Workers Comp

Disabling workplace injuries cost employers some $40 billion in direct wage replacement and medical payments annually and generate indirect costs estimated between $80 billion and $200 billion a year, according to insurer Liberty Mutual.

Liberty Mutual’s Workplace Safety Index, which charts the 10 most prevalent causes of workplace injuries, reveals that injuries associated with overexertion account for $10.5 billion in direct costs, or one-quarter of the total. Falls on the same level cost employers $4.6 billion, while bodily reaction, or injuries resulting from bending or slipping without falling, accounted for $3.8 billion in direct costs. Overall, injuries associated with the 10 leading causes generated 86% of the direct workers’ compensation costs.

Indirect costs for replacement labor, overtime, lost production and decreased productivity are estimated at between double and five-times the direct costs, explains Karl Jacobson, senior vice president at Liberty Mutual.

“The findings of the safety index will help in the discussion about the most effective way to improve workplace safety by identifying the top 10 causes of workplace accidents,” Jacobson states.

Other prevalent causes of workplace injury include falls to a lower level, costing $3.7 billion annually, and being struck by an object, costing $3.4 billion a year. Repetitive motion injuries account for some $2.7 billion annually, or 6.7% of the total direct cost.

A leading provider of workers’ compensation insurance coverage and services, Liberty Mutual used its own claims data as well as findings from the Bureau of Labor Statistics and the National Academy of Social Insurance to compile the top 10 list.

The safety index is similar to the customized lists that Liberty Mutual provides to employer clients to help them develop safety and injury prevention programs, Jacobson observes. He urges employers to take advantage of workplace reviews and other safety programs provided by their workers’ compensation carriers and to also solicit help from employees.

“Employees are a great resource,” Jacobson says. “They know the jobs; they do the jobs. Programs that engage employee input into controlling loss exposures can be very effective.”

Employer disconnect

Comparing the results of the 2002 safety index with attitudes measured by a 2001 executive survey sponsored by Liberty Mutual exposes a disconnect between how employers view workplace injuries and the findings about the leading causes of injuries.

The business community tends to focus attention on certain causes of workplace injury and ignore other causes that account for a substantial share of the cost.

For example, a majority of some 200 executives surveyed last year by Liberty Mutual identified repetitive motion as the leading cause of injury, when this is the sixth most common cause of disabling workplace injury. Executives ranked highway accidents as the third leading cause of disabling injuries, while the safety index finds that traffic collisions are the seventh most common injury cause, accounting for some $2.3 billion in direct costs.

The surveyed executives report that workplace safety programs have a positive effect on a company’s financial performance. Fully 61% of the respondents report that their companies received $3 or more in benefit for each $1 spent improving workplace safety.

For example, Liberty Mutual partnered with Darden Restaurants to identify falls on the same level and contact with temperature extremes as the leading causes of disabling injuries. A comprehensive safety review and training program saved Darden an average of $2.9 million a year over four years, yielding a $3 return for every $1 invested.

Rx drives increases

Much of the increase in workers’ compensation costs can be attributed to the rising cost and utilization of prescription medications, according to research by Specialty Risks Services (SRS), a subsidiary of The Hartford Financial Services Group.

A review of prescription drug costs for The Hartford’s workers’ compensation claims clients shows that those costs have surged 67% over the past two years, according to Ken Martino, senior vice president at SRS.

“The increase in prescription drug costs has been building for several years now, but we really saw a spike in the last two years,” Martino says. “Pharmacy costs historically had been a small part of total workers’ compensation costs. Now, almost 10% of total medical costs are for prescription drugs.”

Pharmacy costs are spiking due to increases in drug utilization as well as the replacement of drugs with newer, more expensive medications.

The Hartford, one of the country’s leading workers’ compensation insurers, and SRS, a major third-party administrator, recommend that employers address the issue by analyzing data to understand trends and improve outcomes and increase communication with injured workers and care providers.

Employers can also institute pharmacy utilization management to ensure that the most appropriate and cost-effective drugs are prescribed. Utilization management programs can also uncover unusual usage patterns that may indicate prescription fraud or abuse. -C.G.