Expert Commentary

Workers Compensation Return-to-Work Programs: Cost Savers?

The implementation of a return-to-work program is on everyone's list of workers compensation best practices for employers. Cover your ears for the shrieks of disbelief from the workers compensation establishment if you dare question whether it really helps the bottom line to bring employees back to work on modified duty.


August 2009

You may wonder how paying someone their regular wage to get one quarter of their normal productivity will reduce costs. Or worse you might have a fear of receiving no meaningful contribution to the company, while also providing a soapbox for the injured employee to badmouth management. What if adopting a return-to-work program leads to a whole new class of employees who like the idea of working in a less arduous position while collecting their full salary?

The insurers, brokers, and so-called experts in the industry don't want to hear it, but you may have very real concerns about whether a return-to-work program is right for your company and whether it will result in a net savings. You deserve answers to your questions and concerns that go beyond the typical, "Of course offering temporary alternate work saves money; it's a best practice!"

It has to be said up-front that not every temporary alternate work offer will save the employer money. For instance, the employee may reject the offer because it does not fit with his/her physical capabilities. If a judge agrees with the employee's position and orders ongoing weekly benefits, the offer will not have had the desired effect of reducing the workers compensation payments.

In another scenario, a job offer might be made and accepted after the employee has been on workers compensation benefits for 2 years. If the employee then sustains a new injury or an aggravation, the employer may be stuck with an expensive original case and a second claim that might be even more expensive. For an employer whose premium is adjusted by an experience modification factor, two moderately expensive claims will have a dramatically greater impact on their future premium than one very expensive claim because the experience modification factor calculation is structured such that it penalizes frequency more than severity.

Workers Compensation Savings

Just because there are scenarios where a job offer does not result in net savings to the employer does not mean that a return-to-work program is not beneficial in general. The program should be undertaken with the understanding that it may not be effective in every circumstance, but that, overall, it should pay dividends. It is also important to recognize that only well-constructed and administered programs will succeed. Merely having a policy or occasionally being open to making an offer is not enough. In the scenario where the employee rejected the job offer and prevailed through litigation, perhaps the offer truly did not match the employee's capabilities. In that event, the offer was a waste of time.

To succeed, care needs to be taken to offer a real position that matches the best medical information available. Whenever possible, this means matching what the treating physician indicates for capabilities. If the treating physician is uncooperative or totally unrealistic, an offer based on an independent medical exam can be made, but this will not have the same level of credibility since the independent doctor is typically considered the "insurer's doctor."

Coordinated Loss Management Program

To be effective (and therefore achieve savings), a return-to-work program should be part of a coordinated loss management program. The major components of a loss management program are:

  1. Immediate Reporting and Investigation of Accidents
  2. Primary Medical Care Arrangement
  3. Return-to-Work Program
  4. Regular Communication with Injured Employees

The return-to-work program will not produce the desired results if the injured employee does not treat with a provider that is willing to cooperate in the return-to-work effort. To improve the chances of success, employers should establish relationships with medical providers who will take the time to understand their business and will work with the employer to facilitate a medically appropriate return to work.

The best medical providers are willing to tour the employer's operation and see the various jobs in action. The most progressive employers will also draft functional job descriptions to provide the doctor with detailed information about the physical requirements of each position. The odds of achieving an early and cost effective return to work go way up when there is a primary medical care arrangement in place to go along with the return-to-work program.

Temporary Alternative Work

Offers to return to temporary alternate work have the biggest potential for cost savings when they are made in time to prevent a medical-only claim from becoming a lost time claim. This sort of offer requires timely medical information. Receiving immediate medical reports can only happen if there is close communication with the injured employee and cooperation from the medical provider.

To stay on top of the medical situation, employers can make it required procedure that their injured employees drop off medical reports after each treatment. They can also make arrangements to have the doctor provide a report directly to the employer after each visit. Returning an employee to temporary alternate work after a week or two of disability can help take some of the financial sting out of a case, but avoiding a lost time claim entirely by providing an immediate accommodation will dramatically help an employer's loss experience.

