Reasons for the Increase of Cost of Workers Compensation Insurance 

Workers’ compensation is defined as a type of business insurance coverage, which helps in paying for medical expenses as well as rehabilitating the costs if employees get injured or get sick while working. It is a system where insurance reimburses the damages of employees, which took place in the course of employment (Brandenburg et al.,2017). The essay aims at showing how the cost of insurance has increased using the elements provided as well as showing how those elements impact workers’ compensation insurance.

2 Factors that led to the high cost of workers ‘compensation and healthcare

            (A) Increase in leakage

Leakage in workers’ reward is known as the difference between the amount that was paid during the time of claim and the amount that adjuster was supposed to spend in the application that was made. It is the lost funds during the payment of medical expenses at the time of giving indemnity and the claims handling cost, which results in a higher price of compensation for the employer. Leakage is classified into two that is hard leakage and soft leakage. Hard occurs when there is was no doubt during the payment of the compensation. Mild leakage is known as the payment of questionable at the time of the claim, or there is a high negotiable settlement.

When such leakages occur in the organization, supervisors and the claim manager are not willing to admit that they contributed in any way when such a monetary mistake happened. However, under this circumstance,  files are supposed to be reviewed where auditors are supposed to come up with the final report as to why such a mistake occurred when doing compensation. Increased leakages in workers’ compensation may also happen in the case where the responsible people of giving out funds are not responding to the mater quickly, and they are taking more time to compensate employees. Therefore it means that some of them will interfere with those funds, yet making some funds go missing or else misuse them before the compensation is done. When such cases happen, the insurance cost system is forced to pay more cost to cater to all the expenses, including the price that was misused by the top management and the people responsible for giving out that compensation.

A diagram showing an increased leakage from 1997 to 2015

Years of compensation

The diagram above shows that the rate of leakages from 1977 has been increasing. Thousands present the funds that most of the organization has been paying as payment when compensating its workers. This is because people responsible for giving out the compensation tend to take long, which will make them spent more cost of the amount as well (Brandenburg et al.,2017). For instance, if an employee got injured when working in an organization, then the employer takes long before he responds to his employee, yet the employee is in the hospital. It means that they will have more funds that he could have used; he responded to the matter immediately. Also, the issue of lack of trust between the employees and employer may be another cause that makes an increase in leakages, which will lead to the rise in the cost of workers’ compensation.

In a situation where employers luck trust in his employee, even at the time when an employee will get injured while working, it may take him some time to belive his employee was injured. However, more funds are likely to be wasted because every time an employee visits the hospital for check-up and medications, he will have to use the funds which will be fully catered by the employees. Generall an increase in leakages will always lead to a rise in workers’ compensation because more funds will be wasted and will be used in an unplanned manner that could be avoided if the payment was made immediately the injuries happened. Therefore to solve this employer should immediately take action to the employees to get injured to prevent wasting of costs that will always make the organization to undergo some losses that could have been avoided (Brandenburg et al.,2017).To date, the rate of leakage has been increasing when paying out employees compensation; therefore employers should come up with a strategy where the payment will be made immediately the damages happens

                        (B)       Increase in fraud

            Workers’ compensation fraud is defined as any lie or any misrepresentations that are made by the employer, employee, or even the provider of compensation to get financial benefit.

The act of cheating is a result of people wanting to benefit from what they don’t deserve. For instance, in the old school model, it might be an excellent opportunity for employees to fake documents and claims that they were injured while working. This is a sensitive field that requires people assigned in these areas to be keen because if a person gets damaged, it might be severe. For the last decades, the cases of fraud have been increasing; people are pretending to get hurt to get paid (Heins & Castillo,2020). As a result, they end up making the organization go under loss because of the compensation made to employees when they get injured. More cost of payment is made because the insurance company has to go through a lot of procedures, ensuring that the information provided is not faked and that the employees are claiming for the compensation they deserve to get the payments.

            In most of the organizations, the compensation that is given to employees, the research shows that at least one percent or two percent of those payments are fraudulent. This mostly happens when the employers are not keen enough to distinguish between the fake and the real information provided. With the advanced technology, people are coming with new ideas every day hence making it easier to fake and to provide wrong information (Heins & Castillo,2020). Therefore, the insurance company is forced to pay more insurance to the employees other than using the costing other useful areas. However, this is a criminal case; in such instances in which employees are found producing the fake documents, they are supposed to be taken to the court and heavy punishment to be imposed on them depending on the crime they have committed. Workers’ compensation fraud occurs in many forms, which is in the instance where an employee lies about their injuries or their illness.

