If you have workers, you need workers’ compensation. That’s the law in almost every state and for almost every employer – but this doesn’t mean the laws are consistent from state to state. The requirements and costs can vary significantly under state laws. Faced with a complicated maze of laws, many employers end up overpaying. The good news is that you can get a premium refund for workers’ comp overpayments.
The History of Workers’ Compensation
According to the Social Security Administration, workers’ compensation programs developed in the early 1900s, when social and welfare programs were seen as the domain of the states. As a result, each state was in charge of creating its own program. In the years since, there have been some reforms, including changes in the late 1980s and early 1990s in response to rising employer costs.
However, the costs can still be significant. Based on March 2022 numbers from the U.S. Bureau of Labor Statistics, private industry employers paid an average of $0.45 per hour per worker for workers’ compensation, which is 1.2% of total compensation. That might not sound like much, but for an employee who works 40 hours a week, 50 weeks a year, it comes to $900 a year. For companies with a large number of employees, these costs can add up fast.
Calculating Workers’ Compensation Rates
Employers won’t necessarily pay average workers’ compensation costs. Some will pay more, and some will pay less. According to Investopedia, workers’ compensation costs depend on a number of factors including the state, the industry, the company’s annual payroll, the company’s claims history and the type of work being done.
The experience modification factor – sometimes called the experience mod, the e-mod, the x-mod or just the mod – can have a big impact on costs. The experience mod is a multiplier that can increase or decrease the workers’ comp premium based on the employer’s loss history, typically based on the last three years. To calculate the experience mod, you need to compare actual losses to expected losses for the industry.
Ample Opportunity for Error
Workers’ compensation premium calculations are complex. If any of the figures used are incorrect, the result will also be incorrect.
For example, if the wrong job classifications are used, the employer might end up paying rates that are based on more dangerous work. Likewise, payroll errors can also result in higher claims. Mistakes can also stem from errors in claim valuation and experience mod calculation. In the end, there are many different numbers, and the calculations are performed in a multi-party system, and this creates ample opportunity for error.
Miscalculations are common, and most of these miscalculations result in overpayments. In fact, 80% of our forensic account reviews reveal an overpayment. Even small mistakes can add up to big overpayments when you’re dealing with a large number of employees and a prolonged period of time. We’re talking tens of thousands of dollars in many cases, sometimes even more.
Recovering Your Overpayments
Workers’ compensation premium calculations are complicated, but getting a premium refund doesn’t have to be. Insurance carriers aren’t purposefully overcharging employers. If a mistake is discovered, it will be corrected, and you’ll get the premium refund that you’re entitled to.
Most employers don’t have the internal resources needed to conduct the type of expert and thorough workers’ compensation premium audit required to uncover errors. This is true even among industry leaders. They’re experts in their own industry, not in workers’ compensation. That’s OK.
Here at Cost Recovery Consultants, we perform workers’ compensation premium audits for employers. There are no upfront costs. If we uncover an overpayment – and in most cases, we uncover a large one – we’ll take our fee out of the refund amount. We can also make recommendations that will help you save on your workers’ compensation costs in the future.
That’s right. We do the work. You don’t pay anything unless we recover a premium refund for you. When you consider that most employers are overpaying, getting a premium audit done just makes sense. We do audits on various types of employers and workers’ compensation plans, including guaranteed cost policies and pay-as-you-go policies. We can even help with accounts in collection and provide litigation support.
If there’s no recovery, there’s no cost, and you can rest easy knowing you’re not overpaying. If there is a recovery – and there usually is – you’ll get the refund you’re owed. Why wait? Contact us to get started.
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