Free WC-119-AI.qxp - Missouri

AN EMPLOYER'S GUIDE
TO

MISSOURI WORKERS' COMPENSATION INSURANCE

Published by Missouri Department of Labor and Industrial Relations

DIVISION OF WORKERS' COMPENSATION

Table of Contents
History ............................................................................... page Rates .................................................................................. page Safety ................................................................................ page 2 4 9

Claims Management ......................................................... page 11 Self-Insurance ................................................................... page 17 Additional Costs ................................................................ page 18 A Final Note ...................................................................... page 19

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History
"Labor and management at the concession stand."

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issouri's Workers' Compensation Law was first enacted in April, 1925, and took effect in 1926 following voter approval. The new law required significant concessions from business and labor. Business's concession allowed a no-fault system in exchange for labor's concession of workers' compensation as the exclusive remedy for a work-related injury. Under the no-fault system an injured employee is not denied compensation simply because his or her unsafe actions may have contributed to the injury. Under this system employees are directly compensated for lost time due to a work-related injury and for the full costs of medical expenses without regard to whom was at fault. Employers are protected from high dollar awards in civil court that could result from unsafe working conditions. Exclusive remedy requires employees to file all claims for work related injuries through the workers' compensation system and prevents them from trying to recover in civil court for injuries sustained on the job. Workers' compensation systems have been in place in all states since 1949. Each state's system is unique in the type and amount of benefits payable for injuries, but the characteristics of no-fault and exclusive remedy are universal. The contents of this guide apply only to the Missouri workers' compensation system. Since states vary in their laws and how their systems operate, employers with operations in more than one state must familiarize themselves with the workers' compensation laws of the states in which they do business. An important thing to know about Missouri's law is that, with some exceptions, all employers with five or more employees and employers in the construction industry with one or more employees are required to cover their employees under workers'

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compensation. The exceptions include farm labor, domestic servants in a private home, occasional labor performed for or related to a private household, qualified real estate agents, direct sellers, volunteers of a tax exempt organization where such volunteers are not paid wages and adjudicators, sports officials or contest workers for interscholastic activity programs or amateur youth programs who are not employed by the sponsor of such event. Prior to 1994, workers' compensation insurance rates were set by the National Council on Compensation Insurance (NCCI) with approval of the Missouri Department of Insurance. There was one rate per classification that all insurance companies in Missouri charged the employer for coverage. Since January 1994, those insurance rates are set by each insurance company on a competitive basis. Employers can benefit from these insurance reforms as any consumer can benefit from shopping around for the best insurance covereage. Shopping for insurance is more than just finding the lowest rates. Other services provided by insurance companies can affect the employer's bottom line when it comes to work-related injuries. Claims management and safety services, if properly handled by both the insurance company and employer, can reduce losses and be mutually beneficial to both the employer and the employee. This guide will explain these factors, as well as other factors that play a significant role in reducing the cost of workers' compensation.

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Rates
"You have the opportunity to shop for the lowest prices."

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hy do you pay what you pay for workers' compensation insurance? Insurance companies are competing for your business. Consequently, there are insurance companies that will have rates lower than other companies. It is up to the employer to find those lower rates. While there are a number of factors used by insurance companies to set rates, there are two major factors that determine the employer's cost of workers' compensation insurance: the classification code and the experience modifier. There are approximately 600 different classification codes used in Missouri to which employees of a company may be assigned. These classification codes cover all types of industries and segments within those industries. High hazard and low hazard industries are distinguished by the classification codes they are assigned. The classification code is the first factor used to determine an employer's insurance premium. If an employer is assigned a high hazard code such as roofing, trucking or logging, the employer will pay a higher premium than employers assigned a restaurant, clerical or light manufacturing code. The dollar amount of premium a company pays for workers' compensation insurance depends, in large part, upon the classification code assigned to that company. For instance, the manual premium of a logging company, which is considered a high hazard industry, will be significantly higher than that of a company which employs predominately clerical personnel. Some companies may be assigned more than one classification code if it has employees performing different tasks. For example, a manufacturing company may have a code for its assembly line employees, one for its clerical staff and one for its outside salespersons, while a service business may have only one code for