Time is money in the workers compensation system, so it is very costly to be waiting for medical information. Additionally, the experience modification factor calculation is weighted so that the first $5,000 of every case counts the most. Any bottleneck that causes a delay can lead to a lost time claim which will exceed this $5,000 value. Employers that take their return-to-work program to the level where they routinely avoid lost time claims by providing modified work will most assuredly have reduced workers compensation costs.

Bottom-Line Savings

The fact that successful return-to-work programs can reduce workers compensation costs does not necessarily mean that the program is good for the bottom line. There remains the issue about whether paying an employee full wages for a reduced contribution to the company ultimately pays a dividend. In the best-case scenario, the return-to-work program is embraced by the employee as a means of remaining a part of the work environment while also receiving the treatment necessary to recover to the point where they can resume their full duties. The employer may have a period of reduced productivity, but this should be counterbalanced by successfully avoiding the need to search for, hire, and train a replacement.

A well-written policy will also indicate that the modified duty position will be reviewed on a weekly basis so the employer has the flexibility to withdraw the offer if it is not working out. An employee with a bad attitude who is adversely affecting the workforce could therefore have his or her job offer revoked as part of a weekly review. However, every effort should be made to manage through this sort of scenario since revoking the offer and placing the employee back on benefits can be costly and is likely to be what the employee was looking for. In any event, the accommodation should not typically last more than 30-90 days.

The intent is not to create another class of employee by putting large numbers of employees to work in modified positions. The intent is to maintain the work connection and work routine for a limited period of time and then have the employee resume full duty work.

The Experience Modification Factor

An employer that refuses to offer temporary alternate work because of concern about the lack of productivity from the injured worker needs to understand that without the job offer, the employee will likely continue to receive close to their full salary on workers compensation benefits while contributing absolutely nothing to the company. Additionally, the employer may have to pay a replacement employee's salary while the injured employee is being paid to stay home. The employer will essentially be paying two employees for the contribution of one. The employer's double payment will be felt when there are future premium increases as a result of the workers compensation benefit payments. The impact of the injured employee's claim on the experience modification factor will likely be significant and will continue for the 3 years of the experience period.

When evaluating whether a return-to-work program saves money on the bottom line, the 3-year experience modification factor impact must be contemplated along with the cost of searching for, hiring, and training a replacement. If the increased experience modification factor causes the premium to rise by $20,000, and this increase will last for 3 years; the employer has incurred a $60,000 cost in order to avoid perhaps a 60-day period of less than full productivity.

Side Benefits

The biggest opportunity for cost savings from a return-to-work program comes from the early return of employees to work and the avoidance of litigation. However, there is a significant side benefit for employers that offer temporary alternate work. If the employee declines a job offer and the claim heads to litigation, the employer is in a strong position to argue that the employee should not receive workers compensation benefits because they have chosen to reject a reasonable offer to return to work. Without a job offer, the odds of having a judge remove an employee from workers compensation benefits are close to nil.

A job offer increases the probability of litigation success and also creates leverage if the case is destined to be resolved through settlement. Particularly if an employer gains the reputation for routinely making good faith job offers, their results when forced to litigate, should be markedly better than an employer that refuses to embrace temporary alternate work.

Conclusion

It turns out there is a good reason that return-to-work programs are considered a best practice: they generally do save employers money and help them maintain a stable workforce. There are bound to be individual claims where a job offer does not result in savings, but that is not a good reason to avoid implementing a program. Particularly when they are part of a more global loss management regime, return-to-work programs make all the sense (cents?) in the world.


*The Albert Risk Management Consultants claims management team (Glenn Brown, Lisa Hartman, William Quinn, Jr., and David A. Tweedy) contributes articles on claims topics. You can reach Glenn Brown at


Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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