Sunday, December 6, 2009
The Texas Department of Insurance allows employers with similar businesses to form purchasing groups to save on their workers' compensation premiums and to promote safety in the workplaces. The Texas Green Industry formed a purchasing group for workers' compensation in February 2004. Texas Mutual is the insurance company underwriting the group. The first dividend was paid in 2005. The dividend was $72,519. The dividend for 2009 was just announced November 19, 2009. The dividend was $760,070. Due to increased participation by eligible employers, the dividend has grown over 100% in just 5 years. Texas Mutual Insurance Company is the leading writer of group purchase programs in Texas.
By joining a purchasing group in Texas, the employer gets the premium discount for the premium volume of the whole group, not just his/her own premium. The premium discount for The Texas Green Industry for 2009 was 10.9%. Combining this discount and then participating in a work comp health care network can achieve substantial savings. The work comp health care network savings is an additional 12%. The employer then is eligible for a dividend based on his/her own experience and another dividend based on the experience of the group as a whole. The combination of all these discounts can reduce the employer's standard workers' compensation premium over 30 to 40%. Texas employers will retain their own workers' compensation experience modifier. In addition to landscape contractors, The Texas Green Industry Workers' Compensation Group Purchasing Program is open to qualifying wholesale and retail nurseries. Irrigation contractors and other green industry businesses may also qualify. The qualifying class codes for the Texas Green Industry group are: 0005, 0035, 0042, 5183, 8017, 8018, and 9014.
Code 0042 is the workers' compensation code for landscape contractors. This code is considered a construction classification, and includes planting trees, shrubs, plants or flowers, as well as planting or sodding grass for lawns or commercial landscapes. A landscape contractor my also perform lawn maintenance services. Those payrolls are rated separately under code 9014, Lawn Maintenance - By Contract.
In addition to dividends and premium discounts, Texas Mutual assigns a loss prevention consultant to the group. The Texas Green Industry has a consultant that is an expert in the group's common operations. All members of the group adopt a Safety Manual - written exclusively for Texas Green Industry policyholders that includes workers' safety programs, guidelines on how to implement a safety plan plus loss control engineering provided by Texas Mutual. All of this is at no additional cost to the employer.
By joining a purchasing group in Texas, the employer gets the premium discount for the premium volume of the whole group, not just his/her own premium. The premium discount for The Texas Green Industry for 2009 was 10.9%. Combining this discount and then participating in a work comp health care network can achieve substantial savings. The work comp health care network savings is an additional 12%. The employer then is eligible for a dividend based on his/her own experience and another dividend based on the experience of the group as a whole. The combination of all these discounts can reduce the employer's standard workers' compensation premium over 30 to 40%. Texas employers will retain their own workers' compensation experience modifier. In addition to landscape contractors, The Texas Green Industry Workers' Compensation Group Purchasing Program is open to qualifying wholesale and retail nurseries. Irrigation contractors and other green industry businesses may also qualify. The qualifying class codes for the Texas Green Industry group are: 0005, 0035, 0042, 5183, 8017, 8018, and 9014.
Code 0042 is the workers' compensation code for landscape contractors. This code is considered a construction classification, and includes planting trees, shrubs, plants or flowers, as well as planting or sodding grass for lawns or commercial landscapes. A landscape contractor my also perform lawn maintenance services. Those payrolls are rated separately under code 9014, Lawn Maintenance - By Contract.
In addition to dividends and premium discounts, Texas Mutual assigns a loss prevention consultant to the group. The Texas Green Industry has a consultant that is an expert in the group's common operations. All members of the group adopt a Safety Manual - written exclusively for Texas Green Industry policyholders that includes workers' safety programs, guidelines on how to implement a safety plan plus loss control engineering provided by Texas Mutual. All of this is at no additional cost to the employer.
Here in Texas, it has been difficult to influence employers to implement drug testing in the workplace. In the construction industry, it has been even more difficult. As employees come and go so rapidly, employers fail to recognize the benefits of drug testing. According to Jonathan Gerber of Cornell University, a new study reveals; “construction companies that drug test appear to be successfully reducing workplace injuries”. Drug testing was unheard of twenty years ago. Recent studies have estimated that as high as 49% of employers nationwide have implemented some form of drug testing.
