Workers' Compensation
Smoother Sailing
On-the-job injuries continue falling
and workers' comp rates are steady,
but businesses must reamin vigilent
against expensive lapses in safety
Additional resource: Tips
on Buying the Right Workers' Comp Policy
Below: Edgar Bryan, vice president for finance at
Grady-White Boards in Greenville, says accident rates at
the plant have been reduced by more than 70 percent in
the past dozen years, mainly due to increased awareness
and better planning. Photo by Kevin Brafford.
 By Lawrence Bivins
There was a time
when some business executives believed “The Great
State of Texas” carried that moniker because it was
the only one in the nation in which employers weren't
required to carry workers' compensation insurance.
While it's true that Texas is still the Lone Star --
depending on your perspective -- in that regard, a trend
toward lower workers' comp rates in many states,
including North Carolina, has quieted cynics.
Last fall, Insurance Commissioner Jim Long announced that
workers' comp rates would remain steady for 2000, with a
zero percent base rate change. “This is good news
for North Carolina businesses, as we are continuing our
trend of low workers' compensation rates,” he said
then.
Workers' comp, of course, is a compromise: Benefits are
paid regardless of who is to blame for an accident or
injury. The no-fault status is key -- the employer
doesn't admit liability and the employee recoups benefits
without having to sue.
That's lessened the pain for Walter “Mac”
MacDougal. It's only when he groans his way through a set
of standing calf-raises that he shows signs of barely
being able to walk just nine months ago. Otherwise, the
42-year-old custom-framing carpenter gets through his
nightly workouts at Cary's Spa Health Club without much
trouble. Last October, MacDougal dropped a stack of 2x4's
on his right foot at a Preston job site, shattering three
bones. The accident laid him up for 17 days.
“All I really wanted to do was get back into the
gym,” says the ponytailed MacDougal, a Ventura,
Calif., native whose work and intense workouts keep him
tanned and fit. “I was very fortunate -- my foot
healed quickly. But for the first few days, I was really
hating life.î
Fortunate indeed. The accident may just as easily have
gone the other way, leaving him hobbled and unable to ply
his trade -- MacDougal's specialized framing expertise is
in high demand in the Triangle's sizzling residential
building industry -- for months or even years.
In his 25-year career in carpentry, it was MacDougal's
second on-the-job mishap that resulted in a worker's
compensation claim. In 1991, while working a job in
suburban Washington, D.C., he sheared off the tip of his
index finger with a power-saw, but, incredibly, the
incident resulted in only the loss of a day's work.
Again, he was lucky.
“I've been very fortunate,” MacDougal says,
“because in the construction industry, few employers
take the time to explain what's right and what's wrong in
terms of workplace safety.” And when times are
robust, as they now are, the pressure is even greater to
complete one job and move on to the next. Worker safety
becomes less a priority.
Tame as it was, MacDougal's workers' compensation claim
was one of more than 68,000 filed in the state last year,
the fifth year in a row in which the number of claims has
fallen. All told, workers in North Carolina who were
either injured or stricken ill on the job received nearly
$304 million in workers' comp benefits in the fiscal year
1998-99, according to the N.C. Industrial Commission
(NCIC), the state agency that administers and adjudicates
workers' comp claims. Employers, meanwhile, paid more
than $603 million in workers' comp premiums to cover
medical expenses and lost wages of their workforce.
“Workers' comp is a billion dollar business in our
state,” says Buck Lattimore, NCIC administrator. Add
up the premiums, benefits, taxes and other expenses and
the issue easily runs into the 10-figure range.
Although costs have fallen dramatically in the past
decade, North Carolina experienced a 53 percent spike in
benefits paid between 1996 and 1998, according the
National Academy of Social Insurance (NASI), a
Washington-based organization that studies workers' comp
issues. The dramatic increase followed an almost 30
percent decline over the previous three years, and the
state currently boasts the eighth lowest workers' comp
rates in the country.
Still, premiums are squeezing many firms, especially
small and medium-sized manufacturers that lack both the
purchasing clout and sophisticated workplace safety
programs needed to bargain for lower rates.
When Edgar Bryan took over as vice president for finance
at Greenville-based Grady-White Boats Inc. in the late
1980s, workers' comp costs were spiraling into the
stratosphere. A poor safety record was to blame. “We
were having as many as 100 accidents a year then,”
Bryan says.