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its clerical people. The key here is that the company's insurance premium is tied closely to its classification codes and those codes are determined by how hazardous the workplace may be based upon the work performed by the employees. The NCCI defines the scope of work performed by certain types of jobs and gives those jobs a classification based on the work performed. The NCCI makes these definitions available to insurance companies and agents. A company's classification code is normally determined by that company's insurance agent or insurance carrier Since the classification code is a primary factor of the insurance rates a company pays, the employer should become thoroughly familiar with those classifications to make sure the employees are assigned the correct codes. The employer's insurance agent or carrier will be able to supply the employer with a description of the classifications. The codes can also be found on the Division of Workers' Compensation's website at www.dolir.mo.gov/wc. If there are discrepancies between the assigned codes and the actual operations of the employer, a call to the insurance agent or carrier will most likely provide answers to the employer's concerns. If still not satisfied, the employer should contact the NCCI for an evaluation of the company's classifications. This is true particularly if the company changes operations, which could result in the need for different classifications. For problems that remain unresolved, the employer may appeal to the Workers' Compensation Determinations Review Board. This board, established in 1992, reviews the complicated cases that cannot be resolve by the insurance agent or NCCI. This board is associated with the Missouri Department of Insurance and can be contacted through that office at 573-751-3365. A rate is assigned to each classification code based on the hazardousness of the job. These rates are expressed in dollar figures
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per one hundred dollars of payroll and are referred to as "manual rates". Each insurance company can have a different manual rate for a particular classification code. For instance, a long distance trucking company's manual rate from one insurance company might be $13.71 per one hundred dollars of payroll. If the trucking company has $500,000 of payroll the manual premium would be $68,500 (5000 x $13.71). Another insurance company might have a rate of $13.45. In this case the manual premium for the same trucking company would be $67,250, a difference of $1,250. For a company whose employees are all classified as clerical the rate might be $.43 per one hundred dollars of payroll. With a payroll of $100,000 the rate would be $430 (1000 x $.43). If the rate from another insurance company is $.39, the premium rate would be $390. The rate for those employers with more than one classification would be determined in the same manner by applying the payroll of employees in each classification to the rate for that classification. A second major factor to be considered in determining the rate an employer pays is the experience modifier or "mod". The mod is a multiplying factor of the company's manual premium determined by the company's loss (or injury) experience. The mod is calculated for a company each year using the company's claims history from the previous three years preceeding the previous year. It is a factor that an employer should pay close attention to because it is an indication of how well or how badly a company is doing in managing workers' compensation costs. The average mod is expressed as 1.00. This means that a company having average losses will pay 100% of the manual premium. If a company experiences higher or lower than average losses, the mod will be higher or lower thus affecting the manual premium. For instance, if a company has higher than average losses it will be assigned a mod that is higher than 1.00. If such a company's mod is calculated to be 1.40 it will pay 140% of its manual premium. If a company has below average losses it will be assigned a mod
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lower than 1.00. For example, with a mod of .75 the company will pay 75% of its manual premium. As an example, the trucking company cited earlier, with a mod of 1.40, would pay a modified premium of $95,900, an additional $27,400, because of the higher mod. A new company receives a mod usually after two years of experience and will normally pay the manual premium until that time. The following chart compares different experience modifiers for our fictional trucking company. Manual Premium $68,500 $68,500 $68,500 Experience Mod .75 1.00 1.40 (Discount)/ Surcharge ($17,125) None $27,400

