If you’re a small business owner, you’ve come to this realization – not only do you need to understand your product or service and how to target your market, but you face a ton of collateral technicalities. There are rules, regulations, and laws for nearly every possibility. Some of these protect consumers, others your employees, and some even protect you and your business.
There are laws, rules, industry guidelines, taxes, employee relations, and, perhaps most daunting, insurance challenges. Naturally, there are lots of different kinds of insurance. Property, liability, key-man, life and health, and workers’ compensation insurance are just some of the protections in which you must enroll.
Workers’ Compensation Insurance is unique in that it is a premium over which you do have some control. You can lower or raise your premiums by paying attention to your workers’ compensation claims.
We all know that claims for car accidents will raise your auto insurance rates. Well, workers’ compensation claims work in much the same way. One key score indicates what you’ll pay in premiums – the Experience Modification Rate (EMR).
What is your Experience Modification Rate?
The Experience Modification Rate represents the workers’ compensation actual claims made against your business by your employees. It tracks injuries that occur arising out of and in the course of employment. This doesn’t include slip-and-fall type claims or actions brought by customers.
In Ohio, the Bureau of Workers’ Compensation compares your number of claims against other businesses like yours in your geographical area. If you own a grain farm in Ohio, your claims will only compare to other grain farmers in Ohio. Comparison of this narrow class code determines your Experience Modification Rate.
There are three ranges of results in these comparisons. The average company has an Experience Modification Rate of 1.0. If the score is greater than 1.0, the business is a riskier bet and premiums are higher. A safer company has a rating of less than 1.0 and earns a lower rate
In these calculations, the government multiplies the actual losses by 100. Expected losses multiply payroll by the Expected Loss Rate of your class code and dividing the result by 100.
The scores indicate the number, type and funds paid for each incident. There are three variables that affect your EMR:
- Frequency of claims
- Severity of claims
- Payroll per $100
Again, like automobile insurance, a negative score stays around awhile. The data from actual claims reported to the National Council on Compensation Insurance remain for the past five years. Insurance agencies that sell workers’ compensation policies access and use that data from the three years ending in the prior year.
Controlling premium costs
The best way to control the number and types of claims is, of course, to ensure your employees work in the safest environment possible.
Employers need to pay attention to the risks of chemicals, the layout of the work environment, whether office furniture may cause back problems, or if the grinder at the quality control station has an adequate shield. Thousands of small things can cause real and significant injury.
Of course, no one wants an injury to happen to their employees. Employees are essential to your business, many of them may be your friends or family. Eventually, though, there will be claims, some minor and some major. A fire, an explosion or a chemical spill hurts not only the employees, the surrounding citizens and the business. Paying close attention to safety always pays off.
What is workers’ compensation fraud?
If an employee fakes sickness or injury to collect compensation from the employer or his insurance, that is a fraud. It is also fraudulent if the worker exaggerates an injury or claims that the claimant got hurt at your business when the injury took place before the claimant began working for you.
Some healthcare clinics are guilty of fraud when they exaggerate a workers’ condition to bill for more money than is fair recompense for the actual injury.
Fraudulent claims have been increasing due to economic hardships. It is common to see some types of frauds not work due to a supposed injury but work at another establishment while they are supposed to be unable to work at all.
Penalties under laws for fraud can range from a fine for a minor case to a felony conviction for the most egregious.
After an injury, you can still control Experience Modification Rate
There are two ways to ensure that a malingerer or con artist won’t make a claim. Particularly in a small business, it is hard to accuse one of perhaps five employees of cheating. It not only wrecks your relationship with one employee but likely every other worker as well.
You need to address the situation professionally and dispassionately.
Experienced private investigators who specialize in workers’ compensation and accident investigations take the onus off the business owner and leaves the matter in the hands of the experts who’ve seen it all and know how to proceed.
Private investigations use covert surveillance, background investigations and open source intelligence investigations to determine whether an employee is injured and how badly. Private detectives can blend into the background while recording instances that call a claim into question.
Using investigative services can protect your business against receiving untrue and unfair EMR scores. They can also help your business in other ways. Knowing you and your business, your practices and objectives will help them find other ways to protect you.
And remember, lowering the claims this year means reducing your premium costs next year.
Deciding whether to investigate a claim
There are two ways to go about deciding when to hire a private investigator. You can make it a company policy to investigate workers’ compensation claims every time in every instance.
If this is the decision, it is a good idea to use the same investigator for all claims. The investigating firm will become acquainted with your business and your risk exposure. Engaging in a contract agreement would be suitable for a larger company who wants an investigator to put their needs first and foremost.
Hiring the same investigator over time has two other advantages. First, you won’t have to feel embarrassed for starting an investigation against a friend or long-time employee. Second, you never know who will try to cheat. It is often one the owner would never suspect. By investigating each claim, the business safeguards its assets evenly and fairly.
On the other hand, you can decide to call in an investigator only when you think a claim may be false. There are many methods crooks use to falsify a workers’ claim against an employer. Here are just a few red flags to watch for that might mean fraud.
- When an employee makes a claim is an important clue and can raise suspicions. Dates just before or after a holiday, when the employee finds he will soon lose his job, or when he or she immediately hire an attorney or asks for a settlement, are all warning signs that the claim may be false.
- If the accident itself takes place out of view, is not recorded on security cameras, or if the claimant gives an inconsistent story are often clues that the worker is not telling the truth about an incident.
- The injury itself can point to a possibly false claim. Often, psychological or back injuries are the root of a fraudulent injury. Those are difficult to prove, thereby making them a favorite of scam artists.
- Hospitalizations are a common way for the dishonest employee to attempt to validify an injury. Private investigators can quietly and stealthily canvas the hospital to verify that the employee was injured as reported and did indeed spend the specified amount of time as an inpatient.
- Repeatedly avoiding medical appointments or calls from you or the insurance company is a big signal that the claimant may be falsifying the record.
- People who are faking injuries often doctor shop to find a physician who will go along with the illness or injury that they claim.
Other warning signs may point to a dishonest workers’ compensation claim. Dozens of shady practices come to light during investigations. Hiring an experienced private investigator to study the claims against your business might quickly repay any investment by lowering your EMR.
Fighting a claim and winning
Most of the states in the US allow employers to fight an employee’s workers’ claim. Every state differs on which legal venue is proper and what proof it requires. Experts who work with workers’ comp claims in your region regularly are good sources to use. They know where to go and what proof to present.
Other good reasons to lower your EMR
When bidding for jobs or trying to lure a big potential customer or client, they will want to see your safety record. After all, if you are seeking to build a large office building, that score will tell the potential client a lot about your commitment to safety. That commitment will let them know whether you are a trustworthy contractor. Government contracts may require an EMR score below a certain limit.