Since 1958, the company has made high-quality fiberglass
boats that range in size from 18 to 30 feet. The
privately-held firm, which employs about 500, is one of
Greenville's largest employers.
But like residential construction, boatbuilding is an
industry that sees more workplace injuries when times are
good. Orders get placed, and the pressure is on to fill
them. “When time begins to run short, accidents
occur,” says Bryan, who has been with the firm 32
years. “Then I got busy and put some teeth into our
safety program, and we brought our accident rate down to
about 20-30 per year.”
Although the firm had always had a safety program in
place, Bryan moved aggressively to beef up policies by
winning the support of line managers. “Getting the
buy-in from supervisors was key,” he says.
At the same time, the company made another bold move --
it began to self-insure. “Ten years ago, insurance
companies offered little in terms of support for
workplace safety measures,” Bryan says. “They
just kept raising premiums higher and higher.”
Self-insurance mechanisms, like Key Risk Management
Services Inc., the Greensboro-based third-party
administrator that Grady-White signed with, were
proactive in working with firms to reduce risk.
In North Carolina, as in all but three states,
self-insurance is a viable option for companies striving
to cut workers' comp costs. NASI estimates that in 1998,
self-insured plans accounted for nearly 20 percent of all
workers' comp premium dollars. Such plans are popular
with some firms because they escape paying agent
commissions, marketing costs and company overhead. By one
estimate, about 78-85 percent of premium dollars actually
go to cover claims.
“The potential cost savings in self-insuring are
strong,” says Pat Hoare, a regional financial
manager for Liberty Mutual Group in Charlotte. “But
so too is the potential exposure to serious losses.”
For those companies opting to self-insure, workplace
safety immediately becomes a top priority, as it did for
Grady-White, which in the past few years has switched
back to an insurance carrier.
“Employers are beginning to realize that workplace
safety is a priority in good times and bad,” Hoare
says. “In today's economy, with workers in short
supply, having a strong workplace safety record is even
more important when it comes to recruiting and retaining
good employees.î
Liberty Mutual, a top underwriter of workers' comp
insurance in North Carolina, sends safety consultants
on-site to look for ways firms can eliminate unnecessary
workplace hazards. “Our loss control services also
examine claims to spot injuries and illnesses that
re-occur, things like back injuries, and then identify
the causes and take measures to correct them,” says
Hoare, who believes the recent run-up in workers' comp
benefits in North Carolina is a result of the state's
rapidly growing economy and rising wages. “Since
total benefits are also a function of wages and the
number of people working, the strong economic conditions
here are partly to blame.î
In illustrating its commitment to workforce safety,
Liberty Mutual cites the example of a large employment
agency that was having difficulty controlling its
workers' comp losses due to the wide variety of
industries the firm served. Claims had reached the
$600,000 level prior to the company turning to Liberty's
loss prevention program.
The insurer, which has been underwriting workers' comp
insurance since its founding in 1912, analyzed the
customer's losses and the types of industries its
placements were working in. An action plan was written
that aimed at addressing the hazards that were prevalent
at various client locations. Loss-control consultants
then visited the sites to determine what remedies were
needed to reduce employee exposure. Recommendations
included the redesign of workstations, supplying
employees with additional safety gear and assigning
special aides to assist with the handling of certain
materials. The measures resulted in a huge cut in yearly
losses, while the number of work hours actually increased
significantly.
Liberty Mutual's success in North Carolina stems in part
from its track record of underwriting firms in the
textiles, manufacturing, trucking and construction
industries -- each a strong component of the state's
economy. The company's loss control efforts are
especially sought in the commercial building industry,
where Liberty Mutual's risk management experts assist
contractors in dealing with common safety hazards like
falls, dangerous materials, and vehicular and electrical
accidents.
But workplace safety isn't simply a blue-collar issue.
Increasingly, repetitive motion injuries, carpal tunnel
syndrome and tendinitis account for costly workers comp
claims as the state's economy shifts from agriculture and
textiles into areas like financial services and
information technology. For clients with claims' exposure
in such areas, some insurers offer regular ergonomics
training seminars on site for employees, managers,
supervisors, and maintenance and engineering personnel.
