Update - NCCI Audit Noncompliance Charge Endorsement

Effective 1/1/2017 the National Council on Compensation Insurance approved a Workers Compensation policy endorsement where an insurance company can charge up to 2x the originally estimated premium when a policy holder is in non-compliance with an audit request. 
 
In addition, failure to cooperate with the audit may result in a cancellation of Workers Compensation coverage. Audit noncompliance will disqualify an employer from obtaining coverage from any insurance company until the outstanding audit is completed.
 
We realize these audits can be time consuming, our staff is available to assist with questions and audit preparation. 
 
Feel free to contact us should you need help.
 
Dan Zeiler
dan@zeiler.com
708.597.5900 x134

 

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Experience Modification Looks Complicated, But It Isn't

 

Experience modification (experience mod) is a key factor when monitoring workers compensation premiums. Experience mod is a rating factor that determines your workers compensation premium based on loss experience. A 1.0 rating means expected losses equal actual losses that occur. A rating below 1.0 indicates that actual losses occurred are less than expected losses, resulting in a lower premium. A rating above 1.0 means actual losses are higher than expected losses, resulting in a higher premium. In short, your experience mod compares your workers compensation claims to companies of similar size and industry.  

Experience mod ratings are calculated based on certain components. One component is the payroll for the business. Workers compensation claims are highly dependent on payroll numbers being accurate, therefore payroll figures are often audited. A second component is the loss history of the business. The loss history can be determined from analyzing claim data that has been filed. When calculating the premium for the policy, items such as the frequency of claims are essential to provide an accurate premium. It gives an insight as to how the business operates and if there are trends regarding workers compensation claims. The last component is reserves used for claims. Claim data provides information to help compute payments, and reserves are required for claim totals. Reserves are assigned to open claims and represent future payouts. Claim adjusters often handle large amounts of claims, so it is imperative to have open claims reviewed for accuracy to avoid the formulation of the experience mod can become incorrect.  

In the real world injuries will happen, but the response can help keep your experience modification rate from increasing. Having a plan to manage injuries and workers compensation claims is imperative for getting control. An effective safety program that eliminates hazards is the starting point. Also, your experience mod is influenced more by small, frequent losses rather than large infrequent ones. Implementing a Return to Work Program is important for any business. Having a program in place will help lower days off which in turn will keep your experience mod down. For example, if an employee sprains their ankle, what can you do to decrease their days off? Can they input data while sitting at a computer or maybe help out somewhere else? Read our article  Illinois Workers Compensation Insurance - Keep Your Premiums Low  to learn more.

If you have questions or would like more information, call any of our 3 locations in the Chicago-land area today. Our customer service representatives are eager to share their knowledge and speak with you about any insurance related topic. Zeiler Insurance is an independent insurance agency and has been providing quality customer service for 101 years in our Alsip, Chicago, and Gurnee locations. Our goal is to help you understand insurance as well as provide you with the most competitive insurance rates in the industry. Whether you are a customer or just want more information, let us help you with our years of expertise in the insurance business.

Dan
dan@zeiler.com
708.597.5900 x134
http://www.zeiler.com

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Why “Bidding” Your Insurance is the Worst Thing You Can Do.

 

In the insurance industry, “quoting” is the term used to describe an insurance agent who contacts his carriers on the customer’s behalf to see which company is most competitively priced. The Landscape Industry and other Contractor Industries refer to this as “bidding” and the reason is obvious.

When meeting with landscape contractors it is not uncommon that we will discuss how they go about bidding on a given project. I often hear how some projects are lost to those “fly-by-night” companies that are very cheap and illegitimate. The homeowner in this case does not care - just wants the lowest price at that time and then spends twice the amount 2 years later when their patio caves in.  Yes price is important, but how do you explain quality to a homeowner? How do you educate the homeowner? There’s more to building a patio than the number at the bottom of the proposal.

99% of Landscape Contractors can relate to this – but the funny thing is, when it’s time to look at insurance options. BOOM it’s “Bidding” time! “Here’s my information, please find the lowest price, if you need anything call Sandy, and she will get the information for you.”

