Orange County businesses are bracing for an expected increase in workers’ compensation insurance premiums.
State Insurance Commissioner Steve Poizner could suggest a 5% rise in premiums by the end of November based on a recommendation from a nonprofit group.
After Gov. Arnold Schwarzenegger’s 2004 reforms, premiums have been steadily dropping. They’re now so low that it’s below the cost of administering claims, according to some in the industry.
If Poizner recommends an increase, it would be the first in four years. Insurers don’t have to follow his lead but usually do.
Under Schwarzenegger’s reform, injured workers had to see the insurers’ doctors rather than their own.
That’s led to a decline in the number of claims and medical bills, allowing insurers to offer cheaper premiums. The state reports about 800,000 claims have been filed per year, down from the 1 million per year average seen before Schwarzenegger’s reforms.
Employers have made their own efforts to reduce costs, mostly by keeping their workplaces safer.
Good track records in safety not only cut medical bills, but also can lead to lower premiums down the road. Such is the case for blue-collar work, where injuries seem to be an unfortunate cost of doing business.
Some companies, such as PBC Cos. in Brea, have gone the self-insured route.
Two years ago PBC dropped its insurer and posted a bond with the state to cover workers’ comp claims.
The bond, through the California’s Department of Industrial Relations Self-Insured Program, allows employers to provide their own insurance coverage.
The company, which employs 500 in the county, does residential and commercial concrete flatwork, masonry and stone work.
PBC has several in-house programs designed to keep its workplace safer, reducing its risk for workers’ comp claims, according to Victor Thibeault, director of risk and safety. Thibeault also oversees the company’s workers’ comp program.
One of PBC’s biggest programs is an incentive-based one for workers.
Six months ago, itstarted a point system for those volunteering for online safety training, according to Thibeault.
“These online classes supplement the company’s other scheduled safety training programs,” he said.
Workers going injury free each quarter also earn points.
Prizes,ranging from clock radios and digital headphones to big-screen TVs and refrigerators,are made eligible in drawings that employees enter with the points they’ve earned.
The families of employees are included in the process, with prize catalogs sent home.
“The idea is they’ll keep the pressure on dad to be safe and earn points,” Thibeault said.
The family wins with a healthy wage earner and the company wins with a productive employee who’s not injured, he said.
When Santa Ana-based Ajax Boiler Inc. was in the market to lower its workers’ comp costs it ended up working with a professional employment organization, known as a PEO.
A PEO typically handles the administration side of employment, providing paperwork, establishing and maintaining employee files, processing payroll, filing payroll taxes, developing employee handbooks, benefit administration, workers’ comp management, compliance assistance and human resource support.
“It took a lot of the burn off us,” said Jane Terry, president of Ajax Boiler.
Ajax, a maker of industrial water heaters, has about 80 workers for which Barrett Business Services Inc. oversees human resources.
The company said it saved $185,000 just a year after its partnership with Barrett.
Barrett is a human resources outsourcing company, including PEO work, headquartered in Vancouver, Wash. It trades publicly with a market value of about $200 million.
After taking in bids from several insurance companies, Terry said the company decided it was best to go the PEO route.
Barrett competes with insurance brokerages that offer a similar price for workers’ comp. But Barrett says it also offers safety resources, human resources, benefits and other services.
Lowering workers’ comp expenses has been key, said Leslie Perry, manager of the Santa Ana branch for Barrett.
Being self-insured also forces a company to do everything it can to lower its exposure to accident risk, Perry said.
Four years ago Barrett would save a company 30% to 50% of their costs, but as rates came down that number has been reduced to 10% to 20%, she said.
The firm caters to the blue-collar type of company, including manufacturers, bakeries and construction companies.
Its services are more cost effective for companies with 400 employees or less, because bigger ones tend to have their own HR service, Perry said.
Barrett works closely with employees on safety issues, using manuals and training sessions to instill safe practices, Perry said.
One of the most common workplace hazards is simple housekeeping, she added.
“It’s huge. In manufacturing, people slip over random things,” she said.
In construction, strains from heavy lifting are one of the most common injuries.
Barrett also tries to cut down on employment fraud by screening job applicants to eliminate drug users and ex-criminals. Statistically, eliminating ex-cons and drug users from becoming employees makes for a safer environment, she said.
Cutting down on cases where false claims are made has been another way Barrett keeps costs down.
Barrett also says it has learned to close workers’ compensation cases faster, which lowers costs, Perry said.
In Orange County, the company handles human resources, insurance and benefit needs for 120 companies.
Local clients also include Newport Beach-based Nordic Security Services and Cypress-based USA Express and Tire Service Inc.