Premium $51,375 $68,500 $95,900

The mod is determined using a mathematical formula that is too complicated to explain here in detail. However, the employer's insurance agent, carrier or the NCCI have booklets and information that explain in detail the experience modifier calculation. But, as can be seen, controlling a company's experience modifier is essential to reducing and controlling insurance premiums. When the mod is lowered, the premium is lowered. The mod factor of a company can be significantly reduced through implementation of an aggressive safety program. If losses can be reduced, the loss experience of the company can be reduced thereby lowering the mod factor and the insurance premium. Many employers purchase insurance from a commercial insurance company just like they would buy auto insurance or other liability insurance. Some employers meet their workers' compensation liability through a method known as self-insurance. Self-insurance is explained later in this booklet. When buying insurance in the commercial market most employers buy a policy from an insurance agent who writes the policy through an insurance company the agent represents. The remaining employers who are not selfWC-119 (08-07) AI www.dolir.mo.gov/wc
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insured are insured through the residual market, commonly known as the assigned risk pool or "pool". Employers in the pool usually consist of those employers who have extremely bad experience and those with small premiums (under $10,000). Prior to July 1, 1995 policies for pool employers were written by several insurance companies. After that date the new Assigned Risk Pool is serviced by only one insurance company that writes policies for all pool employers and provides loss control and safety programs for those employers. The number of employers in the pool has been reduced considerably since 1994. The Missouri Department of Insurance provides an on-line service where an employer can inquire as to the workers' compensation rates by insurance companies and rate comparisions for all workers' compensation insurers in the state. The website is www.insurance.mo.gov. An employer will need to know all applicable classification codes to inquire about manual rates. It is important that employers shop around when deciding on workers' compensation coverage.

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Safety
"An ounce of prevention is worth a ton of premiums" ne way for a person to maintain good health is prevention. In the same manner, an employer can maintain, and improve, his fiscal health through loss prevention. Loss prevention though a comprehensive safety program will reduce lost time injuries thereby reducing the company's workers' compensation premium and making the company more competitive in the marketplace. Insurance carriers are required by Missouri law to provide, upon request, extensive safety and loss control services for the companies that purchase coverage from that carrier. The most effective way for a company to reduce losses is to use the loss prevention services of its insurance carrier. An additional resource is the Missouri Workers' Safety Program in the Division of Labor Standards. This program provides advice to Missouri's business community on methods of reducing the cost of workers' compensation insurance. This program reviews insurance company safety plans for adequacy and availability and provides certification to satisfactory programs. Review of safety professionals' education and experience is also performed for those wishing placement on a register maintained by the Division. These services are provided at no cost to the employer. The Missouri Workers' Safety Program may be contacted at 573-526-5757. In addition to the Workers' Safety Program there is also the Missouri Safety and Health Consultation Service in the Division of Labor Standards. This program provides a free inspection upon request of all or any part of the employer's facility to identify potential hazards and suggest the least expensive and most expedient remedy for hazard elimination. The Missouri Safety and Health Consultation Service may be contacted at 573-751-3403.
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Even with these resources at work, the company must rely on its own commitment and initiative to reduce workplace injuries. Aggressive management of loss prevention on the part of the employer is the key to reducing losses. There are a number of things company management can do: Clearly state, post, and enforce work site policies that establish a safe and healthy work environment and convey those policies to the employees. Establish clear goals for the company's safety program. Encourage employee involvement in the structure and operation of the safety program. Provide adequate job training and ongoing training of employees so that misunderstanding of duties will not lead to injury. Properly report accidents in a timely manner. Quick response to an injury allows the employer to investigate the matter to determine if changes in the work environment need to be made to prevent future injuries. Periodically communicate with the insurance agent or carrier on matters of concern to the employer.

