How One Mental Health Agency Saved 85% on their Workers Compensation Insurance

The organization came to me on the agency website.  They had received some of my emails, a few phone calls, and they were finally ready to talk.  They weren’t confident that their broker understood their business, and the costs were getting out of control.

One Phone Call Saved a Mental Health Agency 85% on their Workers compensation costs

They asked me to start by looking at their workers’ compensation insurance.  I went through my framework or analyzing workers compensation insurance… Which you can find here:

https://www.insuranceforentrepreneurs.net/post/my-framework-for-analyzing-workers-compensation-insurance

I looked at their policy, and the problem was immediately obvious to me. 

Everybody in the organization was classified as a home healthcare organization.   The rate associated with that classification was about $1.30 for every $100 in payroll.

Not a bad rate for home healthcare workers, but I thought that this classification was incorrect..

None of the work was done in their client’s home.  None of the work was done outside of an office setting.  Home healthcare workers typically will go into a client’s home and provide various services.  That can include cooking, cleaning, administering medications, or simply companion care.

In this business, the clients transported themselves to an office setting.  The clients would meet with a therapist or clinician and discuss a variety of issues.  This could include a variety of mental health conditions including anxiety, depression, family issues, or substance use disorder counseling.

I looked through their audit to doublecheck my hunch.  Every single employee was categorized as a counselor or a therapist.  Further, when I talked to my client, all their revenue was generated from counseling work. 

From what I could tell, there was no evidence to support that  a Home Health Agency description was appropriate for this client.

The more appropriate classification was for a doctor's office, 8832, which cost about $.30 for every $100 of payroll.

It wasn’t a hard sell to the underwriter, either.  It took two voicemails and an email.  On the third call, she picked up.  The account was renewed recently, so it wasn’t at the top of her priority list.  I quickly explained the issue, and just as quickly, she agreed.

Just like that, the insured saved 85% on their workers’ compensation premiums.

All we had to do was make sure employees were classified correctly on the workers compensation policy.

There were no coverage changes.  No deductibles.  The client didn’t have to start paying for claims out of pocket.   All we did was make sure that the employees were classified correctly.

And this is a rule you can apply to any business.  You would be surprised how often it happens, especially in niche marketplaces. 

This is one of the scenarios where it helps to have an agent that serves a large volume of businesses just like yourself.  There are issues that may seem obvious to them, that are not obvious to a person with less experience in your industry.