In a situation where an employer may misclassify employees to avoid paying him the insurance that he deserves or even in the case when an employee may decide to provide exaggerated symptoms in order for his to get paid (Heins  & Castillo,2020).The act of giving wrong information in order to get compensated for the injuries has been increasing year after year. Some companies are not performing well or making their benefits because of the payings it’s making for their employees when they get injured. The more the frauds, the more the cost of compensation is used in compensating people who do not deserve to be given that funds. The average amount that most of the organization has lost for the last ten years is as follows:

Years                                      compensation cost (monthly)

2009-2010                                           $20

2010-2011                                           $30

2011-2012                                           $40

2012-2013                                           $50

2013-2014                                           $60

2014-2015                                           $70

2015-2016                                           $80

2016-2017                                           $100

2017-2018                                           $120

2018-2019                                           $150

            The above data shows that the cases of frauds are increasing annually with a slight difference, but as we are moving on, the compensation tends to grow more. This is because people have known many tricks on how to present and provide the wrong information in order to be an aid. Therefore the more the cases of frauds continue, the more the cost of insurance will be incurred because anytime employees claim they are not feeling well. They claim to get sick while working the employer, or the institution has the responsibility of ensuring that they get compensated. Therefore to solve this, the organization should introduce things like CCTV and medical care within or around institutions as a way of confirming whether employees got injured and in case they are hurt to be taken immediately to the hospital for treatment purposes.

                        ( C. ) Increase in lost time

Lost time is defined as the period that employees spent when they get injured or when they are sick. Lost time may be experienced for many days every month, depending on how the employers will respond to employees when they get injured. Increased loss of time usually happens when the people responsible for giving out the compensation funds are not flexible or are not used in this field. For instance, when employees claim their compensation for the loss they incurred in the course of work, people responsible for giving out benefits will react to this issue differently hence wasting a lot of time. For instance, some people suggest that the insurance company must be given a period to do an investigation on whether it is accurate or false, whether the employees got injured or they did not get injured. Others will ignorance fail to give out compensation to the employees, and maybe the situation may be worsening. Therefore they end up wasting more time, which at the result of the high cost of compensation because in the end, the payment will have to be made as well as paying all the time wasted. Therefore the organization seems to be affected negatively because employees may not go to work in case they get injured.

It is evident that when employees get injured or get sick, they cannot perform their assigned tasks.However, if the compensation can be done very fast where employees are taken to hospital and given some medication depending on the type of illness, they will be able to recover fast and go back to their regular duties. Also, in the incidence where employees are not in good terms with their employers then they get sick, they might take advantage of this time and spent more time without reporting back to work hence making the performance of the organization to reduce. Therefore when employers fail to respond fast to this time lost by employees, they are likely to spend a lot, especially when it is a severe injury, and yet the production will not be good. The solution to this case is that the organization should come up with a schedule where at least in a year, it keeps aside some days for its employees. In case they get sick or get injured, they can use those days to get treated as a way of reducing that that lost time to make the organization remain functional, whether employees get hurt or not. On the issue of the compensation, it should set aside specific funds that will be used in case employees get injured as well as connecting themselves with the health care that can take care of cater to the sick as well as saving time.

( D)       Incorrect estimates  

            Incorrect estimation occurs when the wrong information is provided. For instance, some employees may claim more compensation when they want to benefit from the organization Inaccurate opinion of the employee is the leading cause of the high cost of payment. In most cases, employee overestimates their value depending on which insurance is responsible for their benefit. When this happens, the company is likely to go loss because was the insurance company is paying more funds the same way the organization will be expected to pay more to the insurance company.

However, people may claim less compensation if they have no idea what process to follow to get back their benefit. In some other cases, employees are forced to indicate less payment by their employers. For the last decade, the fact of under and overpayment to employees has been increasing. This has been a result of corruption where the top people want to benefit also, and in the cases where they don’t want employees to help so, they may require them to present less compensation as it is necessary.

The more the estimates, the more the payment to the workers. This can negatively affect the company because when employees demand more payment, it means that the insurance will be forced to pay them more funds of the organization. When there is more compensation done than it was required, the insurance company is likely to spend more, and employees might feel encouraged to ask more funds hence creating fake injuries in the course of working. There is a need for an organization to be keen on the details and information provided by employees concerning their wounds and where possible accompany them to the hospitals to confirm that they are sick and they deserve to be compensated. The statistical data here may be similar to the increase in fraud because they have a standard feature of providing the wrong information to get financial benefits from the organization.

