Workers’ Comp Math Made Easy
How do you measure the effectiveness of your workers’ comp program?
The Loss Run
A loss run is a basic report that examines your total workers’ comp claim history, typically provided by your insurance provider. For smart small business owners concerned with controlling workers’ comp expenses, a loss run probably won’t tell them anything they didn’t already know; that’s because those small business owners are actively tracking workers’ comp claims already.
Yet many small employers have little understanding of workers compensation, how it impacts business, what they could be doing to get control of comp insurance costs. If that sounds familiar, continue reading.
A basic loss run will cover:
- Amount of open claims
- Cost of medical per claim
- Amount of other benefits per claim
- Total cost per claim
What You Should Be Looking For
A basic loss run is a straightforward measurement of what your workers comp program is costing you, but it is not going provide the insight you need to improve safety, reduce accidents, reduce claims, and ultimately lower your premium expense.
The only real way to sustainably lower your workers comp premiums, is to create the conditions for a safer workforce. That’s why information and collection of data is so important; the more you know, the more angles you have for examining your program, and the more opportunities you can uncover to improve the safety of your workforce.
To effectively measure your workers comp program you need to collect as much data as possible, to help you with meaningful analysis that may translate into dollars saved. So when building a resource for tracking your workers’ comp program, account for these valuable data points…
- Activities frequently resulting in injury
- How fast injuries are reported
- Use of personal protective equipment (PPE)
- Injuries involving certain equipment types
- Number of new hires with injuries claims
- Injury frequency under certain manager
- Injury frequency in specific work groups
- Accident-to-reporting time per claim
- Loss average per employee
- Claims per worker
- Claim resolution by medical provider
- Claim resolution by claim manager
- Claim types (medical vs. indemnity)
- Total rate of closure
- Claim delays
- Claim denial rate
- Average cost vs. industry
- Indemnity claims vs. medical claims
Tracking for the information listed above can tell you where your workers comp program needs improvement, and suggest solutions as to how to fix problems.
For example, if you take a look at your claim history and examine it for use of personal protective equipment, you might recognize a trend where protective gear was not used consistently, and that failure to use protective gear contributed to the severity of claimable injuries. Now, that information may suggest to you that employees are (a) not using certain protective gear, (b) are using it improperly, or (c) don’t have any protective equipment to speak of. Whatever the case, you’ve recognized a problematic safety issue and can set about correcting the improving the situation. In this way, you are controlling your workers comp expenses.
Alternatively, ask your insurer for deeper analyses. They should be willing to answer your questions and query data for the information you need the most. Loss control departments may perform analysis and offer recommendations that can help in your mission to control costs.
Basic Workers Comp Metrics
How Are Workers’ Compensation Insurance Premiums Calculated?
Base Rate X MOD (Experience Modifier) X Payroll (per $100) +/- Adjustments = premium
Cost Per Worker
Total Active Claim Expenses
Total Amount of Workers
Calculation establishes the expense of workers’ comp per worker
Total Indemnity Cost of
Total Number of Workers
Calculates indemnity costs for active workers’ comp indemnity claims per worker.
Medical costs per worker
Total Medical Expenses for Medical-Only Claims
Total Number of Workers
This calculation establishes the medical costs for active medical-only claims per worker.
Claim Incidence Metrics
Annual Claims per 100 Workers
Total New Claims
Calculates the number of new claims per 100 workers in a 12 month span.
Medical-Only Claims per 100 Workers
Total of New Medical-Only Claims
Total of Workers Covered by Comp
This equation calculates the number of new medical-only claims accrued over any period of time.
New Indemnity Claim Percentage
Total Number of New Indemnity Claims
Total Number of All New Comp Claims
This calculation reveals the number of new indemnity claims accrued over any period of time.
Expense Per Active Claim Metrics
Expense per Active Claim
Total Active Claim Expense
Number of Active Comps Claims
This calculates the cost of workers’ comp coverage per claim for any time period.
Cost of Indemnity for Indemnity Claims
Total Indemnity Costs for Indemnity Claims
Number of Active Comp
This calculation establishes indemnity cost per active workers’ comp indemnity claim.
Costs for Medical-Only Claims
Total Medical Costs for Medical-Only Claims
Number of Active Workers’ Comp Medical-Only Claims
This calculates the medical costs per active workers’ comp medical-only claim.
Cost Per Closed Claim Metrics
Cost per Closed Claim
Total Benefits Paid for Closed
Number of Closed Claims
Calculation establishes total cost per claim of workers’ comp coverage for any time period .
Indemnity Cost per Closed Claim
Total Indemnity Costs for Closed Indemnity Claims
Number of Closed Comp Indemnity Claims
The calculation establishes the costs of indemnity per closed indemnity claim.
Medical-Only Cost per Closed Claim
Total Medical Costs for Closed Medical-Only Claims
Number of Closed Medical-Only Claims
This metric calculates the medical costs per closed medical-only claim.
Lost Time Metrics
Lost Temporary Total Disability Workdays per 100 Workers
Lost Workdays for TTD Claims
Total Number of Workers
This calculation measures the effect of lost productivity from indemnity claims.
Lost Temporary Total Disability Workdays per Closed TTD Claim
Lost Workdays from Date of Injury for Closed TTD Claims
Total Number of Closed TTD Claims
This equation establishes a company’s average number of lost workdays associated with closed temporary total disability (TTD) claims.
Return-to-Work Claim (RTW) Percentage
Total Number of Claims with RTW Duty
Number of Total Active Claims
Calculation establishes the percentage of all claims with return-to-work transitional duty for any time period.
Return-to-Work Transitional Workdays Percentage
Total Number of Workdays with RTW Duty
Number of Total Lost Workdays
This calculation establishes the percentage of workdays lost due to return-to-work transition duty for any time period.