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Workers Comp Statistic Combined Ratio Best In 50 Years – NCCI

August 8, 2017 By JL Risk Management Consultants Leave a Comment

One workers comp statistic stood out the August 3rd NCCI Virginia State Advisory Forum. Actually, it exceeded even my positive outlook for the Workers Compensation market health.

The Combined Ratio performed even better than last year in the overall market. Last year the ratio pegged at 94%. What does this mean? The formula consists of three main variables:

Losses + Expenses / Earned Premium

The current workers comp statistic – Combined Ratio came in at 85% this year. The Combined Ratio measures a market’s total efficiency. Investment income by carriers is not counted in the Combined Ratio.

According to NCCI,, this was the best Combined Ratio in 50 years. Does this mean that carriers are making a 15% profit off all written premium – not exactly, but the more the number decreases, the healthier the market becomes overall.

I marked a few more pages in the presentation. (You may want to download the PDF from the first link in this article.) They were:

Slide 20 – Changes in Medical Lost-Time – Claim Severity by Component. The utilization number has decreased to an almost no growth figure compared to 20 years ago.
Slide 32 – All states are reducing Loss Costs except Virginia Hawaii and South Carolina
Slide 33 – North Carolina North Carolina reduced Loss Cost on 4/1/17 by –14.4% which was the largest reduction in the US.

The slides are great for a quick review. The national information provided by NCCI provides a good bit of insight beyond the Virginia data.

Filed Under: combined ratio, NCCI Tagged With: Hawaii, North Carolina, South Carolina, State Advisory Forum, Virginia

Insurance Industry Employment Alarming Numbers – Shocker

August 2, 2017 By JL Risk Management Consultants

Insurance Industry Employment Figures Should Be A Wake Up Call

These insurance industry employment trends should sound off a few alarms. Recently, I was reading the July issue of AM Best’s Monthly Magazine.

The July Issue covers the Millennial paradox among other concerns. One of the article covers a very salient point. The industry employment threats abound now with the attrition and aging of the workforce versus the slow pace of the new hires.

One table on page 3 of the article stopped the show. The numbers from the Baby Boomer’s Exit table*:

74% increase in the number of employees aged 55 and older in the last decade (ouch!)
25% of the insurance industry workforce consist of employees aged 35 or less.
50% of the industry workforce will be retired by 2030.
20% of experienced underwriters will retire in the next few years
And the grande finale —are you ready for this one–-70% of insurance adjusters age > 40!

Let us cover those fascinating insurance industry employment numbers one more time.

The 74% number alone rings an alarm bell with me. I have just joined that group over the last year. Attending a safety and risk management conference a few years ago opened my eyes. No one under 40 showed up for the conference. Everyone was the same people I talked with and had seen over the last 20 years. There were no new faces.

The second bullet point aligns with the first one. I have experienced this at many conferences lately. Where was the younger crowd? I was told possibly that companies send only Senior level people to the conferences. I find that hard to believe. Why? When I attend conferences outside of the insurance industry, the 35 and younger attendees are out in force.

The third bullet point could be allayed with the fact that technology may replace some of the workforce. However, 50% coverage is an illusion.

The fourth bullet point shows the insurance underwriting industry losing 20% of the workforce. Once again, I have been told technology will replace much of this function. Twenty years from now this could possibly happen, but not in the next few years.

The fifth bullet point, which made me write this article, shows a real crisis in one area the insurance industry must heed – only 30% of the adjusters are under age 40. (Double ouch). I was informed once again that this shortfall can be withstood by the increase in technology. However, the insurance industry cannot make this ground as insurance seems to be far behind in technology. I have written many articles on the lack of the technology in Workers’ Compensation.

One wonders what the solution will be ten years from now.

*Credits should be given to McKinsey and Co., Insurance Careers movement, Bureau of Labor Statistics, The Jacobson Group, Deloitte, and The Institutes for the table as AM Best used them to create the table.

Filed Under: AM Best, employment Tagged With: Baby Boomer, millennial

Free WCRI Webinar On Study Of Workers Post Accident August 9th

August 1, 2017 By JL Risk Management Consultants

Free WCRI Webinar Explores Injured Workers Post Accident – 08/09/17

The free WCRI Webinar on August 9th should be an interesting one. The WCRI hails from Boston – Workers Comp Research Institute. I learned about this study while live blogging the 2015 WCRI Annual Conference in Boston.

If you have anything to do with Workers Comp, this should be well worth your time. Knowing what employees think of the claims process should be very insightful.

Dr. Bogdan Savych’s research is groundbreaking. No organization had really ever followed the outcomes of employees after their recovery period and the Workers Comp file closes. One had to wonder what happened to injured employees after the claims was over or was far along in its development.

