Safety Pays in Mining: Technical Guide

This Technical Guide describes the data and calculations used in Safety Pays in Mining.

Most Common Injuries and Work Activities for 2015

MSHA’s accident/injury/illness file for 2015 was used to provide this data. Data were sorted by industry, and then: 1) the most frequent Mine worker activities in which a miner was injured were identified, and 2) Part of body was cross tabulated with Nature of injury to identify specific types of injuries. Injury data can be found on the NIOSH web page for MSHA data file downloads.

What Is the Cost of Occupational Injury?

Injury - Nature

Injury - Nature is based off of the Ohio Bureau of Workers’ Compensation’s (OHBWC) 57 injury diagnosis category descriptions. About a third of the claims included multiple diagnosis categories. In these cases, the category used for the claim was the diagnosis most likely to keep the injured work off work for the longest period. Claims with multiple diagnoses tend to have higher costs than cases with single diagnoses. Additional injuries were identified from the 2015 MSHA injury data and were classified in the OHBWC data by using the Barell Injury Diagnosis Matrix. Only injury types with more than 10 claims were included in the cost analysis.

Injury - Cause

The Injury - Cause description indicates the manner in which the injury was inflicted. NIOSH used the Occupational Injury and Illness Classification System (OIICS) to code the occupational injury incident descriptions included in the claims data, which was provided by the OHBWC. Only events or exposures with 10 or more claims were included in the cost analysis. OIICS v2.01 event and exposure codes were used and more information can be found on the NIOSH OIICS Code Trees page.

Direct cost ($)

Direct cost in Safety Pays in Mining is the cost of workers' compensation claims (medical expenses and indemnity payments for wage loss, both paid and reserved) for a specific injury type represented as a mean cost and various percentile costs. All costs are rounded to the nearest $100.

This data is based on the cost of workers' compensation insurance claims in the mining industry (excluding oil and gas) in the OHBWC system for years 2001 to 2011. Only non-zero cost injury types (diagnosis) with more than 10 cases were included. A total of 4,041 mining claims were included in the analysis. All costs are adjusted to 2015 dollars. Mining companies can enter their own injury cost data or can use one of the default values provided in the web application.

All injuries have mean, 25^th percentile, 50^th percentile (median), and 75^th percentile direct costs. If there were more than 50 cases of a specific injury, the 90^th percentile costs were included. If there were more than 100 cases, the 95^th percentile costs were included and if there were more than 500 cases, the 99^th percentile costs were included.

When expecting a single claim, the cost is likely going to be around the median. The median provides a good estimate, since half of the claims have higher costs and half of them have lower costs. However, you should consider two factors that may lead you to select a cost higher than the median:

• The total number of claims you expect, considering all claim types

If you are expecting more than one claim, the chance of having one very expensive claim increases. As a result, if you are expecting 2 to 10 claims, using the 75th percentile for each claim will lead to a better estimate for total cost. When the number of claims exceeds 15, the 90th percentile for each claim provides a better estimate.

• Your concern about the risk of having a claim that costs much more than the typical claim

There is substantial risk that claims will cost much more than the "typical" claim, as illustrated by the cost of claims at the 90th percentile and above. Even if you have a single claim, there is a 10% chance that your claim will exceed the 90th percentile cost.

How the direct cost estimates were calculated

The most recent total cost evaluations (medical expenses and indemnity payments for wage loss, both paid and reserved) for each claim were used. A time-trend analysis on claims filed from 2001 to 2011 showed that total claim costs are rising at about 5.8% a year. Using this percentage, injury costs were calculated into 2015 figures. For example, a claim in 2005 that had a total cost evaluation of $1000, is estimated as having a total cost evaluation of $1,757.34 (=$1000*(1.058)^10) if it had occurred in 2015.

Indirect cost ($)

Indirect costs usually account for the majority of the true costs of an injury and these costs may be uninsured and unrecoverable. The indirect costs used in Safety Pays in Mining are the costs to the employer beyond those covered by workers' compensation.

Indirect cost estimates can include:

• Any benefits paid to injured workers for absences not covered by workers' compensation
• The wage costs related to time lost through work stoppage associated with the worker injury
• The overtime costs of other workers necessitated by the injury
• Administrative time spent by supervisors, safety personnel, and clerical workers after an injury
• Training costs for a replacement worker
• Lost productivity related to work rescheduling, new employee learning curves, and accommodation of injured employees
• Clean-up, repair, and replacement costs of damaged material, machinery, and property
• Increased workers’ compensation insurance premiums

Indirect cost estimates generally do not include:

• The costs of MSHA fines and any associated legal action
• Worker pain and suffering
• Loss of good will from bad publicity

To estimate the indirect costs of injuries, Safety Pays in Mining uses an indirect cost multiplier of 2.12.* The indirect cost is calculated by multiplying the direct cost of an injury and the indirect cost multiplier.

