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It's all in the numbers

Gauging the health of return to work programs

Let's face it: I'm a numbers guy, often devoting this column to topics like accident rates, roadside inspection results, and the link between safety violations and future crash involvement.

But my interest in numbers is not purely quantitative. In fact, I have a limited mathematics background and I've never studied calculus. Rather, I'm interested in converting data to meaningful information. For example, I recently helped my company wade through five years of liability claim data to ensure that our fleet safety efforts are on track.

In this column, I'd like to share a method for combining two numbers from your workers' compensation claim data into information that will help you gauge the health of your return-to-work programs.

The three primary financial components to a workers' compensation claim are:


Payments for health care and bodily injuries related to the accident.


Payments to the injured employee that compensate for lost wages and/or partial or permanent disabilities resulting from the accident.


Payments associated with managing the claim, including attorney fees, court costs and claim-adjuster expenses.

A powerful gauge of workers' compensation performance is the ratio of total medical payments for all claims to total indemnity payments for a defined period. For example, the medical-to-indemnity ratio for a company with annual medical payments of $300,000 and annual indemnity payments of $150,000 would be 2.0 (i.e., $300,000/$150,000). In insurance industry terms, this 2.0 figure is expressed as a 66/34 ratio.

Historically, the ratio of medical to indemnity payments has hovered around 1.0, i.e., medical costs are about the same as indemnity costs. (A 50/50 ratio.) In recent years, however, we've noticed a swing in the ratio from approximately 45/55 to 55/45, perhaps indicative of generally higher medical costs.

While ratios may vary from industry to industry, we expect them to be fairly consistent within an industry. If a company has a medical-to-indemnity ratio that is higher than the average for its industry, one or more of the following factors may be at work:

  • The firm may not be utilizing a “preferred provider” medical network.

  • Claimants may be over-treating their injuries, aka “doctor hopping.”

  • Claimants may be using Emergency Rooms for immediate care, rather than health clinics or practices specializing in occupational health.

Low medical-to-indemnity ratios, on the other hand, may be symptomatic of the following:

  • Little or no working relationship between the health care provider and the employer.

  • Designated health care providers are not focused on return to work.

  • Employees may not be receiving the proper medical treatment.

  • Company culture does not promote return to work.

With these indicators in mind, evaluate your fleet's medical-to-indemnity ratio. If you're outside of the 40/60 to 60/40 range, I suggest you undertake a “top down” review of your health care provider network and/or your return to work programs. These numbers do tell a story. And if you interpret it correctly, you can have an impact on the bottom line.

Jim York is the manager of Zurich Service Corp.'s Risk Engineering Transportation Team, based in Schaumburg, IL.

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