The 45-minute webinar on the latest worker outcomes research on Wednesday, August 9, 2017, at 2pm ET (1pm CT; 12pm MT; 11am PT).

The outcomes examined include

Recovery of physical health and functioning,
Return to work,
Earnings recovery,
Access to medical care, and
Satisfaction with medical care.

The research, Comparing Outcomes for Injured Workers, 2016 Interviews, is a product of an ongoing, multiyear effort by WCRI to collect and examine data on the outcomes achieved by injured workers in a growing number of states. Interviews were conducted in six of the states (Indiana, Massachusetts, Michigan, North Carolina, Virginia, and Wisconsin) in 2016. Interviews for all other states (Arkansas, Connecticut, Florida, Georgia, Iowa, Kentucky, Minnesota, Pennsylvania, and Tennessee) were conducted from 2013 to 2015.

Questions addressed:

In what states did injured workers report higher rates of return to work?
How did recovery of physical health and functioning vary across study states?
In what states did injured workers report higher rates of experiencing “big problems” getting desired medical care?
What percentage of injured workers across the 15 states was satisfied with their overall medical care?

The medical care satisfaction analysis varied among the states on the last survey.

Filed Under: WCRI Tagged With: Arkansas, connecticut, Florida, Georgia, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, North Carolina, pennsylvania, Tennessee, Virginia, Wisconsin

Independent Contractor Employee Checklist For Employers and Contractors

July 27, 2017 By JL Risk Management Consultants

Independent Contractor Employee Checklist

The independent contractor employee checklist answers quite a few of the question we receive when I write an article on independent contractors. Yesterday, I wrote an article that included all the IRS independent contractor information. I came across this info at the Hawaii Work Center website. They have distilled the ACE (see bottom of article) version of the independent contractor employee checklist.

I have used this in my own business when dealing with subcontractors. The Ladder of Insurance(c) serves as a caveat when hiring contractors that have their own employees.

How can I tell if I a worker is an independent contractor or employee?

Independent contractor or employee? Below are examples of the questions the courts may review in making a determination.

The most important consideration is that of control: Does the employer have the right to control or direct only the result of the work, and not the means and methods of accomplishing the result? If so, it is more likely that the worker will be considered an independent contractor.

Thus, the following factors may be considered in determining whether the employer has sufficient control over the worker to result in employment status. Note that there are factors that are common to both“independent contractor” and “employee”; therefore, it is best to look at the relationship as a whole rather than focusing on one or two factors.

The bottom line: The more the relationship looks like an employer/employee relationship, where the employer has the right to control the means and methods of accomplishing the desired results, the more likely it is that the courts will view it as such.

• Is the worker required to follow specific instructions as to the means and manner of performing the work? (Yes=Employee; No=Independent Contractor)

• Is there a set amount of hours and days that the person must work each week? (Yes=Employee; No=Independent Contractor)

• Does the employer supply the office, equipment, and tools needed to accomplish the work? (Yes=Employee; No=Independent Contractor)

• Must the work be performed on the employer’s premises? (Typically, a “yes” answer would indicate the person is an employee; however, there are instances where an independent contractor would be required to perform on the premises. You would need to consider your answer to this question in relation to everything else.)

• Is the worker trained by the employer to perform the assignments? (Yes=Employee; No=Independent Contractor)

• Is the assigned work a part of the regular business of the employer? (Yes=Employee; No=Independent Contractor)

• How long does the relationship continue? (In general, the longer the relationship continues, the more the worker looks like an employee.)

• Can the employer assign additional projects to the worker? (Yes=Employee; No=Independent Contractor)

• Is the person paid in the same manner as employees, e.g., biweekly? (Again, typically a “yes” indicates the person is an employee, but there may be instances where the independent contractor is paid in the same or similar manner. Here
again you will need to consider this factor in relation to all other factors.)

• Can the worker hire assistants? (Yes=Independent Contractor; No=Employee)

• Does the worker provide services to more than one firm? (Yes=Independent Contractor; No=Employee)

• Does the worker make his or her service available to the general public? (Yes=Independent Contractor; No=Employee)

• Is there a written contract between the parties delineating their rights and responsibilities? (Yes=Independent Contractor; No=Employee)

• Can either the worker or the employer terminate the relationship at will? (Yes=Employee; No=Independent Contractor)

• Is the worker making any investment into facilities or equipment, and will the person realize a profit or risk of loss? (Yes=Independent Contractor; No=Employee)

The article was adapted by, the National Association of Colleges and Employment (NACE) . Thanks to them for providing the independent contractor employee checklist.