Controlling workers' comp costs also involves remaining
vigilant against fraud. “Fraud hurts everyone -- not
just the insurer,” Hoare says. “So there's a
constant educational effort to help companies weed out
fraudulent claims.” In doing so, premiums can be
kept at a more manageable level. On this front, insurers
collaborate with state investigators.
“We have a very good relationship with insurance
companies when it comes to fighting fraud,” says the
NCIC's Lattimore. “In many cases, they are the ones
who notify us of potential fraud cases. Of course, they
have more resources than we do, but we have the
prosecutorial power.”
Lattimore, now in his sixth year with the agency, can
point to several examples of cases where the commission's
investigators worked with insurance company auditors and
even private investigators in surfacing and punishing
those filing illegal claims.
NCIC's role in fighting fraud began in 1995 when it
assumed investigatory oversight of workers' comp claims
from the Department of Insurance, which had handled it
previously. Not long thereafter, it became clear the
commission needed a stronger stick, and the General
Assembly responded by amending the law to make filing
fraudulent claims a felony rather than a misdemeanor.
“We were referring workers' comp fraud cases to
prosecutors who were routinely handling murder and rape
cases,” Lattimore says. “We had a hard time
asking them to spend their limited resources going after
misdemeanor offenders.î
Today, the commission's two full-time fraud investigators
are kept busy looking into reports of various types of
fraud that come in from all over the state. Its toll-free
hotline (1-888-891-4895) enables callers to report
instances of fraudulent behavior without identifying
themselves. Often, those abusing the workers' comp system
are turned in by their own co-workers, neighbors and
relatives.
But workers' comp fraud can take many forms. “The
commission investigates cases involving employees as well
as employers operating businesses without workers'
compensation insurance, employers presenting false
certificates of insurance, questionable billing charges
by third-party administrators, and suspected unlawful
activity by medical providers,” Lattimore says.
Just as the state prosecutes those who violate the
workers' comp laws, it rewards firms that display an
exemplary record of workforce safety. Since 1993 the
Carolina STAR program has been part of the N.C.
Department of Labor's Occupational Health and Safety
office's efforts to encourage firms to work with --
instead of around -- workplace safety regulations. The
program took its lead from a similar effort by the U.S.
Department of Labor, in which state inspectors are
charged with enforcing rules established by the
Occupational Safety and Health Administration (OSHA).
“Basically, government wanted to join forces with
good companies that could be held out as positive
examples,” says Leonard Mangum, STAR program
consultant at the state Department of Labor. “We
were looking for a partnership, not the usual
adversarial, ëus vs. them' relationship that had been
typical.î
The STAR program emphasizes comprehensive worksite safety
and health programs. Though the sites are not expected to
have perfect records, they must meet rigorous safety and
health program management criteria.
STAR designation exempts the site from routine and random
OSHA inspections, although an evaluation team returns
every three years for a review, but state officials do
reserve the right to inspect the site if a complaint is
filed. Otherwise, the program is highly collaborative
between government, labor and management.
An award of “Carolina Star” indicates the
employer has maintained a loss rate due to injury or
illness of no more than 50 percent of the average for
that industry group. Currently, there are 22 such sites,
with two more pending final approval by the labor
commissioner.
“No effective safety program can ever be
top-down,” says Bob Dunnaway of Gastonia Bakery,
which was awarded a Carolina Star designation in October
1998. “It has to be 100 percent participation for
everyone.î
Gastonia Bakery, a division of New Jersey-based Best
Foods, has always enjoyed a sterling safety record due to
its vigorous accident prevention programs. The site, the
first bakery in the nation to be recognized for its
worker safety efforts, has not filed a workers' comp
claim since 1996.
“It's our record that keeps premiums down,”
Dunnaway says, adding that the STAR program was valuable
in that it focused the attention of every worker on
workplace safety.
“We've had all kinds of programs for years, but this
one was different. It was a real challenge for all of
us.” Before the application was approved, Dunnaway
says, state officials interviewed each of his site's 165
workers about workplace safety practices.
“That's exactly the kind of client we're interested
in partnering with,” says Liberty Mutual's Hoare,
“one who takes a real interest in protecting their
workers."
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