Not understanding Workers' comp costs everyone

Workers' compensation is not a particularly riveting topic. Financially, however, it is very significant to every veterinary practice, its staff members and, ultimately, to clients.

Workers' compensation is more complex, legally, than many people believe. For readers who are not practice owners, I want to begin by answering a question which I know my employees always wondered about. That is, "Why the heck are the boss and the office manager always so wound up about workplace safety and Workers' comp claims?"

Several answers

There are several answers.

First, of course, any good employer should be concerned about the physical welfare of his or her workers. Good employees are difficult to find and when one is found, it should be a primary concern of the animal hospital to provide a safe and healthy workplace for that employee.

There is more than just OSHA to consider. Sick and injured workers are bad for morale and bad for business. And, if an owner helped cause an unsafe condition which led to an injury, the feeling of guilt can last a long time.

Second, there is a major economic issue involved for a practice when it comes to safety training and providing a safe workplace. If you were to ask the typical employee at an animal hospital what Workers' compensation insurance is, he or she would probably say that it is a government program to help pay workers' medical bills when they are injured at work and to pay their salary while they are off from work. If you asked whether it has any impact on the practice's ability to give pay raises, they would more than likely say no, because the government pays.

Wrong, wrong, wrong

Virtually everything about this common perception of Workers' compensation is wrong. Further, it does have a significant impact on a practice's ability to give raises to workers.

Here is how it really works and why you, as an owner or employee, should be concerned about workplace safety.

First, a brief history lesson.

In the olden days, businesses were subject to the same laws concerning negligence as private individuals. That is, if a business acted negligently and a worker was hurt, the business could be sued.

What began happening was that businesses did negligent things, such as providing rickety ladders, and employees were being injured. The resulting lawsuits began putting businesses out of business.

If the business was short on cash and liability insurance, the injured worker could end up hurt, unable to work and also unable to collect on his negligence judgment. The risk multiplied every time a new employee came on board. That system was a lose/lose scenario for businesses and workers alike.

Government to the rescue! But not in the way most people think. Many years ago, state governments decided to devise a system of special insurance for employees who were hurt on the job. It became mandatory that businesses carry such insurance. Would the government pay for it? Not a chance. The business would pay for it. To make the system more palatable to industry, however, there would be a trade-off. In exchange for providing employer-paid Workers' compensation insurance, most businesses would be insulated from private lawsuits for general negligence leading to the injury of an employee.

Such protection might not extend to exposing workers to horribly dangerous and unreasonable hazards, but most private lawsuits against employers would be eliminated.

Still cranky

So, you ask again, why is the boss so cranky and obsessed about this insurance? It comes from the high cost of the coverage and how the employer's premiums are calculated.

Working on dogs and cats is an inherently dangerous thing to do. So your state and your insurance companies have calculated just how dangerous they think it is; way more than accounting. Less than building skyscrapers or underwater welding.

In short, somewhere around $3 to $10 per $100 of payroll. If you work at a three-doctor hospital, that translates to between $6,000 and $20,000 per year. You never see the money, but your boss pays this for the luxury of employing you and your co-workers.

The formula for figuring out how much the premiums actually are, is more complicated.

Simply, the more bad "experiences" your workplace has (the more claims that it generates for injuries), the higher the "experience modifier" the insurance company calculates.

Understanding the actual formula for calculating this "modifier" is like trying to pronounce Mr. Spock's Vulcan name. It cannot be done by normal humans. The upshot, however, is that this modifier is multiplied by the premium total. If your practice has a bad claim record, the modifier may be 1.5 or 2.0, so instantly, your boss goes from paying $20,000 per year to $30,000 or $40,000. And the business is stuck with the high modifier for several years, even after the safety record improves.

So the system leaves your employer very anxious to avoid workplace injuries, especially serious ones. It also makes employers want to get injured employees back to work as soon as possible, in order to minimize the drain on the insurance. It's all in the magic of the modifier.

But you know you don't fake workplace injuries. And you know that if you were injured you would come back to work as soon as you could. Unfortunately, not everyone is so honest.

Fraudulent claims

Private insurance watchdogs have estimated in my home state of New York, a full third of all Workers' compensation claims are fraudulent.

Furthermore, insurance companies have no real system for ferreting out fraud. This is up to the individual insured employer.

Furthermore, fraud allegations are exceptionally difficult to prove. Again, it is up to the company to show that an injury is not really continuing to bother the employee or that he or she could really return to work.

The boss has to not only provide a safe workplace and pay the premiums, but has to do the insurance company's detective work as well. Beginning to see why the subject makes him or her cranky? See why when the $25,000 Workers' comp bill shows up on his or her desk the boss is less able to dole our those generous raises?

Personal anecdote

Let me close with an anecdote from my personal experience as an employer. It explains how veterinary hospital owners not only have to be safety inspectors, detectives and premium payers, but must also be nurses and mommies.

About five years ago, I had a nice young lady in my employ who managed to get herself bitten by a cat. I immediately sought medical attention for her and the doctor prescribed a 10-day course of Augmentin. The next day I asked her how her injured hand was. She showed it to me and it looked terrible-swollen, red and puffy! I asked her if it felt any better and she responded, "I'm sure it will when I get around to picking up the medicine."

Horrified, I personally drove her to the pharmacy and gave her the rest of the day off. Two days later, I asked her how her hand was doing. She showed it to me. Still red, puffy and awful-looking.

"How could this be?" I asked her.

She explained that she kept forgetting to take the pills, but she was sure that as soon as she got around to taking them, the sensation would return to her thumb and first three fingers.

For the next 10 days I followed this employee to her car to personally observe her taking her pills. I called her at home nightly to remind her. Finally, she managed to heal. No permanent loss of function in her hand. No permanent partial hand disability lingering on my experience modifier until time itself comes to a close.

Veterinary school only teaches you how to treat animals. Being a boss and a caregiver is learned on the job.

Dr. Allen is the owner of a four-doctor small animal practice in upstate New York. He is also a partner in Associates in Veterinary Law, P.C., a practice specializing in tax, probate and other services for health professionals. Questions can be directed to aVL, 1970 New York Route 12, Binghamton, N.Y. 13901; or call (607) 648-6113.