Filed Under: Independent Contractor Analysis Tagged With: IRS, Ladder of, NACE

IRS Contractor Employee Rules – Updated Web Page With Videos

July 26, 2017 By JL Risk Management Consultants

IRS Contractor Employee Rules Have Been Updated

The IRS Contractor Employee rules assist business owners on who can be considered independent contractors or employees. Each state’s Workers Comp rules may have their own employee vs. contractor tests. The IRS Contractor Employee rules supply a great basic place to start the determination.

I have updated this section often over the years. Below is the complete webpage from the IRS. One specific difference is the addition of statutory employees and statutory non-employees. Statutory employees can be very important such as in the case where South Carolina made a ruling on statutory employees post-accident.

Independent Contractor (Self-Employed) or Employee?

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It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.

Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

Select the Scenario that Applies to You:

I am an independent contractor or in business for myself
If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center.
I hire or contract with individuals to provide services to my business
If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are.

Determining Whether the Individuals Providing Services are Employees or Independent Contractors

Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be –

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

Common Law Rules

Facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

Filed Under: IRS Guide Subcontractors Tagged With: independent contractor, statutory employees

WCIRB Board of Directors May Add Small Business Member

July 25, 2017 By JL Risk Management Consultants

California State Senate Changes WCIRB Board of Directors Makeup

The WCIRB Board of Directors may be required to add what many more Workers Comp rating bureaus should consider in the near future. The WCIRB is California’s Workers Compensation Rating Bureau (Workers Compensation Insurance Rating Bureau) . Most rating bureaus consist of many members of the insurance carrier community.

The California State Senate recently passed a measure AB 61 that requires the Governor to appoint a small business member to the WCIRB Board of Directors. I think this is ingenious. Small businesses have experienced a rough ride due to two different rating changes over the last decade.

From the Senate Counsel’s Digest:

AB 61, as amended, Holden. State Compensation Insurance Fund: board.

Existing law establishes the State Compensation Insurance Fund to be administered by a board of directors for the purpose of transacting workers’ compensation insurance and other public employment-related insurances, as specified. Under existing law, the board is composed of 11 members, 9 of whom are appointed by the Governor. Existing law requires the Governor to appoint the chairperson and one board member from organized labor, as well as appointing board members, other than the labor member, who have specified qualifications.

This bill would require one of the board members that the Governor appoints to be a current or former small business owner who is or has been a small business owner for more than 5years. years and who is a State Compensation Insurance Fund policyholder, as specified. The bill would require the exemption from specified qualifications that currently applies to the labor member to also apply to the small business owner member. The bill would provide that the small business owner member shall be appointed to the first board vacancy that is not left by the labor member or the member with an auditing background.

The two interesting facets of the bill are:

SCIF policyholder – why SCIF?
Had to be a small business owner for 5+ years – (mark of success?)
Member with auditing background cannot be replaced by small business member – interesting exclusion

If I remember correctly, NCCI had one “outside” board member. The member was a local attorney in Boca Raton, FL – the headquarter city of NCCI.

The NCCI Board of Directors has now changed its makeup to include two megalithic companies’ Senior Management. The North Carolina Rate Bureau’s Workers Comp Governing Committee (similar to a Board of Directors) has no one on the committee such as public members even though some of the other governing committees have Public Members.

Many of the newer rating bureau rule changes will heavily impact small businesses. The WCIRB changed one of the small business rating discounting factors in 2013 that heavily penalized unsafe small employers. The newest 2015 X-Mod changes may impact small businesses – once again – especially the unsafe ones. To be fair to the WCIRB – the theme is penalizing small unsafe employers, not really all employers.

I will attempt to keep up with the Governor signing or vetoing AB 61. One would be shocked if Governor Brown did not make it law.

Filed Under: WCIRB Tagged With: AB 61, California, NCCI, SCIF, State Compensation Insurance Fund, X-Mod

Physician Dispensed Meds A Mixed Bag Says Massive WCRI Study

July 13, 2017 By JL Risk Management Consultants

The controversial physician dispensed meds subject pops up often at the workers comp claims department “water cooler” discussions. The cost and pre-certified authority to dispense seems to bristle against many adjusters. How do I know this? Whenever I bring up the subject, many become very concerned even with the “new reforms”.

DEA Pill Bottle physician dispensed meds drug take back

Many adjusters feel the physicians worked their way around the new reform systems.

A new WCRI (Workers Comp Research Institute out of Boston) study showed that many states still struggle today with the subject. According to WCRI :

The study, A Multi-state Perspective on Physician Dispensing, 2011–2014, found physicians dispensed fewer prescriptions after price-focused physician dispensing reforms. However, as of 2014, physician dispensing was still common and represented a large share of prescription costs in several states, including California, Florida, Illinois, Maryland, and Pennsylvania.