Whether you are a Landscape Contractor trying to sell the quality of your work or an insurance agent trying to gain a new client – the same problems exist. The buyer is looking at price and does not take the time to be educated. When that homeowner moves away from the buying process and actually takes the time to educate themselves, their Landscaping Decision becomes much more sophisticated, they are likely focus more on quality, and more often than not they will save money in the long run.

The same situation is applicable in the insurance world. There are many contractors and EVEN OTHER AGENTS that do not understand the intricacies that affect insurance premiums. When a contractor takes the time to educate themselves, a couple things happen:

1. They will make a better decision.

2. They will save more money in the long run.

3. Their expenses go down, they become more competitive, and the success of their company grows.

These things do not happen when you “BID” your insurance. Maybe you get a lower price that year, but how does that stop your organization from leaking money year after year? Yes, when the season is rocking and rolling there is zero time to be educated about insurance, but don’t be like that cheap homeowner. Find the slow season, and invest the time with an insurance professional to make an educated decision regarding your insurance program. The alternative is a “caved – in” insurance program, and wasted money out the door. If a homeowner can learn something about building a patio that other contractors don’t understand then it is possible that contractors can learn something that their agent doesn't understand.

To learn more ways in which many Contractors may be “leaking” money year after year. Click Here   

 

 

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“Primary Causation” Added to Illinois’ Workers’ Compensation Law

 

“Seeking to help Illinois attract investment, create jobs, and end fraud and abuse,” state Sen. Dale Righter (R-Mattoon) filed legislation that would add “primary causation” to Illinois’ workers’ compensation law.

“For years, a higher percentage of Illinois citizens have been out of work, compared to our neighboring states,” Righter said. “We are plagued by people moving for better jobs to neighboring states and new businesses choosing other states. According to my constituents and business owners in Illinois, a significant reason our state isn’t competitive is because we lack ‘primary causation’ in our workers’ compensation law.”

Righter’s Senate Bill 846 would require an employer’s workers’ compensation insurance to pay a claim only if the employee’s injury was caused primarily by a workplace accident. Under current law, any connection to a workplace accident. Under current law, any connection to a workplace accident, regardless of how remote, obliges the workers’ compensation policy to cover 100 percent of the costs associated with the injury, according to a press release from Righter’s office.

“In far too many instances, our law has allowed simply the slightest connection with the workplace to justify a workers’ compensation policy to pay the entirety of the costs related to an injury. It is unfair and an abuse,” Righter said.

“Requiring primary causation would strike a fair balance.”

Righter estimates that adding “primary causation” to Illinois’ workers’ compensation law would save employers $1 billion per year in reduced insurance premiums. By way of evidence, prepayments point to Indiana and Missouri, where premiums are less than half of what employers pay in Illinois. Twenty-nine states have a more stringent causation standard than Illinois.

“I am optimistic with a governor who understands how to make Illinois competitive, we can make this legislation law,” Righter said. “It’s ridiculous our job creators are on the hook for paying millions in bogus claims. It has to end now.”

Senate Bill 846 also states that if an employee is discharged from his or her employer for cause, then temporary partial disability and temporary total disability payments will not be paid.

 

Please call with questions.

Dan 

dan@zeiler.com 

708.597.5900 x134

www.zeiler.com

Source: http://www.dalerighter.com/Media/News/TabId/273/p/27565/v/2000/workers-compensation-reform-legislation-makes-illinois-more-competitive.aspx 

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Five Ways to Avoid OSHA Penalties

Five Ways to Avoid OSHA Penalties

During the first half of October 2014, the U.S. Occupational Safety and Health Administration announced a dozen citations against employers. A New Hampshire roofing contractor was fined $61,600 for not providing adequate fall protection. A Connecticut roofing contractor faces several citations following a fatal accident in July. A metal parts processor in Ohio was cited for 10 serious violations and $64,000 in fines over the accidental death of a supervisor. A cabinet maker in New Jersey faces a six-figure fine for exposing employees to a carcinogenic chemical. The death of an employee on a conveyor belt has a Mississippi lumberyard facing a $75,000 penalty.

Noncompliance with OSHA regulations can cost employers a lot of money. The good news is that complying does not have to be cumbersome or expensive. These procedures and attitudes can help a company keep its name out of an OSHA news release.