The incidence of high numbers of alcohol and drug abuse in the construction industry along with the high risk of workplace injuries have caused most construction companies in Texas to at least give lip service to drug testing. Many insurance companies now require that the construction company submit their employee manual regarding safety to qualify for insurance.
Jonathan Gerber’s study entitled “An Evaluation of Drug Testing in the Workplace: A Study of the Construction Industry,” found the following:
1. Over 50% reduction in its injury rate within two years of implementing a drug-testing program.
Within two years of starting a drug-testing program, the injury rate had decreased by over 50%.
2. The average company that drug tests experienced a greater reduction in its workers’ compensation experience-rating modification factor,as opposed to companies that did not implement drug testing. Seventy-two percent of respondents with drug-testing programs in place said they think the benefits of drug testing outweigh the costs.
If you decrease injuries, you will in almost always reduce the workers' compensation experience-rating modification factor. Companies implimenting drug-testing programs experienced greater reductions in the experience-rating modification factor than those that did not implement drug-testing. Over 70% of employers with drug-testing programs said that the benefits of drug-testing outweighed the cost of the program.
3. The most positive impacts of the programs concerned are the overall safety of the work environment, reductions in workers’ compensation costs, and the quality of job applicants.
A drug-testing program that is fully supported by the employer with benefit the employer in three ways: lower workers' compensation costs, greater safety in the workplace and a better quality of job applicants.
4. Drug testing is most effective in reducing workers’ compensation experience-rating modification factors in the first three years immediately following the implementation of a program.
Because of the nature of how the workers' compensation experience modifier is calculated, the first three years after the drug-testing program has started will experience the greatest reduction in the experience modifier. Remember other factors may and will also play into this calculation.
5. The majority of company officials who responded to the survey think the problem of drug and alcohol abuse on the job has dropped in the past five years.
Employers responding to the survey believed that the incidence of drug and alcohol abuse on the job has dropped.
6. The number one reason why employers in the construction industry drug test their employees and job applicants is to promote the safety of their workers. In addition, company officials believe that drug testing contributes positively to a company’s image and is an effective deterrent in preventing drug abuse.
Safety is the number one reason why employers drug-test their employees. The best employers drug-test job applicants. This enhances the employer's image because current employees understand the employer's commitment to safety. Drug-testing job applicants also deters applicants the use and abuse drugs and alcohol.
7. The number one reason why some employers in the construction industry do NOT drug test their employees and job applicants is a concern for increased legal liability. Other reasons include concern that drug testing is too costly.
Cost is the number one reason that employers do not drug-test. Perceived exposure to legal liability is the other prime reason. Here's the reason for the legal liability concern. If you commit to drug-testing, you must drug-test all employees. Failure to drug-test even one employee can result in additional liability exposure if that one employee causes harm to property or another employee. Once you commit to drug-testing you have to keep drug-testing.
8. Larger construction companies are significantly more likely to test workers for drugs and alcohol. This could make small firms particularly vulnerable to substance abuse problems as drug users may intentionally seek employment where they are not likely to be detected.
You find that virtually all large construction companies drug-test. They have the resources to commit to faithfully drug-test. Smaller companies with less resources are more likely to avoid drug-testing. The real problem is that job applicants know who drug-tests and who doesn't drug-test. For this reason, employees with abuse problems gravitate to these companies.
So is drug-testing being to costly? In addition to the saving from the reduction to your experience modifier, you reduce your exposure to general liability claims. If your employee is intoxicated or high on the job, he may cause damage to either a third partier’s property or to the third party themselves or another employee. This could be a negligence claim.Texas lawyers like general liability claim litigation more than work comp litigation. They also like any type of negligence claim. The work comp system took away lump sum settlements years ago, but this is not true in general liability claims The small employer is putting his/her business at risk by not drug-testing. I have seen high insurance costs or the inability to obtain insurance cause many small construction companies to go out of business. Drug-testing is not too costly. Properly administrated, drug-testing can put more money on the bottom line.
The incidence of high numbers of alcohol and drug abuse in the construction industry along with the high risk of workplace injuries have caused most construction companies in Texas to at least give lip service to drug testing. Many insurance companies now require that the construction company submit their employee manual regarding safety to qualify for insurance.