One asks themselves why did California, Florida, Illinois, Maryland, and Pennsylvania still have so many problems with physician dispensed meds? WCRI had an answer:

According to the study, the reforms reduced prices for existing drug products, which was evident in all post-reform states. However, physician prices increased for several drugs commonly used to treat injured workers in several post-reform states, including California, Florida, and Illinois. The increase in physician prices in these states was a result of frequent physician dispensing of higher-priced new drug products. When dispensing these new drug products, some physician-dispensers were able to bypass the reimbursement rules, which target physician-dispensed repackaged drugs, and were paid much higher prices than they were paid for existing strengths of the same drug. The results raise questions about the effectiveness and sustainability of the price-focused reforms in these states.

Dr. John Ruser, WCRI Executive Director and CEO used a phrase in the article that encompasses the problem in a few words:

“With any reform, stakeholders want to know if the desired outcome was achieved. This study answers the most important questions policymakers and other system stakeholders have with regard to these state reforms, including did they work as intended or have they led to unintended consequences?”

Many times a state steps into assist in bring one workers comp aspect or another under control. Sometimes the law of unintended consequences (aka Murphy’s Law) rears its ugly head for all to see.

Once could say that the State Legislatures took the previous WCRI and the Rating Bureau studies on physician dispensed meds and attempted to fix the situation.

You can find the study synopsis here.

This may be one to purchase and study if you have anything to do with RX management of any sort.

If you wish to purchase it, use this link.

The study covered a massive amount of data that makes it one of the largest I have seen by WCRI:

The data used for this report came from payors that represented 36–68 percent of all medical claims across 26 states. The states included in this study are Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin. The detailed prescription data cover service years from 2011 through 2014, for all medical claims with 24 months of experience.

The bottom line – Do those Legislatures need to go back to the drawing board or do they need to just fine tune what they have in place? The state reform problems often go beyond just physician dispensed meds.

Filed Under: WCRI Tagged With: Arkansas, California, connecticut, Florida, Georgia, Illinois, Indiana, Iowa, kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, pennsylvania, physician dispensed, South Carolina, Tennessee, Texas, Virginia, Wisconsin

Work Comp Rate Bureaus Becoming Credit Bureaus?

July 13, 2017 By JL Risk Management Consultants

All Work Comp Rate Bureaus consider an employer with a 1.0 Mod as your average employer in reference to accident rates and severity. However, as I wrote in my last article millions are on the line if a Mod increases above 1.0.

Many employers are now feeling the pinch when their Mod increases or stays above 1.0. A few years ago the Experience Mod Rating formula was changed by NCCI. The Primary Loss part of the claim increased from $5,000 to $15,000.

The Primary Loss equates basically to the part of the Total Incurred that is not discounted. The Excess Loss has a discount factor that is applied to the reserves above the primary loss.

An E-Mod of 1.04 from the Workers Comp rate bureaus can actually have an employer shunned from bidding on governmental contracts. How do I know this is the case? Over the past few weeks and when I wrote the article earlier this week, I heard from quite a few employers with that very concern.

The work comp rate bureaus will usually say that we only process the numbers and generate Mods. That may be true, but now many governmental agencies and large employers producing bids think otherwise.

One of the bid considerations for major contractors and governmental agencies is having a 1.0 E-mod or STOP HERE and go no further before the employer produces a bid. It is not a bid consideration. It is a denial.

How should the Rating Bureaus fix the situation? They should not be responsible. The two parties responsible consist of the employer and the contractor.

A great suggestion to the Risk Managers would be to stop at the first number to the right of the decimal. For instance a Mod of 1.08 equals 1.0. In my opinion an employer with a 1.08 Mod is not that much more risky than an employer with a 1.0 Mod.

I have spoken to a number of Risk Managers that say – hey, I have to draw the line somewhere.

The other side of the coin points to the employers. Spending funds now for safety remains the answer. The expenditures will pay off in time. The business owners and the Senior Management of companies need to allow time for safety efforts to take effect.

Throwing funds at safety for one year and expecting the Mod to lower immediately is not the way the Workers Comp system works. Many safety managers and in fact, risk managers were shown the door because the company’s Mod did not move. The Mod process takes four years to show fully.

As the author Charles Givens once said in his book Super Self – if you want to win in someone else’s ballpark, you have to play by their rules. The Work Comp Rate Bureaus are the ballpark. A great Safety Program keeps you playing in your ballpark. No injuries mean you get you play in your ballpark.

