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Why Are Workers Comp Pharmacy Benefits So Expensive – In One Picture

October 18, 2018 By JL Risk Management Consultants Leave a Comment

Workers Comp Pharmacy High Costs – One Pic Explains It All

A Workers Comp Pharmacy comparison can be shown in the picture below. My comparison is not for a Workers Comp claim that I have presently. Instead, a simple picture shows the source of the high costs of name-brand medications regardless if the benefits are health or workers compensation.

picture of inhalers from Workers Comp Pharmacy

Taken by article author

The one on the left is brand name. The inhaler on the right is a generic version. Each one of them provides 200 doses.

Every year, I have to use an inhaler when I catch the usual upper respiratory infection at an airport or in an airplane. I use air travel just enough to have the usual travel maladies.

I was explaining to a friend of mine in another country that an inhaler here retails for approximately $175. I will not mention the drug company or the drug in the inhaler. He said let me check on that as I think they sell here over the counter without a prescription for $4. I thought he was out of his mind.

Then, one day I received a package from his present home country. I will keep the country anonymous as well. I had remarked to my good friend that the inhaler was running low and I would have to pay for a Doctor’s visit and an extremely high price, even with health insurance, for the inhaler.

I opened up the package and there was an inhaler from his home country from the same pharmaceutical company. With postage, it cost him less than $10 including the cost of the inhaler.

I had thought that it could not be the same medicine. I was wrong. IT WAS THE EXACT SAME MEDICINE manufactured by the same company overseas. So the inhaler can be obtained without a physician visit in his country – amazing, and it was the dollar equivalent of $4.

Let us look at the comparison:

US – $25 for office visit, $175 (let’s not count in the insurance copay) = $200
Foreign country – $4 + 6 postage = $10

Why does it cost 2,000% more for the same drug manufactured by the same company? I then honed in on Workers Comp Pharmacy expenditures. The light bulb went on quickly. Why are name brand pharmaceuticals so expensive for Workers Comp? I think it may be that the generics are produced in the same factories as was the inhaler.

By the way, there is no generic version of the inhaler, unless you live in another country. Why? The domestic patent has not expired yet.

Workers Comp pharmacy costs for the inhaler would be full bore at $175, right?

I am not a Pharmacy Benefit Manager (PBM) expert. However, the numbers are the numbers – PBM or not. If you wish to comment, below, please explain the $173 difference and if the inhaler would be cheaper with a Workers Comp Pharmacy network.

Filed Under: pharmacy

Hurricane Michael And The Newsletter – The Hurricane Won

October 17, 2018 By JL Risk Management Consultants Leave a Comment

Hurricane Michael Damage – Micro-bursts – Check out the pics

I decided to stay home and monitor my home when Hurricane Michael – Tropical Depression moved through the Raleigh NC area. As a part time property damage adjuster, I have seen many strange hurricane effects over the years.

The hurricane had downdrafts or micro-bursts in it. Check out the pics. Everything is better this week except waiting for the insurance damage appraiser and the roofing company to show up. The tree limbs fell like arrows and stuck in the roof. One came completely through the ceiling.

Filed Under: Hurricane Syndrome

IAASE Conference – Not Quite Live Posting October 7 – 9

October 12, 2018 By JL Risk Management Consultants Leave a Comment

Notes From The Insurance Auditors Association of Southeast IAASE Conference

I was going to post the IAASE Conference from earlier this week live. So much helpful information was covered that I found it better to write it down and then post the presentations from the IAASE Conference later in the week.

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The conference was held at the University of South Carolina (Columbia). The conference also provided a career fair for any Gamecock students that were interested in premium auditing or insurance in general. The handouts from the IAASE Conference can be found here. I took notes on some of the presentations.

