Are you making costly mistakes with Kept-on-Salary (KOS)?
Many Washington employers are surprised to learn that common assumptions about KOS can lead to unexpected costs and missed opportunities. In this article, we’ll reveal lesser-known truths about KOS for managing workers’ comp claims, and clarify its strategic use.
Myth: KOS is best used for 30-90 days at most
FACT: Did you know that many employers underestimate how long KOS can be financially viable? While they often assume 30, 60, or 90 days, the actual timeframe varies due to several factors, especially wage calculations, which are frequently miscalculated by TPAs, Retro Sponsors, and employers. Accurate break-even analysis is crucial to determine how long KOS is financially sensible.
Conversely, keeping an employee on KOS for too long, such as a year or more, can lead to unnecessary costs.
Myth: KOS is best used on all claims that’s why a mandate works well
FACT: While a KOS mandate will always benefit the Retro Group and the Retro Sponsor, you might be surprised to learn that KOS isn’t always the best option for you as an individual employer. For example:
- When Light Duty (LD)/Return-to-Work (RTW) can be used first, it should. Some are surprised to hear that KOS is not necessarily the first tool in your toolbox. It is almost always better for the injured worker and also far less costly from a claims perspective if LD/RTW is implemented—check out our LD/RTW webinar for more insight on why. If KOS is required and LT/RTW is ignored, workers may lose motivation to return to work, leading to a range of additional challenges.
- For employees with occupational disease claims the ROI for KOS changes. While you’re paying full KOS wages, you only receive partial credit in your Experience Modification Factor (EMF) calculation. If you’ve received 50% liability for a claim, paying the full wage gives you credit for only 50% of the reduced claim cost as a result. Paying KOS for occupational disease claims may make sense but it’s critical to understand this tradeoff and consider how it impacts the breakeven analysis.
- Catastrophic loss claims (i.e. PPD, pension claims, etc…) where someone is unable to work at all—claims where we reasonably know it will hit the per claim max. In these cases, the negative impact of the claim will already be at its highest, without any hope for relief.
- Claims where saving money may not align with other business priorities. For instance, if an employee is injured on the job and then lawfully terminated after a failed drug test, should you be required to use KOS or light duty (just to increase refunds for your Retro Sponsor)? We think not, yet we’ve observed this happening firsthand.
Surprised by these insights? It’s important to have a third-party administrator (TPA) or Retro Sponsor who is thorough about managing each claim individually, thus ensuring their best outcome for you and not just the Retro group. To optimize your KOS strategy and avoid unnecessary costs, watch our KOS strategies webinar or contact us to find out how we can help you make informed decisions.
Also be sure to SUBSCRIBE to our Washington Workers’ Comp and Retro Insights, Q&A, and expert tips.
