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Workers' Compensation

How Can You Maintain Workers' Compensation Coverage Without Losing the Shirt Off Your Back?

Undoubtedly, one of the major goals of any employer is to make a profit. Sometimes, it may become tempting to cut corners in order to make more money. One thing that should never be sacrificed is workers' compensation insurance coverage. Given the price that many employers must pay for workers' compensation premiums, is there any way that they can keep the costs down? You bet. Here are ten of them.

Check Your Policy for Accuracy

  1. If you are a very small employer, check the number of individuals on your payroll. Many states have an exception for employers who have fewer than a certain number of employees (usually three or five). These very small employers are not required to carry workers' compensation insurance. If you have recently had an employee or two leave your employ, it is possible that you could now qualify for the exception.
  2. Review your payroll. Has overtime been included in your calculations for purposes of computing your premium? Some states allow workers' compensation premiums to be calculated on regular payroll figures, excluding overtime. If overtime has been included in your premium calculation, ask if it can be removed. The less payroll you have, the less your premium will be.
  3. Confirm that your experience rating is correct. Employers who pay more then $5,000 per year in workers' compensation premiums automatically receive an experience rating which compares their claims history to the claims histories of other firms within the same industry. The more claims you have, when compared to the industry as a whole, the more risky you are considered to insure and the higher your premiums go. Make sure that yours has been correctly calculated.
  4. Ensure that you are classified as the right type of employer or employment field. Employers who have heavy machinery or hazardous materials in their everyday workplace will likely have a higher premium than employers who have employees who work only with telephones and computers. Make sure that your premium is being calculated under the right classification for both the type of work you perform and the number of employees you have in "high-risk" positions.
  5. Consider Some Changes

  6. If you are a participant in an assigned-risk pool, gather information on how much your premium would be if you were not a participant. Many times, the premiums that are charged in pools are higher than they would be if you were insured by yourself. If your premiums would be lower outside of the pool, consider taking steps to head off on your own. This may take some time to accomplish, particularly if you have been placed in the pool due to your claims history. You may have to show that your workplace is now a lot safer than it was at the time you got pushed into the pool.
  7. Do some research and consider whether self-insurance might be right for your business. Generally, in order to be self-insured you have to have a large workforce and be able to show that you are clearly solvent. Self-insurance is not a good solution for every employer, and it is not allowed in every jurisdiction, but it might be right for you.
  8. If you are not already, consider whether you want to pay a deductible toward workers' compensation coverage. A number of states allow employers to reduce their premiums through the payment of deductibles.
  9. Consider whether you want to use managed medical care, such as an HMO, to treat workers injured under your employer. The majority of states allow managed medical care providers to handle workers' compensation claims. While you may not win the hearts of your employees by switching to managed care, you will save money in insurance costs.
  10. Help Your Employees Help You

  11. Return your injured workers to work as soon as possible. The longer injured employees sit at home or in therapy recuperating, the more money your insurance company is paying them. Of course, no employee can be forced to return to work before they are physically ready. However, they may be able to work in a different position, or a light-duty job, if they cannot return to their pre-injury employment.

Make Safety A Top Priority

Get serious about safety. Initiate safety programs and protocols to try to, as much as possible, prevent workplace injuries. The fewer claims you have, the lower your premiums will be.

What is Workers' Compensation Fraud and Noncompliance?

In many cases, a workers' compensation claim proceeds through the system with every involved party cooperating and playing by the rules. However, in an increasing number of cases, someone tries to cheat the system and commits "fraud" or fails to comply with the laws in an effort to get more benefits, receive a bigger reimbursement, or save money. Contrary to popular belief, it is not only the employee who can commit workers' compensation fraud and it is not only the employer who can fail to comply with the laws. The following is an overview of the types of workers' compensation fraud and noncompliance which can be committed and the toll which they have on the system.

The Laws

  • Nearly every state has some type of law that prohibits workers' compensation fraud and establishes punishment for offenders. In some states, if a person or entity is found to have committed fraud, they can be charged with a felony offense. In almost every situation, an employee who commits fraud will be denied future workers' compensation benefits and may be required to pay back the value of any benefits already received.
  • The number of individuals who are charged with workers' compensation fraud at the state level each year is significant. For example, statistics from the State of Missouri indicate that in 1999, there were 380 cases of workers' compensation fraud investigated by that state's Fraud and Noncompliance Unit. An additional 705 cases of workers' compensation noncompliance were handled by that unit in the same year.

Employee Fraud

  • Employees can commit fraud upon the workers' compensation system when they fake injuries, fail to make valid efforts to return to work, refuse to cooperate with efforts to rehabilitate them, or accept payments from more than one source for the same injury.
  • Employee fraud can take a monetary toll on the workers' compensation system and can also have a negative effect upon workplace relations, as employers become more and more suspicious of employees who claim to be injured or unable to work.
  • Although there should be a concern for preventing employee fraud, studies have shown that in actuality, employee fraud is less common than employer fraud and is also significantly less costly. In most situations, an employee will be hard-pressed to get away with fraudulently obtaining more than a few thousand dollars worth of workers' compensation benefits. However, employer fraud (particularly for large companies) can "save" a company potentially millions of dollars per year.

Employer Fraud

  • The statistics from the State of Missouri show that in 1999, 705 different businesses allegedly failed to carry the requisite workers' compensation insurance as required by law. Of those businesses, 426 were in the retail sector. The next highest sector, construction, accounted for 185 of the businesses failing to carry proper insurance.
  • Employers who fail to carry workers' compensation insurance when required by law place the health and well-being of their employees at risk. In addition, these injured employees are often paid benefits through a state fund financed in part by tax dollars of all citizens.
  • Premium fraud involves the intentional non reporting or under-reporting of information by a company to its insurance carrier in an effort to avoid higher premiums for insurance coverage. For instance, an employer may try to claim that employees in high-risk positions (which require a higher premium) are working in low-risk positions in order to save money. In 1998, the California State Fund estimated that premium fraud of this nature cost Los Angeles County upwards of $96 million annually.
  • Premium fraud results in higher prices across the board for insurance coverage, and in turn results in fewer jobs as fewer employers can afford workers' compensation insurance coverage.
  • Employers may also face legal problems if they encourage injured workers to seek treatment under group health insurance rather than workers' compensation or if they otherwise discourage employees from filing workers' compensation claims.

Medical Provider Fraud

Medical provider fraud can take a number of different forms, including:

  • Over-billing: Occurs when a provider bills for services not actually performed
  • Self-referral: Occurs when a medical provider refers a patient for additional testing or care to a facility in which the provider has an interest
  • Unbundling: Occurs when a provider performs one service, but breaks it up into smaller services for billing purposes
  • Up-coding: Occurs when a provider bills for a more expensive treatment than the one that was actually performed.

With the advent of managed care, there are new types of medical provider fraud including, among others, the use of illegal kickbacks by medical providers. A kickback occurs when a medical provider receives a "bonus" for referring injured individuals into the program.

Medical provider fraud, as with employer fraud, costs everyone in the end because it results in higher costs for medical care and treatment.


In many cases, a party who commits fraud or fails to comply with workers' compensation laws is required to pay money into the state workers' compensation system. This money, particularly for noncompliance issues, can total millions of dollars per year being paid into the system.

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Donald Briggs C. Donald Briggs, III Feb. 7, 1954 - Sept. 7, 2014 Your dedication and hard work continue...