Improve record keeping. Good documentation is an employer's first defense against an OSHA inquiry. Information gaps in the OSHA 300 log (the record of work-related injuries and illnesses) may prompt inspectors to conduct comprehensive safety audits of businesses. Filling in missing information for the past three to five years can save your business a lot of grief and expense. Check personnel files and workers' compensation loss records for details of accidents.

Focus on ergonomics. Preventing repetitive motion disorders can help businesses avoid citations and penalties. It also reduces workers' compensation insurance premiums in the long run. Analyze how workers are performing their tasks and look for ways to reduce the strain on their joints, necks and backs.

Fix the routine violations first. Some safety issues are simple and cost little or nothing to correct. For example:
•Blocked exits
•Lack of protective equipment, such as gloves and safety goggles
•Poor housekeeping
•Improper storage of materials such as flammable liquids

These problems can accumulate over time. OSHA has penalized businesses with large numbers of violations like these, so it pays to monitor and correct them.

Have a plan for disasters. The weather has become more volatile, as the tornadoes of recent years and storms like 2012's Superstorm Sandy have shown. Contagions such as the Ebola virus can come seemingly from out of nowhere. Businesses must be ready for the unexpected. Disaster plans should include:
•Training for employees on what to do in the event of an emergency
•Procedures for safe evacuation from the building
•Workplace hygiene
•Stockpiling of emergency supplies such as first-aid kits
•Training for employees on how to administer first aid and CPR
•Arrangements for operating from remote locations
•Communications with employees, their families, customers and vendors

Although OSHA is not concerned with some of these aspects of the plan, having them in place will help the business survive the event.

View safety as a profit driver, not a cost center. Preventing workplace injuries costs money, but it also can improve a business's profitability. Some project owners and general contractors will consider bids only from contractors with workers' compensation experience modifications lower than 1.0. Firms with a reputation for safe operations will attract better workers. Also, insurance does not cover many of the costs from workplace accidents, such as time spent on investigating the incident, reduced employee morale, lost productivity, reporting costs, and the cost of OSHA penalties. Money saved on prevented accidents goes straight to the bottom line.

Some workplace injuries occur despite an employer's best efforts to prevent them. However, reasonable steps to improve workplace safety reduce the frequency and severity of injuries, make the business more competitive, and avoid problems when an OSHA inspector visits. To learn more, speak with us!

If you have questions or concerns on this issue, do not hesitate to call Zeiler Insurance and speak to one of our customer service representatives. As an independent agency, Zeiler Insurance prides itself with quality customer services for the people of the Chicago-land area and the rest of the Midwest. Customer or not, we can review your insurance and see if you are being protected appropriately for the right price.

-Dan Zeiler

danz@zeiler.com

(708) 597-5900  X134

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Real Life Case: Underreporting Payroll for Workers Comp

Real Life Case: Underreporting Payroll for Workers Comp

Some business owners think they can hide or under-report payroll data as a way to save money on taxes and workers' compensation premiums. There are several different ways they can hide payroll data, but it is still a crime that very few prosecutors will turn down. Although this is done to save money, the price of self defense in criminal court and the repercussions of having a criminal record are both costly. In addition to this, the risk of ending a business career can compromise a person's long-term income. The following is a case where a business lost about $100,000 by trying to dodge workers' comp premium obligations.

The owner of a building company was convicted of workers' compensation insurance premium fraud for not reporting some of his employees to his insurer or the Employment Development Department. The owner's daughter was convicted of misdemeanor insurance fraud. Another member of the owner's family who worked there was convicted of felony insurance fraud.

Experts say fraud is an enterprise that brings in billions of dollars, but it provides artificial inflation costs to insurance companies and consumers. In a collaborative effort by the local district attorney's office and the Department of Insurance, the investigation on the business owner started after an employee was injured. The owner paid his workers in cash in order to avoid paying insurance premiums. However, the investigators found evidence that all three of the convicted parties had worked together to convince workers to take cash payments.

The employee who was injured required surgery, but the business owner tried to dispute the worker's claim. Instead, the owner offered the injured worker a disability application form for state assistance, and he instructed the worker to claim the injury occurred at home. The company was ordered to pay more than $45,000 in premium restitution, about $30,000 in EDD back taxes and more than $35,000 in restitution to the injured worker.