Jonathan Gerber’s study entitled “An Evaluation of Drug Testing in the Workplace: A Study of the Construction Industry,” found the following:
1. Over 50% reduction in its injury rate within two years of implementing a drug-testing program.
Within two years of starting a drug-testing program, the injury rate had decreased by over 50%.
2. The average company that drug tests experienced a greater reduction in its workers’ compensation experience-rating modification factor,as opposed to companies that did not implement drug testing. Seventy-two percent of respondents with drug-testing programs in place said they think the benefits of drug testing outweigh the costs.
If you decrease injuries, you will in almost always reduce the workers' compensation experience-rating modification factor. Companies implimenting drug-testing programs experienced greater reductions in the experience-rating modification factor than those that did not implement drug-testing. Over 70% of employers with drug-testing programs said that the benefits of drug-testing outweighed the cost of the program.
3. The most positive impacts of the programs concerned are the overall safety of the work environment, reductions in workers’ compensation costs, and the quality of job applicants.
A drug-testing program that is fully supported by the employer with benefit the employer in three ways: lower workers' compensation costs, greater safety in the workplace and a better quality of job applicants.
4. Drug testing is most effective in reducing workers’ compensation experience-rating modification factors in the first three years immediately following the implementation of a program.
Because of the nature of how the workers' compensation experience modifier is calculated, the first three years after the drug-testing program has started will experience the greatest reduction in the experience modifier. Remember other factors may and will also play into this calculation.
5. The majority of company officials who responded to the survey think the problem of drug and alcohol abuse on the job has dropped in the past five years.
Employers responding to the survey believed that the incidence of drug and alcohol abuse on the job has dropped.
6. The number one reason why employers in the construction industry drug test their employees and job applicants is to promote the safety of their workers. In addition, company officials believe that drug testing contributes positively to a company’s image and is an effective deterrent in preventing drug abuse.
Safety is the number one reason why employers drug-test their employees. The best employers drug-test job applicants. This enhances the employer's image because current employees understand the employer's commitment to safety. Drug-testing job applicants also deters applicants the use and abuse drugs and alcohol.
7. The number one reason why some employers in the construction industry do NOT drug test their employees and job applicants is a concern for increased legal liability. Other reasons include concern that drug testing is too costly.
Cost is the number one reason that employers do not drug-test. Perceived exposure to legal liability is the other prime reason. Here's the reason for the legal liability concern. If you commit to drug-testing, you must drug-test all employees. Failure to drug-test even one employee can result in additional liability exposure if that one employee causes harm to property or another employee. Once you commit to drug-testing you have to keep drug-testing.
8. Larger construction companies are significantly more likely to test workers for drugs and alcohol. This could make small firms particularly vulnerable to substance abuse problems as drug users may intentionally seek employment where they are not likely to be detected.
You find that virtually all large construction companies drug-test. They have the resources to commit to faithfully drug-test. Smaller companies with less resources are more likely to avoid drug-testing. The real problem is that job applicants know who drug-tests and who doesn't drug-test. For this reason, employees with abuse problems gravitate to these companies.
So is drug-testing being to costly? In addition to the saving from the reduction to your experience modifier, you reduce your exposure to general liability claims. If your employee is intoxicated or high on the job, he may cause damage to either a third partier’s property or to the third party themselves or another employee. This could be a negligence claim.Texas lawyers like general liability claim litigation more than work comp litigation. They also like any type of negligence claim. The work comp system took away lump sum settlements years ago, but this is not true in general liability claims The small employer is putting his/her business at risk by not drug-testing. I have seen high insurance costs or the inability to obtain insurance cause many small construction companies to go out of business. Drug-testing is not too costly. Properly administrated, drug-testing can put more money on the bottom line.
Friday, November 20, 2009
Texas is the only state in the union that allows employers to "opt out" of the workers' compensation system. An employer is assumed to be a subscriber to the workers' compensation system unless he/she files the appropriate form (DWC-5) with the Texas Department of Insurance that tells the state that the employer is not carrying workers' compensation insurance. The employer that has filed the DWC-5 is considered to be a nonsubscriber.