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Claims Management
"If I had a thousand dollars for every mismanaged claim...." re you scratching your head trying to figure out where to go for effective claims management? One of the most critical areas of service in workers' compensation is claims management. While it will not reduce the number or severity of injuries a company may experience, efficient claims management can reduce the time it takes to get benefits to an injured worker and the time it takes to get that injured worker back to productive employment. For a new company first purchasing workers' compensation insurance, or for an existing company shopping for new coverage, it is important to consider claims management services when selecting an insurance carrier. This may not be easy because sometimes an employer may not realize claims management services of an insurance company are deficient until the employer has already purchased insurance from that company and had a work related injury. But there are things an employer can do. The employer should request informational material from prospective insurance companies. These materials might include client directories, annual reports and any available brochures. When possible, employers should visit the offices of prospective insurance companies to see how business is conducted. It is at this time that the employer would benefit from interviewing claims managers to get a picture of the insurance company's claims management capabilities. In addition, where possible, the employer should talk to other
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employers who are clients of the insurance company to get their insight as to claims management services. Some critical claims management questions the employer should consider are: Is the claims management department of the insurer customer focused and able to meet the employer's unique needs? Does the insurer insure other similar industries? Will the insurer understand the employer's operations and needs? Does the insurer have a claims process that is easily understandable and user friendly? Will the insurer designate a contact person for all claims issues allowing quick response and timely service? Does the insurer have the capability of aggressively investigating potentially fraudulent claims? There are some things that can be done by the employer in house to provide efficiency for the entire claims management process. Employers must respond promptly to workplace injuries when they occur. It is in this early stage of an injury that timely and proper response reduces the possibility of conflict between the employer and employee and may eliminate the need for a claim being filed or even prevent litigation from occurring. The following approaches to resolving claims without adversity can be helpful to employers: 1. Employers must educate employees (including supervisory personnel) about workers' compensation. This training should include the employer's policies concerning workplace accidents and follow-up procedures. The employer is also required by Missouri law to
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display the Division poster explaining an employees rights under workers' compensation. This poster can be obtained from the employer's insurance company or from the Division of Workers' Compensation website at www.dolir.mo.gov/wc. 2. Employers should provide prompt medical attention. Missouri law allows employers to choose the health care provider to treat the injured employee. It is important that the employer choose qualified health care providers to treat the injured workers. Some employers select primary care providers to treat employees. Other employers find that allowing employees to choose their own doctor results in fewer disputes and a higher degree of cooperation from employees. Often, fee arrangements are established with these health care providers to help employers control medical costs. There are managed care organizations certified in Missouri that specialize in occupational injuries and illnesses. Providing prompt medical attention is not only a legal requirement for employers, it communicates to the employee that the employer is concerned about the employee's well being. 3. The employer should designate a staff person who is knowledgeable of workers' compensation to communicate with health care providers and insurance adjusters, and, most importantly, who can communicate with the injured employee regarding each party's responsibilities and rights under the law. 4. The employer must promptly notify its insurer after an injury occurs or after the employer is notified of the injury and request that a claims adjuster immediately contact the injured worker to assure him or her that, when appropriate, medical care will be provided and benefits will be available if lost time occurs. 5. It is important that the injured worker return to work as soon as possible even if the return to work is restricted to modified or transitional duty. Injured workers who return to such temporary duties are kept in their normal daily routine. If an injured worker
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remains off work and out of a normal daily work routine, the worker may become complacent or feel displaced from the job and the employer. Providing timely and quality medical treatment will accomplish this goal. Quick recovery as nearly as possible to the worker's previous state of health can reduce the time a case stays active thereby reducing the total cost. Efficient and cost saving claims management begins with proper and timely reporting to the insurance carrier or third party administrator and to the Division of Workers' Compensation. Filing of the proper forms at the correct time not only moves the case more quickly but also protects your rights as an employer. There are several forms which must be filed with the Division of Workers' Compensation after an injury occurs. 1. Report of Injury. This form, also known as the Form 1, is submitted to the Division by the insurer or third-party administrator (TPA). The employer must report the injury to the insurance company or TPA within five days of the date of the injury or within five days of the date on which the injury was reported to the employer by the employee, whichever is later. The insurer or TPA is responsible for filing within the time frame prescribed by law. For injuries involving no lost time and less than $1,000 in total medical costs, the employer may pay this cost out of pocket rather than through its insurance company. Although a medical only injury of less than $1,000 is reported like any other injury, if it is paid by the employer and not by the employer's insurance
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company, it cannot by law be applied against the employers experience modification. 2. The Notice of Commencement/Termination of Compensation Payments (Form 2) is required to be filed with the Division of Workers' Compensation when compensation payments begin for lost time or for a disability lasting longer than two weeks. This form is completed by the employer, insurer or third party administrator. This form must also be filed with the Division whenever a payment for temporary total or partial disability is paid to an injured worker or whenever compensation payments to an injured worker are terminated for any reason. This form is used by the Division to determine if the amount of payment is correct and to determine the appropriateness of any payment termination. 3. A report of medical costs and temporary disability benefits paid must be filed on the Form 2 within 30 days of the date the injury is reported to the Division. If medical treatment or temporary disability benefits continue past 30 days, a status report including estimated dates of completion of medical treatment and temporary disability benefits must be provided. A final report must be filed upon the conclusion or termination of medical treatment and temporary disability benefits. 4. If the injured worker files a Claim for Compensation (Form 21), the Division forwards a copy to the employer and insurer or thirdparty administrator. The employer, insurer or third-party administrator must file an Answer to Claim for Compensation (Form 22) within 30 days from the date the Division acknowledged the claim. Claims management does not end here. The Division of Workers' Compensation's Dispute Management Unit provides early dispute resolution and mediation services for employees and employers/insurers to resolve any disputes over medical treatment and temporary benefits that may arise. This service of the Division
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is for parties to the case to resolve those disputes before the case gets to the adjudication process thereby becoming more costly. Mediation is an informal process to help disputing parties arrive at mutually satisfactory agreements without the necessity of litigation. You can obtain more information about the mediation services available by calling 1-888-837-6069. If you need additional information about workers' compensation or have questions about your rights and responsibilities under the law, call the Division of Workers' Compensation at our employers' toll free number 1-888-837-6069. Trained information specialists will be happy to assist you with general questions.