(E) Time-consuming

Time-consuming means are taking or spending a lot of time in doing something. More time is wasted in making the right decision, trying to come up with the best possible way of paying out employees’ compensation when they get injured. The more people get damaged, the more time is consumed. Time is wasted more depending on the nature of the injury, as well as how the insurance is responding to the situations. Also, more time is consumed when trying to get full information about how accidents occurred and what was the leading cause of everything. As a result, the organization seems to be performing poorly depending on the number of employees who got injured, which results in more cost of compensation (Lane, 2019). As a result, more charge is consumed in ensuring that the health of employees is in good condition and that they can get back to their healthy lives.

In case of injuries happens, employees will consume a lot of time deciding what to do and how to go about it to get out their compensation when they get injured. The more time they consume, the more the organization is producing less output hence worsening the performance of the organization as well as worsening the health of the employees. The more the employees take time to be compensated, the more the compensation may be required because if the funds needed to be paid to a particular employee are delayed, yet, employees need to go to a hospital that is far. It means that the organization has to cater to all the expenses that employees will spend. This may happen if the organization delayed or assumed to take the patient to the nearest hospital for a check-up hence making the health of the patient to continue worsening wherein returns insurance will be forced to spend more funds to cater to the medication bill of the employee (Lane, 2019). The following are the average estimation of time and the cost that insurance incur when paying for the employees as their compensation.

Year       Time consumed (hours)    Amount of compensation (P/A)

2007                50                                            $ 90

2008                55                                            $95

2009                65                                            $100

2010                72                                            $112

2011                78                                            $130

2012                80                                            $140

2013                85                                            $150

2014                90                                            $170

2015                95                                            $ 180

2016                110                                          $195

2017                120                                          $ 230

            The above statistical data shows that as more time is consumed, the cost of compensation is required. It affects the organization negatively because when employees get injured and more time is taken to compensate him, the output of the organization will below. After all, employees are not at work, and the cost of insurance will be demanded more.

                                     (f)    Lag time reporting.

This is the time between when the injury occurred at work and when the insurance company may make the compensation. Lag time reporting tends to have a high cost of payment because the more the company delay in paying, the more the employees will demand more funds. For instance, in the situation where employees get injured, and they are admitted to the hospital. It means that they have to stay in the hospital until the bill is cleared by the insurance responsible (Oliveira, 2018). Lag time reporting it has been said to be the leading cause of making insurance to spent more cost of compensation. Also, in a situation where a persona was comfortably enjoying with kits, then an accident happens to occur, they seem to take more time before taking the case to the police and later taking the person to the hospital. The process seems to take long because employees here can easily get injured more, therefore, making the process of clearing to belong and the person injured may end up demanding more funds. Hence, the organization is likely to lose both employees and a lot of funds, which will be used to compensate employees. However, what happens in the case of the insurance delay in paying the bills, yet the employees recovered their health? It means that they have to stay in the hospital until the medical bill is cleared.

If he exceeded by one or two before all the payments are made, the insurance has to pay for all services that were provided to the patients all that period, hence becoming a high cost to the system. Therefore it is advisable that as soon as employees get injured, the insurance company acts up them as first as possible to eliminate all the extra charges that are likely to take when they delay in paying employees compensations (Oliveira,2018).To overcome these challenges, the organization should come up with the best schedule of ensuring that that they are looking for funds to meet their objectives. The working conditions of all their employees should be right to eliminate the cost of compensation, which will be done in case any of their employees get injured.

Giving out compensations to employees when they get injured or when they get sick is very okay. However, I recommend that before the payment is made, the organization should have enough evidence and the right information showing that they deserve to be compensated for the loss they underwent. The high cost of compensation occurs as a result of people providing wrong information concerning the injury they are claiming to be paid. To the organization, I recommend that before employees are assigned any duty in the workplace, it should consider that there are right working conditions and their health okay. I would also advise that organization to provide tight security and high supervision to ensure that they have fewer cases of employees who get injured while they are performing their duties. It will reduce the cost of insurance because it is only a few cases of employees who will be reported with injuries. Finally, I recommend that there should be training and programs where employees are taught on how to access or use their tools or to operate in their respective department before anyone is assigned any work

4.Conclusion

The information provided about workers’ compensation insurance shows that the cost of compensation of workers can be high depending on the ways employees are using to claiming their payments. It shows that for the last decade, people have been faking documents, providing wrong information to get more benefits as well as understanding what they do not deserve. There is a need for employees to be compensated when they get injured. It is a requirement for compensation to be done to employees in any organization. Therefore to avoid many costs that may arise in the course of work, it is a requirement for an organization to ensure that they have excellent working conditions as well as ensuring that employees also are in good health.  However, it should be genuine, and all evidence should be provided, showing that truly that person needs to be compensated.