IASSE Conference Keynote Speaker

Robert P. Hartwig, PhD, CPCU

Clinical Associate Professor, Finance Department and Director, Center for Risk and Uncertainty Management

Darla Moore School of Business

University of South Carolina

____________________________

Dr. Hartwig has been quoted by me and presented at some of the conferences I have attended over the years. Dr Hartwig used to work for the Insurance Information Institute. He covered so much good information so quickly I could not blog it live. Some of the notes I took from his presentation:

University of South Carolina has the 3rd largest Risk Management program in the US
New Tax Laws adjustments will show up more in 2019
P&C Insurance Industry $60 billion net income after taxes
ROE (Return on Equity) is in single digits
Combined Ratio receded from 1.14 last year to .96 this year
Domestic Reinsurance 13 – 15% growth, probably due to new tax laws repatriation of assets
$30 billion in mergers and acquisitions
Trumponomics – tax reform, deregulation, infrastructure investment, Fair Trade, and other programs from the new administration resulted in 4.2% economic growth. The 4.2% growth has increased insurance exposures
Economy drives P&C insurance growth
Job growth drives the economy
Commercial lines much more volatile than personal lines
Workers Comp – downward growth trend – why?
- Returning to rate adequacy from prior year
- Safety and Risk Management (?)
- Rates are decreasing

___________________________________________________

The Honorable Ray Farmer – South Carolina Insurance Commissioner –

Three main concerns for the Insurance Commission –

Affordable Care Act – only one carrier left in the state, no competition
Long Term Care Insurance – steep increases in older policies
Coastal Insurance Coverage – Flood Insurance – Hurricane Florence was devastating

South Carolina Workers Compensation System

Favorable and Stable
- 20% rate decrease
- Premium Growth – Total $827 million in 2017
Market
- 300 participating insurers
- Small 4% residual market
- Largest insurer writes 9%
Biggest Challenges
- No in-state burn center, so insurers pay full out-of-state rates for treatment
- Opioid abuse
- No guaranty fund for self insureds in SC – I did not know this

___________________________________________________

Presentation on Managing Remote Workforce

Keith West -Excel Tips For Premium Auditors

Flash Fill – great time saver
Filter
Transpose
Text to Columns – Another great time saver
Pivot Table
V lookup

The IAASE Conference had many more great presentations. I decided to write notes on the above three presentations.

Feel free to check out the handouts and the other presenters from the IAASE Conference.

Filed Under: Conference, IAASE Tagged With: columbia, Keith West, Ray Farmer, Robert Hartwig

InsurTech Revolution Hype/Reality – OutFront Ideas Webinar October 25th

October 11, 2018 By JL Risk Management Consultants Leave a Comment

Webinar Explores InsurTech Revolution Blockchain and Other New Insurance Industry Buzzwords

The InsurTech revolution, blockchain, and other new buzzwords have been ignored by many in the insurance industry – especially Workers Compensation.

Public Use License – Wikimedia

Blockchain was the driver for the Bitcoin investment algorithms and systems.

If you are in the same boat as me and behind the curve a little on some of the new buzzwords or concepts, the upcoming webinar by two of my favorite insurance people, Mark Walls – Safety National and Kimberly George – Sedgwick may be worth checking out.

All OutFront Ideas webinars are free of charge. All you have to do is sign up here, and of course, attend. Their webinars have always been free of charge – what a deal.

One suggestion is to make sure you are on a good solid WiFi system. I have recently missed two other webinars by trying to listen in on hotel WiFi. The system crash was inevitable. Another suggestion is to remember the webinar is in CST, so please convert for your timezone.

The InsurTech revolution webinar information from OutFront Ideas –

INSURTECH: REVOLUTION, EVOLUTION OR HYPE?
October 25, 2018 • 11:00 AM – 12:30 PM CST

You will learn:

Is InsurTech a threat or an opportunity?
What technologies are already in use throughout the industry?
What is blockchain and how do you apply it to insurance?
What impact will InsurTech have on employers, including those in human resources, benefits and risk management?
How will InsurTech specifically affect the workers’ compensation industry?
And more!