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Self Insurance
"To self-insure you have to be committed."

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any employers purchase insurance from an insurance company. Other employers meet their workers' compensation liabilities through a method known as selfinsurance. When an employer qualifies to self-insure, that employer becomes financially responsible for all workers' compensation liabilities incurred. There are two types of self-insurance - individual and trusts. A trust is governed by a board of trustees which must be established to provide workers' compensation coverage for a group of private employers in the same industry, employer members of an association or a group of public employers. These small to midsized employers join together to share losses in a joint and several liability cooperative. With individual self-insurance the employer is wholly responsible for its workers' compensation liabilities. There are specific application and financial requirements including an effective safety program before a trust or individual employer is given the authority to self-insure. Such authority is granted by the Self-Insurance Unit in the Missouri Division of Workers' Compensation which can be contacted at 573-751-3711 for additional information. Most importantly, an employer wishing to self-insure must have the financial capability to self-insure. The inability of an employer to meet financial obligations of work related injuries will directly impact, sometime catastrophically, the entire financial stability of the company. The major advantage of self-insuring is reduced costs. In- house control of claims or through a third party administrator and aggressive loss prevention can reduce costs over what might be paid when purchasing insurance on the open market. The potential of reduced costs, however, must be weighed against the financial commitment necessary to self-insure.