It is not easy to hide payroll information, and employees will be vocal if they are injured. In addition to this, there are other ways to track this type of fraud. If an employee is injured, employers should remember that any under-the-table agreements will likely be exposed. Injured employees must look out for themselves and their families. Many other cases are worse. Employees may accumulate higher bills for hospital stays and rehabilitative services. The cost of paying their bills could be much higher than $100,000, and the cost of business disruptions and legal fees would run into the hundreds of thousands. Recovering from an incident such as this is also difficult, and most business owners have to start over from scratch. In comparison with the cost of such a mess, the cost of workers' compensation insurance premiums is minimal. Every employer should remember that it is not worth the risk.

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Illinois Works Compensation - Misclassification of Employees

Misclassification of Employees is Payroll Fraud. Here's How To Stay Out of Trouble

The Internal Revenue Service and Department of Labor have been going after employers who misclassify employees as independent subcontractors - and the construction industry is squarely in their crosshairs.

In late 2011, the DOL and IRS entered into a formal agreement of cooperation in sharing information and data in order to enforce employment laws. If you have been improperly failing to withhold income taxes and contribute the employer portion of the Social Security and Medicare taxes, and failing to pay unemployment insurance premiums and workers compensation premiums for people functioning as employees, and one of them complains to the Department of Labor, you can expect the IRS to get wind of it, too.

Additionally, if you are using an unlicensed contractor, and closely directing their work, the Department of Labor and IRS will consider this individual to be an employee, not a contractor. If that person is injured while functioning as an employee, the employer is liable… and you had better have workers compensation insurance in place.

The distinction is especially critical in the construction industry, because of the innately hazardous nature of the workplace. Independent contractors are generally expected to provide their own insurance. Employees are not, but are covered under their employers' plan. Failure to comply with employee classification laws risks employees falling through the cracks - and severe consequences for employers.

A Pervasive Form of Fraud

The deliberate misclassification of employees as independent contractors is an epidemic form of payroll fraud in the construction industry - and law enforcement at both the federal and state level nationwide are focusing resources on eradicating it.

Some studies indicate that as many as one worker in twenty is misclassified as a contractor when he should be considered an employee - and that companies that do misclassify workers as independent contractors do so routinely. Among employers that have been caught conducting this kind of fraud, they do so for an average of 40 percent of their workers.

This creates a substantial pricing advantage for dishonest contractors - and makes it that much more difficult for legitimate construction contractors to compete on a level playing field.

The practice also severely undercuts the industry as a whole, according to some observers and market participants. Marek Brothers Construction CEO Stan Marek maintains that as long as dishonest contractors circumvent wage and hour laws, there there is no viable career path for young people who might otherwise consider going into the construction industry. "We will never attract young men and women into the construction industry until there is a career path," he told a panel of Texas legislators and regulators. "There's a tremendous need for skilled workers. A lot of kids don't want to go to college. But if the construction industry is dominated by businesses that exploit workers, Texas kids aren't going to sign up… It is a cancer that is eating the industry. It is killing us."

 Penalties for Payroll Fraud

It's not just federal officials cracking down on employee misclassification and payroll fraud - state governments are also going after employers practicing this form of fraud, and a number of states have actually increased penalties in recent years.

Companies caught committing payroll fraud are typically charged back taxes and interest by both the IRS and state revenue officials. Companies are also fined up to hundreds of dollars per day per worker not covered by workers compensation insurance. Construction firms have also been hit with on-the-spot 'stop work' orders when state inspectors discover workers on site who aren't covered by workers compensation. This can lead to cost overruns, time delays and uncomfortable conversations with customers and prime contractors upstream.

In egregious cases, people have been sentenced to prison time.  For example:

On September 6, 2012, in Richmond, Va., Mark S. Holpe, of Midlothian, Va., was sentenced to 18 months in prison and fined $40,000 for evading the payment of employment taxes on unreported cash wages he paid employees of Nature's Way Landscaping, Inc. Holpe pleaded guilty to evading the assessment of $326,196 of employment taxes. Holpe worked for Nature's Way, a business that did residential and commercial landscaping in the Richmond metro area. He was originally the president, but became the treasurer in 2007 when he sold a portion of the business. In entering his plea, Holpe acknowledged that the company had two groups of employees during tax years 2006 through 2009. Holpe admitted that he paid one group of approximately 30 employees $2,132,000 in cash wages during that period, without withholding social security taxes.

