avoid accidents that lead to comp claims, as well as provide information about obtaining health insurance outside their employment.

“If you don't invest in safety, then you're throwing a lot of money out the door,” said Duane R. Grange, Springfield, Oregon-based safety and human resources director of temporary staffing firm Selectemp Employment Services.

Wal-Mart announced last week that it will stop providing group health benefits for part-time employees who work less than 30 hours a week effective next year. The retailer, on its blog, attributed the decision affecting about 30,000 employees to rising health care costs.

Wal-Mart's moves, which include higher premiums next year for employees who do qualify for insurance, bring it in line with other major retailers such as Target Corp., The Home Depot Inc., Walgreen Co. and Trader Joe's, according to the company's blog.

Wal-Mart did not respond to requests for comment.

Dave Hintz, technical manager of WorkSafe Services, a unit of Accident Fund Insurance Co. of America, said the Lansing, Michigan-based workers comp insurer is seeing more employers use a larger part-time workforce to reduce group health premiums.

“We've been exposed to some of it before, but we really are just starting to see some employers kind of looking into that,” Mr. Hintz said.

Pam Ferrandino, executive vice president and casualty practice leader at Willis North America Inc. in New York, said she's concerned the trend will lead to an increase in workers comp claim frequency nationwide since California's system is a bellwether for other states.

She pointed to an August report from the Workers' Compensation Insurance Rating Bureau of California, which found workers comp indemnity claims increased 19% in Los Angeles County and 14% in the Los Angeles Basin in the past three years, despite declines elsewhere in the state.

Bill Mudge, president and CEO of San Francisco-based WCIRB, said in late 2013 that rising frequency may be partly due to increased part-time employee hiring as a result of the Patient Protection and Affordable Care Act.

Ms. Ferrandino agreed that part-time hiring could be a factor in rising frequency of comp claims in the Los Angeles area, with many in the hospitality, agriculture, retail and manufacturing sectors.

“The good news may be that there's job growth again, and often new employees tend to have a higher accident or a higher frequency of workplace injuries,” she said. “But the other reason that could be driving it is the greater utilization in those industries of part-time workers.”

Safety experts say part-time employees may receive less safety and job training than full-time workers and often are less experienced and skilled at staying safe.

Ms. Ferrandino also said that using a higher number of part-time workers to cover a company's labor needs would mean more employees who could potentially be injured and file comp claims. A higher number of claims could generate higher workers comp prices for employers, cutting into cost savings on group health plans, she said.

“Increased frequency can increase your (experience modification factor), which can ultimately make your workers compensation costs go up,” she said.

George Boué, vice president of human resources at real estate development firm Stiles Corp. in Fort Lauderdale, Florida, said most part-time workers are motivated to make a good impression and become full-time employees at their companies. However, workers who are held back from becoming full-time to reduce health care costs may feel “bitterness” that would prompt them to work unsafely or file a fraudulent workers comp claim.

“That does not create a high level of trust with the employee and the company, and as such ... I think that there can be a greater propensity for either safety issues or workers comp claims,” Mr. Boué said.

Accident Fund's Mr. Hintz said part-time workers have some advantages over full-time workers, such as being exposed to safety hazards for fewer hours a day.

However, Mr. Hintz said some employers are unsure whether to provide the same level of job and safety training to part-time and full-time workers. He said companies should make sure all employees are engaged in a “daily safety focus” teaching them how to prevent injuries regardless of the number of hours worked.

“Safety is no less important just because they're working in a diminished capacity from an hourly standpoint,” Mr. Hintz said of part-time workers.

Selectemp's Mr. Grange agreed that companies that do not offer group health coverage to part-time workers should pay for proper safety training for such employees or risk higher workers comp costs.

Employers also should consider offering information to help part-time workers get health insurance so they don't turn to the comp system for primary health care, Mr. Boué said.

For instance, Wal-Mart said last week that it will work with Orange, California-based HealthCompare Insurance Services Inc. to “guide our associates through the process of finding the right, affordable health care.”

“Employers should not lose sight of how important health insurance is to employees,” Mr. Boué said.