Nursing Homes: Avoid Costly Workers’ Compensation Claims
Posted in: Commercial Insurance
One might think nursing homes constitute a low-risk work environment. But that’s not the case: employees of nursing homes and personal care facilities suffer some of the highest rates of injuries on the job. Consequently, nursing homes experience a lost workday illness and injury (LWDII) rate more than four times higher than that of private industry as a whole – greater than mining, construction, and manufacturing, according to the Bureau of Labor Statistics!
What makes nursing home care so high risk? In large part, it’s the manual lifting of patients — moving residents to and from bed, assisting with bathing and positioning patients in chairs — that can cause micro-injuries to the spine and trigger moderate to severe musculoskeletal disorders. These injuries, in turn, not only wreak havoc on the health and earning potential of workers but also on the turnover rate and financial health of nursing home operators.
How can you protect yourself from major losses caused by workers’ comp claims? What policies and procedures can you put in place to shore up your bottom line? In a series of blog posts, I answer these questions and share stories from my team’s experience helping healthcare companies, nursing homes, and senior living environments lower their risk. To build a foundation of understanding, this first post reviews what you might not know about workers’ compensation, along with key terms from the insurance industry.
1. Workers’ comp covers more than you think.
Most people think workers’ comp covers only medical expenses and lost wages, but employees can also receive benefits that include expenses like mileage, vocational rehabilitation, wages for a second job, and activities of daily living (ADL) care that come as a result of the accident. Additionally, employees can receive benefits for a permanent partial disability as a result of the accident, even if they return to their regular jobs.
Claim expenses can add up quickly. Find out your obligations under your state workers’ compensation statute, and make sure you understand all of the components that go in the claim expense.
2. Workers’ comp statutes vary by state.
When human resources personnel oversee claims, they sometimes take a one-size-fits-all approach to workers’ comp. But laws differ by state, and you want to work with someone who understands the nuances. For instance, some states have a viable second injury fund set up for employees who have a prior injury or disability. When workers with prior injuries come to work at your facility and sustain another injury, the insurance company can seek reimbursement on your behalf through the second injury fund if the old injury combined with the new injury creates a greater impairment.
Another example is the state of Texas, which doesn’t require employers to provide workers’ comp coverage. If companies opt not to provide those benefits, they are not protected by the “exclusive remedy” provision of workers’ comp statutes, which prohibits employees injured on the job to file a negligence lawsuit against their employer.
Other regulations that vary by state include whether employees can choose what doctors and healthcare providers to see, the maximum amount of wages to pay out, and how long the waiting period (or the time out of work before wage compensation starts) extends. In Florida, for example, employees must be out of work for seven days before they start getting compensation for lost time and wages, while in California, the waiting period is just three days.
3. Loss history and experience modification affect your premium.
Loss history is a reflection of the workers’ comp claims a company has had over a designated period of time (usually one year). It includes all of the claims that have been filed with the insurance company, along with what has been paid and what is expected to be paid in the future.
When determining a facility’s premium, insurance companies prepare loss history reports, and those facilities with higher amounts of loss nearly always pay higher premiums. Few people realize it, but when you buy an existing elder care facility, you inherit that facility’s loss history, even if your own losses are minimal — and you’re doing everything you can to lower the exposure to the new facility. You’ll still pay the higher premium, and continue to do so for at least three years. Complicating matters is that in some instances, you may have no control over claims from a prior owner, and the prior owner may have no incentive to manage the claims. So your premium could get worse over time.
Experience modification rate (known as “mod” or “e-mod” rate in the insurance industry) relates specifically to your workers’ comp premium and warrants attention. Put simply, a facility’s mod is based on the number and severity of workers’ comp claims filed. Insurance companies use this rate to gauge past injuries and potential risk to predict future losses and calculate workers’ comp premiums.
We’ll take a deeper look at mods in a forthcoming post, but for now, know that you need to evaluate and factor in both a currently valued loss history covering the past five years and the most recent experience modification before you purchase a facility. Sellers are often reluctant to turn over this information, but demand it and take the time to scrutinize it with someone who understands how it works.
4. A return to work program can reduce the amount of losses paid out.
Getting employees back to work after an injury can be challenging. Yet studies show that returning to work sooner rather than later can improve employee relations and reduce the overall cost of claims. Essentially, the longer employees sit at home, the less likely they are to return.
With this in mind, we advise clients to develop a well-conceived return to work program that includes options for “transitional duty.” Here, employers adjust employees’ responsibilities temporarily as prescribed by the doctor so they can heal properly. This might involve replacing patient lifting responsibilities with less strenuous work — passing ice and water, answering calls, assisting with bathing residents, taking vital signs, folding linen and clothes, or making a safety bulletin board. These modifications are important because they keep employees in the routine of coming to work daily and give them a sense of responsibility, all while giving you, the employer, a more active role in their recovery.
5. Timely accident reporting matters.
Like your medical records release system, your accident and injury reporting procedures are crucial to lowering your risk of costly, time-consuming claims and lawsuits. There are two components to timely reporting. First, your employees must report any accident, whether it causes an injury or not, as soon as it happens. Second, your team needs to document the incident immediately, and report injuries or questionable accidents to the insurer within 24 hours.
Documenting all incidents, regardless of whether an injury occurs, is an essential step that protects you in the event that an employee comes back days (or even weeks or months) later linking a new ailment to a past incident at work. Some injuries do manifest over time, but the best way to lower your risk of unsubstantiated claims is to document everything from day one.
Countless studies indicate that faster reporting correlates with lower claim costs because it allows your insurance company to step in, investigate, and take action in a timely manner. In addition, statutory requirements necessitate prompt reporting, and in many states, failure to report work-related injuries (and deaths) can result in steep fines.
Understanding workers’ compensation is critical to running a successful nursing home or elder care facility. In our workers’ comp blog posts to come, I’ll share stories from the field and strategies to lower your risk. So stay tuned, and reach out to me at FGiachini@psafinancial.com to learn how PSA’s Healthcare Risk Solutions Team can help you.