 

 

Staying out of Trouble

It is true that there is substantial gray area in defining who is an employee vs. who is an independent contractor. The IRS has published a 20-point series of tests to help determine how a worker should be properly categorized. In the construction industry, a lot of it comes back to who is holding the license: If you hire an unlicensed contractor, and you are directing their work and telling them what to do on a daily basis, and they are operating under your license, this is clearly an employee.

If that worker is injured, the employer is liable, and if workers compensation insurance is not in place, the medical costs could potentially push an employer into bankruptcy - even before back taxes, penalties and possible criminal prosecution is taken into account.

By way of further examples, your independent contractor may legally be an employee if any of the following factors apply:

  1. You provide tools, training and/or materials for the job.
  2. You are closely directing what time the worker or workers must show up on the job.
  3. You are 'counseling' workers in writing about tardiness or other disciplinary issues.
  4. You are dictating methods. Contractors don't tell subcontractors how a job is to be done - they just define the scope of work and leave it to the subcontractor how best to complete it. If you tell someone how to do a job, rather than just describing the end state, chances are you could be turning them into a legal employee.
  5. You expect any kind of exclusivity.
  6. Do you require any kind of company-provided training?
  7. Do you pay transportation expenses or provide transportation for these workers?
  8. Do you reserve the right to terminate the worker at will?

The complete IRS 20-factor test can be viewed here.

Note that not all 20 factors need apply for the IRS, Department of Labor or state officials to determine that an employment relationship exists. Officials can and have determined that an employment relationship exists even when just a few of the 20 factors apply.

Meanwhile, if there is any doubt or gray area, it's important to address it immediately - and maintain legally required workers compensation, medical and other coverage until you are certain you are engaged in a bona fide contractor-to-contractor relationship, rather than an employer/employee relationship.

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Illinois Business Insurance Premiums

 Why Insurance Premiums are IncreasingIllinois Business Insurance Premiums

Insurance premiums are a function of these factors: The perception of future risks, recent catastrophic claims and the return available on investment. Huge fires and other disasters factor in, such as the Colorado Springs blazes earlier this year and other natural disasters have also forced large payouts. Even the devastating Japanese earthquake and tsunami from 2010 affects insurance premiums in the United States, since insurance companies routinely purchase re-insurance coverage from very large companies. And these reinsurance companies, such as General Re, have been increasing their rates. In addition, jury awards and settlement costs in a variety of commercial fields have put pressure on insurance company reserve funds.

Yes, insurance companies are just like you: They assess the risks they can cover, and then buy insurance themselves to protect themselves against very large but unlikely events that would overwhelm their reserves.

We saw a similar tightening of the property and casualty insurance world across the board, in 2001, following the 9/11 attacks on the World Trade Center. The direct costs themselves were significant, but reinsurance companies also increased their rates then, in order to cover their own risks and ensure clients were protected in case of acts of war, nuclear strikes, chemical strikes, etc.

Fortunately, their worst fears weren't realized, but prudent insurers are in business to cover the worst case scenario, and so they had to plan and set premiums accordingly.

Fast forward to today, though, and we have a different phenomenon at work. Reinsurers had just started to climb out of the substantial capital shocks of 2008 and 2009 when they got hit with the Japan tsunami, which put pressure on capital pools. But as they work to replenish their reserves, all insurers, all over the world, have been forced to reckon with a new reality: Low interest rates.

Insurance companies make money in two ways: Bringing in premiums, and investing the "float." Normally, insurers break even or even run a slight loss on premiums. This keeps premiums affordable, but is only possible because they can invest their accumulated reserves at a profit.

Ten years ago, an insurance company could get 5 or 6 percent on a portfolio of Treasuries. Now that same insurer struggles to get 2 or 3 percent on a AA-rated bond portfolio, and U.S. Treasuries - the traditional mainstay of conservatively-run insurance companies, may well be generating a negative real return after inflation.

Something has to give.

That's what we're seeing now: Actuaries have no choice but to increase premiums to cover anticipated payouts in light of the new lower interest rate environment. To do otherwise risks insolvency, which does no service to the insured at all, and even defeats the purpose of insurance.