J&L Risk Management Consultants assisted many employers to reduce their Experience Mods over the years. Other than a safety program, a full Loss Run Analyses brings down Mods as long as your company does not have a string of accidents.

Filed Under: rate bureau Tagged With: E-Mod, Excess Loss, NCCI, primary loss, total incurred, WCIRB, X-Mod

How An Experience Mod Of 1.01 Can Cost A Company Millions

July 12, 2017 By JL Risk Management Consultants

Experience Mod > 1.0 Can Negate Large Private or Government Contracts

An Experience Mod of 1.1 does not necessarily indicate that a company operates unsafely. We have received many questions over the last three to your years on this situation.

Over the past 30 years, I have presented and wrote how an X-Mod is like a credit score from hell.

Government and now even private contracts require an employer to have a 1.0 Mod or less. Does an employer with a 1.01 Mod versus one with a .99 E-Mod denote a better level of safety? Many contractors are caught on the outside looking in for having such a Mod.

One has to agree that dealing with an unsafe subcontractor can cost the Risk Manager’s organization dearly. The Ladder of Insurance (c) shows how a contractor can be responsible for employees they never knew that had on staff.

Then again, to eliminate a good subcontractor that has a 1.05 Mod my not be providing the best value to that Risk Manager’s organization.

I had just got off the phone with a very large contracting firm in this very situation when I decided to write this article, What is a contractor to do? This contractor had a Schedule Credit Rating Factor which helped reduce their Workers Comp premium. Then again, the amount of premium saving was paltry compared to the inability to bid on certain contracts.

There exists a large alternate market which includes Self Insurance, PEO’s, Captives, Large Deductibles that may be worth pursuing to possibly remove the employer from the Experience Mod System.

The most effective method would be the re-doubling of safety efforts to reduce the Mod back at or below 1.0. How much safety funding would bring the Mod below 1.0 when one bad year can push it above 1.0? That is the employer’s conundrum.

To the government and large private contract bidders – good luck with your Experience Mod.

Filed Under: E-Mod X-Mod Tagged With: Captives, ladder of insurance, large deductible, PEO

Work Comp Schedule Rating Factor – Use It or Lose It When Policy Commences

June 28, 2017 By JL Risk Management Consultants

Work Comp Schedule Rating Factor Highly Negotiable Before Start of Policy

Search For The Work Comp Schedule Rating Factor. Why do we want to search for it? Because your company may be leaving negotiable premiums on the table, so to speak. Ok, Workers Comp policy wonks, this article was produced as a generic article as there are many deviations to Schedule Rating Factor throughout the states.

What Is the Schedule Rating Factor? Let’s find it first. Get our your Workers Comp policy. You know, the thing the agent sent you that you filed away at the start of your policy. I will wait. Hmmmmm…….hhhhhmmmmm………hhmmmmm……hhhhmmmmmm. Ok, so you found your Workers Comp policy. If you found it quickly, you are ahead of the game.

The first page of the policy after the agent’s generic cover letter starts the Declarations Page(s). The parts of any policy – even non-workers comp ones–have DICEE for any acronym.

The five parts are:

Declarations
Inclusions
Conditions
Exclusions
Endorsements

Let us stay with the first one. I actually produced that list to give anyone that was slow on locating the policy a little more time. OK, now to the Dec Page.

Do you have your highlighter? – #1 Best Policy Review Tool, well get it out.

Now, start going down the right side of the Declarations Page. Do you see where you have your Classification Codes, Rates, Etc. Keep going down the page until you see Schedule Rating Factor . It is almost at the bottom.

What is your Work Comp Schedule Rating Factor? Did you know that it was negotiable at the START of the policy. You are too late now. Hey, do not look at me. I could have helped you with this at the renewal. Well, you can try to negotiate it on your next policy, or call or email me BEFORE your next policy renews.

The Schedule Rating Factor can swing policies 25% Debit (not good) or 25% Credit (very good). Where is this secret document that covers how these are based? The Rating Bureaus or if you follow this link, I listed some generic ones in a previous article.

Also, I include some of the terms in most of my presentation slides. Search for the word “presentations” in the box at the top right of any page. You will see Presentation Slides on the top search result.

All of the considerations are safety-related. Usually, the first one on the list is Housekeeping. Imagine, a clean workplace is a safe workplace. The Factor is an arbitrary factor between an employer and insurance carrier.

Why did I bring this up today? A company (still litigated, so no names here) just found out in Federal Court that the Rating Factor cements itself to the policy one you sign off on it. No matter what happens later on in your policy year, usually nothing can change your Work Comp Schedule Rating Factor.