The Texas Department of Insurance periodically surveys both subscribers and nonsubscribers in regards to the health of the workers' compensation system. The latest survey (2006) found that approximately 23% of Texas Employers were nonsubscribers. This represented approximately 1.7 million workers. This is the second lowest amount of employers that were nonsubscribers since the Texas Department of Insurance started taking these surveys in 1993. It is also the second highest number of employees working for nonsubscribers since 1993. What does this mean?
Large employers (500 or more employees) are continuing to opt out of the system. These employers thought that they could do a better job than the Texas workers' compensation system providing injured workers with medical and wage benefits at a lower cost. Medical costs in the workers' compensation system were perceived as being to high. These employers either have or contract risk managers to enforce safe working conditions in the workplace. They also have alternative types of insurance to cover medical obligations to injured employees. In addition they purchase employers' liability separately to cover any legal obligations that may arise in the case of an injured employee. Recent decisions by the Texas Supreme Court have raised the bar in proving negligence. With a properly enforced safety program, negligence is very hard to prove in Texas.
Small employers (1-4 employees) were returning to the workers' compensation system in the 2006 survey. In 1995, 45 % of small employers were subscribers while in 2006, 57% were subscribers. Workers' Compensation premiums have been declining since 2004. This has brought many employers back into the system. I believe that price and not the threat of lawsuits is the driving force in determining whether or not the employer buys workers' compensation insurance. I believe that any survey conducted today would see more employers dropping out of workers' compensation. The general state of the economy would be the reason. In trying to be more competitive, employers are looking for ways to drop costs and workers' compensation is going to be one of the first costs to go.
An interesting fact found in these surveys of Texas Employers is that nonsubscribers are more satisfied with their programs than subscribers. One of the main reasons for this is the ability of the employer to manage medical and wage replacement costs more effectively than the workers' compensation system.
It must be noted that nonsubscription rates vary by industry. The Mining/Utilities /Construction industry has the lowest rate of nonsubscription. This is due to the fact that workers' compensation is required by contract. All government contracts and most general contractor contracts require workers' compensation insurance. The service and the food industry sectors continue to have the highest rate of nonsubscribers. The food services industry (restaurants) continues to have the highest nonsubscription rate at over 50%.
The Texas Department of Insurance periodically surveys both subscribers and nonsubscribers in regards to the health of the workers' compensation system. The latest survey (2006) found that approximately 23% of Texas Employers were nonsubscribers. This represented approximately 1.7 million workers. This is the second lowest amount of employers that were nonsubscribers since the Texas Department of Insurance started taking these surveys in 1993. It is also the second highest number of employees working for nonsubscribers since 1993. What does this mean?
Large employers (500 or more employees) are continuing to opt out of the system. These employers thought that they could do a better job than the Texas workers' compensation system providing injured workers with medical and wage benefits at a lower cost. Medical costs in the workers' compensation system were perceived as being to high. These employers either have or contract risk managers to enforce safe working conditions in the workplace. They also have alternative types of insurance to cover medical obligations to injured employees. In addition they purchase employers' liability separately to cover any legal obligations that may arise in the case of an injured employee. Recent decisions by the Texas Supreme Court have raised the bar in proving negligence. With a properly enforced safety program, negligence is very hard to prove in Texas.
Small employers (1-4 employees) were returning to the workers' compensation system in the 2006 survey. In 1995, 45 % of small employers were subscribers while in 2006, 57% were subscribers. Workers' Compensation premiums have been declining since 2004. This has brought many employers back into the system. I believe that price and not the threat of lawsuits is the driving force in determining whether or not the employer buys workers' compensation insurance. I believe that any survey conducted today would see more employers dropping out of workers' compensation. The general state of the economy would be the reason. In trying to be more competitive, employers are looking for ways to drop costs and workers' compensation is going to be one of the first costs to go.
An interesting fact found in these surveys of Texas Employers is that nonsubscribers are more satisfied with their programs than subscribers. One of the main reasons for this is the ability of the employer to manage medical and wage replacement costs more effectively than the workers' compensation system.
It must be noted that nonsubscription rates vary by industry. The Mining/Utilities /Construction industry has the lowest rate of nonsubscription. This is due to the fact that workers' compensation is required by contract. All government contracts and most general contractor contracts require workers' compensation insurance. The service and the food industry sectors continue to have the highest rate of nonsubscribers. The food services industry (restaurants) continues to have the highest nonsubscription rate at over 50%.
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