The tightening of the reinsurance market, combined with adjustments to account for the lower returns on assets, is now making its presence felt on Main Street: Aggregate commercial insurance ratios increased for the fifth consecutive quarter, and by 5 percent in the first quarter of 2012 alone. That's the biggest increase we've seen since 2004 (remember those summer hurricanes in Florida that year?)

The two lines responsible for the largest increases, according to a Towers Watson survey, were the two segments most vulnerable to jury award and medical cost increases (workers compensation), and increased reinsurance costs from megadisasters and lower interest rates (commercial property insurance), respectively.

Insurance markets tend to cycle along with other industries. As reinsurance pools of capital get replenished, or as interest rates rise, allowing carriers to generate more revenue from the "float" rather than rely so much on point-blank premium collection, rate increases tend to moderate, and new carriers spring up to compete for business.

So if you are seeing rates increase, it's more a matter of prudence in the face of risk and low returns on capital, which affect all carriers everywhere. As a result rates increase to make sure there are enough in reserves to cover future claims . No one is exempt, and it's a bigger issue than any single insurance agency, carrier, or insurance line. 

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Illinois Workers Compensation Policy

A quick review of the workers compensation policy declarations (Dec) page prior to renewal and upon receipt of the renewal policy can turn up opportunities to save premiums or avoid disputes with the insurer. Take a close look at the following items and give some thought to the possibilities.

  • Estimated payrolls -- If they look high, you could be giving your insurer a free loan. If they are too low, then expect severe sticker shock from an additional billing at the time of the premium audit.
  • Classifications -- Are these the jobs the employees are actually performing?
  • Discounts and Rates -- Are they similar to your last policy?
  • Credits -- Are they similar to last year? Have any credits been eliminated?
  • Deposit premium for the policy period -- Can you pay a smaller deposit premium and make monthly payments?
  • Insured's information -- Check the first section, usually listed or shown as Item 1, and verify information about the named insured, such as name, address, and entity type. Make sure that this matches your company's info exactly. (There can be major problems when the policy has a slightly different name or address.)
  • Coverage provided -- Item 3 of the Dec page details information concerning coverage. Check Section A, Workers Compensation Insurance, and Section C, Other States Insurance. If your company is operating in a state that is not listed, you could end up paying a WC claim out of pocket.
  • Premium calculation -- Usually Item 4, does this look right to you? Does it look similar to last year's policy?
This exercise only takes about 20 minutes, maximum, but could result in corrected errors that provide significant savings for your company.  We help employers in the Chicago Illinois area control their workers compensation costs.  Let us know if we can be of any help to you.
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Illinois Workers Compensation Modification Factor - Is it correct?

Having a handle on the method of computing your experience modification factor for your workers compensation is a must. Because of the many factors and hands involved in the process the potential of error  is very high.

 

  • As you know, your work comp premium is based on your payroll and the payroll used to compute your mod is derived from your payroll audits. Have you checked that the correct payroll is being used on the workers compensation mod worksheet? Are you confident that the payroll audit was correct? 
  • Experience mods are also developed from your loss history. Do you know when and where the claim data is pulled in order to compute your mod? 
  • When claim data is provided for the computation, any open reserves are used for the claim totals. Do you know that a claim adjuster can handle hundreds of workers comp cases? Have your open reserves been reviewed prior to claim data being sent to formulate your mod?

 

Mod Errors

 

We work with many businesses in the Chicago Illinois market. Our  processes ensure that your insurance premiums are at the minimum. Feel free to contact me with any questions.

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Illinois Pay as You Go Work Comp

Pay as You Go Workers Compensation

 

We are excited to announce a new Pay As You Go workers compensation program. The idea being that you pay your insurance premiums based on the wages in any given pay period. 

 

·         Improved cash flow

·         Eliminates large down payments

·         Minimizes audit adjustments

·         No late fee charges

 

Who are good candidate for this program?

 

·         Businesses with fluctuating payroll (Contractors!)

·         Businesses with past audit issues

·         Businesses with seasonal exposures

·         Businesses with a peak season

·         Any business that wants to improve cash flow

 

 Pay as You Go Workflow

 

Not only do we manage your workers compensation program,   we offer competitive pricing and now an online pay as you go program. Contact me with any questions or interest.