*Huang, Y. H., Leamon, T. B., Courtney, T. K., DeArmond, S., Chen, P. Y., & Blair, M. F. (2009). Financial Decision Makers' Views on Safety. Professional Safety, 54(4), 36.

A note regarding injury costs

Direct costs are paid by those companies who self-insure. Companies who purchase workers’ compensation insurance would have these direct costs paid by the insurance company. However, the cost impact for mines with workers’ compensation insurance would largely be through increased premiums and eligibility to participate in group policies.

It should not be assumed that all injuries results in workers’ compensation claims. Many injuries are unreported. These injuries can result in costs for employers as well, although there is some evidence that the unreported injuries tend to be less severe. Unreported injuries can still result in reduced productivity, absenteeism, sick days, and group medical costs.**

**Leigh, J. P., Marcin, J. P., & Miller, T. R. (2004). An estimate of the US government’s undercount of nonfatal occupational injuries. Journal of Occupational and Environmental Medicine, 46(1), 10-18.

**Ruser, J. W. (2008). Examining evidence on whether BLS undercounts workplace injuries and illnesses. Monthly Lab. Rev., 131, 20.

**Boden, L. I., & Ozonoff, A. L. (2008). Capture–recapture estimates of nonfatal workplace injuries and illnesses. Annals of Epidemiology, 18(6), 500-506.

Total cost ($)

This is the sum of the direct and indirect costs for a select injury or injuries.

What Is the Impact of the Cost of Occupational Injury on Your Company?

Profit margin (%)

Profit margin measures how much of a company’s sales it keeps as earnings, and here it is calculated as after-tax profit divided by revenue. The profit margin used in Safety Pays in Mining can be either your company's profit margin or a default value. The default value of 5.5% represents the average of after-tax profits per dollar of sales for all mining for years 2010 through Q2 of 2015. The average was calculated using data from the U.S. Census Bureau's Quarterly Financial Reports for Manufacturing, Mining, Trade, and Selected Service Industries. The default value gives the best estimate for corporations with NAICS mining codes and assets of $50 million or more.

Annual sales ($)

Enter your company sales total, or Safety Pays in Mining will use the default values shown in the table below. Annual sales were averaged using U.S. Census Bureau Enterprise Statistics data for 2011 (Table 7). This is the average yearly sales estimate for the selected commodity for companies with at least 250 employees and at least two establishments.

Injury total cost as a percentage of annual sales (%)

Additional sales needed to pay for injury total cost ($)

How Could Your Company Spend Its Savings from Preventing Injury?

While a mining company might choose any number of ways to spend or reinvest savings from injury prevention, mines may decide to add to their workforce or better outfit existing workers. Using the program, explore your options and their associated costs.

How many additional employees could your company employ for one year?

This provides an estimate of the number of employees that your company could have hired for one year if the injury was prevented.

Hourly wage data was retrieved from the Bureau of Labor Statistics (BLS) Occupational Employment Statistics, National Industry Specific Occupational Employment and Wage Estimates, which is calculated each May. The default hourly wages were calculated from the five-year (2011 to 2015) average hourly wages for mining (based on NAICS coding) and are shown in the table below.

The total cost to a company for employee compensation includes both the wage amount and any additional benefits they provide. Employee benefits might include Social Security, insurance, retirement benefits, paid leave, and overtime pay. The average benefit amount for mining industries (calculated using 2011 to 2015 data) was one-third of the total compensation figure. Therefore, total compensation is equal to hourly wage plus another 50 percent of the wage value in employer-paid benefits. This data was retrieved from the BLS National Compensation Survey.

Data on the average weekly hours worked was retrieved from the BLS Current Employment Statistics program. The average hours worked per week for the mining industry (for the years 2011 to 2015, excluding oil and gas) was 44.5 hours per week. By calculating 50 working weeks per year, the average employee worked 2,225 hours per year.

How many employees could your company provide with a hearing loss prevention program for one year?

The default $375 per person annual estimate for a hearing loss prevention program is based on estimates by Driscoll, D.P. 2010. Presentation: The Economics of Noise Control Engineering versus the Hearing Conservation Program. Professional Conference on Industrial Hygiene (PCIH), American Board of Industrial Hygiene, as cited in OSHA Technical Manual (OTM) Section III Chapter 5. Noise – Appendix G.

How many employees could your company provide with MSHA-suitable safety boots?

The default price of $175 for MSHA-suitable safety boots was averaged by NIOSH using 2016 prices from numerous occupational safety and health equipment suppliers and NIOSH purchases from 2015 to 2016.

How many employees could your company provide with MSHA-suitable hard hats?

The default price of $60 for MSHA-suitable hard hats was averaged by NIOSH using 2016 prices from numerous occupational safety and health equipment suppliers and NIOSH purchases from 2015 to 2016.