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Additional Costs
"Who's on first, what's on second"

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rior to 1994, the operating expenses of the Division of Workers' Compensation were funded by a two percent tax on an employer's net workers' compensation insurance premium and on calculated equivalent premiums of self-insurers. While the two- percent tax is still in place, a change in the law in 1993 allows for suspension or reduction of the tax when it is not needed for administrative costs of the Division. A 2003 law change imposed an administrative surcharge on the deductable portion of insurance policies. In a similar manner, a surcharge on workers' compensation premiums and equivalent premiums for self-insured employers is assessed to finance the Second Injury Fund. This surcharge can be reduced or suspended when the balance in the fund exceeds a certain amount. The surcharge is capped at 3%. The Second Injury Fund, although effecting an employer' insurance policy only when the surcharge described above is in place, assists injured employees when an injury results in additional disability for which the employer is not solely liable. Let's say a worker was injured five years ago and sustained a permanent disability from that injury. That is the first injury. The worker is injured again. That is the second injury. The second injury results in a greater disability than the worker had as a result of the first injury. Does the employer pay for the entire disability?

No. The employer pays only for the disability resulting from the second injury. The difference between the disability from the first injury and the disability from the two injuries combined is paid from the Second Injury Fund. Current law also provides for payments from the Second Injury Fund for medical treatment charges, burial expenses or death benefits for employees who are employed by an employer who is required under the law to be insured but fails to insure.
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A Final Note
"Give employees a little R & R (rewards and recognition)" mployers can benefit from making changes that enable them to reduce costs. Shopping for insurance, as an employer shops for the best and lowest priced products to sell to the consumer, or to use in the manufacturing process, is a key element of control. This guide briefly explains those factors an employer must consider to find the right workers' compensation coverage. In addition to the factors described in this guide, there are other things, simple things, an employer can do to reduce injury costs and to prevent the injury from occurring altogether. Develop a program to recognize and reward employees and departments that are doing well in reducing injuries. Involve all employees in improving the workers' compensation program in the company. Develop a plan to determine priorities; set specific goals and target dates. Establish regular procedures for evaluating the workers' compensation program. Assess safety policies as well as numbers to see if they are successful.

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Fraud Warning
t is a crime for any person including employers, employees, medical providers, insurance companies, insurance agents, attorneys or any other person to lie or give false or fraudulent information in order to receive any benefit, payment or financial advantage that the person is not entitled to under the Missouri Workers' Compensation Law. Prosecutions are handled by the Missouri Attorney General's office. Offenses are a class D felony, with up to five years in prison and, a fine up to ten thousand dollars or double the value of the fraud whichever is greater and restitution to the defrauded person or persons. Other violations of the Workers' Compensation law are a class A misdemeanor. There is also a noncompliance provision in the Workers' Compensation Law that states that any employer that knowingly fails to insure when required by law for its workers' compensation liability is also guilty of a class A misdemeanor and a fine of an amount up to three times the annual premium the employer would have paid had the employer been insured or fifty thousand dollars whichever is greater. Any person may file an allegation of fraud or noncompliance with the Division of Workers' Compensation by calling 1-800-5926003. Complaints can be anonymous and are referred to the Division of Workers' Compensation's Fraud and Noncompliance Unit staff who investigate the complaint.

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RESOURCES
"You don't have to go it alone" For more information you may contact: Missouri Division of Workers' Compensation P.O. Box 58 Jefferson City, MO 65102-0058 573-751-4231 Employer Toll Free Information Line 1-888-837-6069 Website: www.dolir.mo.gov/wc Worker's Safety Program 573-526-5757 Dispute Management Unit 888-837-6069 Self-Insurance Unit 573-526-6004 Fraud and Noncompliance Unit P.O. Box 1009 Jefferson City, MO 65102-1009 800-592-6003 Missouri Department of Insurance Property and Casualty Section P.O. Box 690 Jefferson City, MO 65102-0690 1-800-726-7390 or 573-751-3365 National Council on Compensation Insurance Midwestern Division 1999 Wabash Avenue P.O. Box 19430 Springfield, IL 62794-9430 1-800-622-4123 or 217-793-1100

Missouri Department of Labor and Industrial Relations

WC-119 (08-07)
P.O. Box 58 Jefferson City, MO 65102-0058

DIVISION OF WORKERS' COMPENSATION

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