Dan Zeiler
708.293.5500
dan@zeiler.com
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Assigned Risk Adjustment Program

 

Assigned Risk Adjustment Program – (ARAP)

 

Another reason you should carefully manage your Workers Compensation Insurance Program and Employee work related injuries.

 

A Workers Compensation Insurance Policy is unlike other insurance policies, in that it acts more like a finance mechanism than an insurance policy. Insurance Companies don’t pay for Work Related Injuries, Employers do!

 

The ARAP is just one more surprise lurking in the shadows of your Experience Rating Modification Worksheet that you had better understand before dismissing the affect of mismanaging your Workers’ Compensation Program.

 

The ARAP modification is applied after the Experience Modification and does not replace it. Salt in the wound to Employers that are forced out of the Voluntary Market, the ARAP can add an additional 49% to the cost of your Workers’ Compensation Insurance Premium.  

 

Read more about the Assigned Risk Adjustment Program in NCCI’s article Did You Know….

 

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Illinois Workers Compensation Premium Audit

There's many employers who's workers compensation policy period ends 12/31.  So basically...  it's PREMIUM AUDIT SEASON!

BUILD AN OVERCHARGE-PROOF WORKERS COMPENSATION PREMIUM AUDIT PACKAGE

 

  • Utilize a spreadsheet
  • From your Illinois Unemployment Quarterly Reports – total each employee’s earnings for the year.
  • Slide each employee into a job duties column (make sure you’re specific as to the duties which correspond to the appropriate work comp classification).
  • Adjust for Excluded Payroll (overtime, tips, certain allowances, contributions to benefit plans, etc.)
  • Have your Certificates of Insurance ready for any subcontractors
  • Cap owners pay to the appropriate number
There's a little more to the process but you get the idea...  

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Pay as You Go Work Comp

Pay as You Go Workers Compensation

 

We are excited to announce a new Pay As You Go workers compensation program.  The idea being that you pay your insurance premiums based on the wages in any given pay period. 

 

·         Improved cash flow

·         Eliminates large down payments

·         Minimizes audit adjustments

·         No late fee charges

 

Who are good candidate for this program?

 

·         Businesses with fluctuating payroll  (Contractors!)

·         Businesses with past audit issues

·         Businesses with seasonal exposures

·         Businesses with a peak season

·         Any business that wants to improve cash flow

 

 Pay as You Go Workflow

 

Not only do we manage your workers compensation program,    we offer competitive pricing and now an online pay as you go program.  Contact me with any questions or interest.

 

 

Dan Zeiler

708.293.5500

dan@zeiler.com


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Check Your Workers Comp Policy Dec Page Closely at Renewal

A quick review of the workers compensation policy declarations (Dec) page prior to renewal and upon receipt of the renewal policy can turn up opportunities to save premiums or avoid disputes with the insurer. Take a close look at the following items and give some thought to the possibilities.

  • Estimated payrolls -- If they look high, you could be giving your insurer a free loan. If they are too low, then expect severe sticker shock from an additional billing at the time of the premium audit.
  • Classifications -- Are these the jobs the employees are actually performing?
  • Discounts and Rates -- Are they similar to your last policy?
  • Credits -- Are they similar to last year? Have any credits been eliminated?
  • Deposit premium for the policy period -- Can you pay a smaller deposit premium and make monthly payments?
  • Insured's information -- Check the first section, usually listed or shown as Item 1, and verify information about the named insured, such as name, address, and entity type. Make sure that this matches your company's info exactly. (There can be major problems when the policy has a slightly different name or address.)
  • Coverage provided -- Item 3 of the Dec page details information concerning coverage. Check Section A, Workers Compensation Insurance, and Section C, Other States Insurance. If your company is operating in a state that is not listed, you could end up paying a WC claim out of pocket.
  • Premium calculation -- Usually Item 4, does this look right to you? Does it look similar to last year's policy?
This exercise only takes about 20 minutes, maximum, but could result in corrected errors that provide significant savings for your company.  We help employers in the Chicago Illinois area control their workers compensation costs.  Let us know if we can be of any help to you.
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Illinois Workers Compensation Insurance Premium Adjustment Factor

Most contractors know that workers compensation insurance premiums are based on payroll. However, I’m still finding that many don’t know that Illinois allows for a "Contractors Premium Credit Adjustment".   If the hourly wage level exceeds the state hourly average wage contractors paying union scale will usually qualify for the credit. The size of the credit varies, but in Illinois eligible contractors can earn a credit of anywhere from 5 percent to 40 percent, and discounts of 20 percent or more are not uncommon.

 

The Contractors Workers Compensation Insurance Premium Credit Adjustment can be obtained by completing a simple application form and submit to the National Council on Compensation Insurance (NCCI). Because the credit applies on a per-state basis, eligible contractors operating in Illinois can take advantage of the credit, even if they also have operations in other states that do not allow the credit. If you have any questions or if I can be of any assistance feel free to contact me. Our agency services insurance for contractors in the Illinois and Chicago land area.

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Illinois Workers Compensation Premium Audit

Found another simple mistake yesterday on a worker’s compensation premium audit. An owner/officers payroll was slid into the governing work comp class. This is a janitorial service client of mine in the city of Chicago and the error was simple to find.  It was simple to find because we completed a premium audit package for the insurance auditor.  We had a summary to refer back to once the final audit was completed by the insurance company.

 

BUILD AN OVERCHARGE-PROOF WORKERS COMPENSATION PREMIUM AUDIT PACKAGE

 

  • Utilize a spreadsheet
  • From your Illinois Unemployment Quarterly Reports – total each employee’s earnings for the year.
  • Slide each employee into a job duties column (make sure you’re specific as to the duties which correspond to the appropriate work comp classification).
  • Adjust for Excluded Payroll (overtime, tips, certain allowances, contributions to benefit plans, etc.)
  • Have your Certificates of Insurance ready for any subcontractors
  • Cap owners pay to the appropriate number
There's a little more to the process but you get the idea...  

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Illinois Workers Compensation: Opportunity Costs

Have you ever considered the true cost of a work related claim? We’re all learning the direct result on your workers compensation experience modification factor and how your insurance premiums are affected… but what about indirect costs or opportunity costs?

  • Some of the your customers are now requiring a modification factor below 1.00.
  • If you’re a contractor… a mod over 1.00 will disqualify you for the Illinois Contractor Credit.
  • Working Capital:  the money you’re spending on premiums are misdirected.
  • Downtime: The injured employee, supervisor and others.

 

Can you afford not to implement a strategy to control your workers compensation expenses?




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Illinois Workers Compensation Insurance: The Processes to Control your Costs

Historically, the emphasis on keeping premiums low has been at the time of a workers compensation insurance policy renewal.  Agents start contacting employers before the expiration date to collect payroll and loss information.  Applications are prepared and requests for quotes get shot out to multiple insurance companies.  Problem is that this practice does nothing to control the factors that affect your workers compensation costs.

  • Controlling your Workers Compensation Experience Modification
  • Claim reserve control
  • Hiring Practices
  • Managing Injuries
  • Premium audit preparation
  • Supervisor Training
These are all important tools to truely have an impact on your long term workers compensation premium.  If you are an Illinois employer or have a business in the Chicago area.  Contact me for a workers compensation evaluation.

Processes
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Illinois Workers Compensation Insurance: Subcontractors

At least once a week I have an uninsured subcontractor issue. Some common misconceptions:

 

  • I’ll have them sign a waiver.  Unfortunately, it's not that easy.
  • Subcontractor has no employees and not required to buy work comp.  Not an option for you.   

 

The Illinois Workers Compensation Act reads - in addition to an employee the employer is liable to pay compensation to “any contractor or subcontractor unless such contractor or sub-contractor has insurance, in any company or association authorized under the laws of this State” blah blah blah.   See definition of an Employer 1(a)3.

 

The Basic Manual published by the National Council on Compensation Insurance (NCCI)  reads – “in those states where workers compensation laws provide that a contractor is responsible for the payment of compensation benefits to employees of its uninsured subcontractors, the contractor must furnish satisfactory evidence that the subcontractor has workers compensation insurance in force covering the work performed for the contractor.” 

 

Basically, get your certificates in order to avoid being charged at time of a workers compensation premium audit!

 

If you are an employer in Illinois or the Chicago area and have more questions on this issue… feel free to contact me.

 

Dan Zeiler

708.293.5500
dan@zeiler.com

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