Speakers include:

Guy Fraker, Chief Innovation Officer, Insurance Thought Leadership
Jason Landrum, Global Chief Information Officer, Sedgwick Claims Management Services, Inc.
Peter L. Miller, CPCU, President and CEO, The Institutes | Risk and Insurance Knowledge Group

If you want to access any of their prior webinars, you can check that out here. I will be listening to the InsurTech Revolution webinar in two weeks. In fact, I just signed up using the above link.

Filed Under: Buzzwords, Out Front Ideas Tagged With: Bitcoin, Blockchain, InsurTech

North Carolina Insurance Commissioner Issues Warning On Steerage

October 5, 2018 By JL Risk Management Consultants Leave a Comment

North Carolina Insurance Commissioner Warns On Steering Hurricane Damage Repair – Big No No

This morning I received a general memo from current North Carolina Insurance Commissioner – Mike Causey. The first thing I noticed was that it was not directly addressed to me – whew!

Unlike Workers Compensation directed care for injured employees in most states, an adjuster just cannot make any recommendations. My question always was, what if the home or property owner asks for names of a few companies – but the answer is still NO.

Whenever I do property damage claims, yes, I do those – I recommend the insured contact their agent or the Department of Insurance. That always deflected a question that can really cause problems for an adjuster or damage repair company.

Most states have these laws in place. Many property and casualty adjusters read our newsletter and articles. I forwarded the memo to a few friends. I doubt they were ever steering clients to certain repair companies.

To: All Insurance Companies and Other Entities Licensed Under Chapter 58 of the North Carolina General Statutes

From: Mike Causey, North Carolina Insurance Commissioner

Date: October 4, 2018

RE: Anti-Steering Laws

I would like to thank all companies who have responded quickly and with compassion to the disaster in North Carolina resulting from Hurricane Florence. Several of the companies have also madea special effort to participate in the Insurance Camps that the Department has organized over the past three weeks. The Department recognizes that juggling schedules due to last minute site selections has been difficult, but, the effort was very much appreciated. It truly made a difference to those devastated by the storms to see the industry out in force trying to help.

On another note, the Department has also received some reports that some outside adjusters are insisting that consumers use the services of certain firms for damage repair. I would like to remind the companies that North Carolina has very strict anti-steering laws that prohibit companies, agents, adjusters, or appraisers from requiring consumers to utilize a particular service or source for repair of autos or property damage. I refer you to N.C. Gen. Stat. §§58-3-180 and 58-33-76, as well as other statutes and regulations, for review ofour anti-steering laws. Please ensure that any out-of-state adjusters or any in-state adjusters you use to adjust claims in North Carolina are familiar with and adhere to our anti-steering laws.

Thank you again for all that you do for our state.

Respectfully,

Filed Under: Insurance Commissioner, North Carolina Tagged With: steerage

When Are The Final Claim Reserves Set – Is There An Exact Date?

October 4, 2018 By JL Risk Management Consultants Leave a Comment

Final Claim Reserves Set Earlier Than Expected

The final claim reserves are set much earlier than one might expect in the reserving process.

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Most adjusters set the final reserves at 60 days into a claim. The exact timetable is:

14 days – initial reserve – usually made to the medical bills for first treatment and to start any indemnity benefits (if required). These reserves may not be accurate when examining a loss run
60 days- final claim reserves – regardless of claim severity the reserves are set “for the life of the claim.” The adjuster reviews the reserves every 30 days to make sure of adequacy to pay benefits, medical bills, and expenses. The 30 day reserve review can be very difficult to accomplish with the other 13 daily adjuster tasks. The claims supervisor usually has a diary at 50 days to analyze the reserves and ask the adjuster questions on the reserves.
6 months – locked in reserves – any adjustment to the 60 day final claim reserves is analyzed at this point in the claims. At 6 months, the claims staff has sufficient knowledge of claim seriousness. The Claims Manager usually has a 6 month diary for any larger claims. For the very large claims, a diary for the Claims VP/Examiner may kick in at this point.
Repetitive diary -(Every)
- 30 days for claims adjuster
- 60 – 90 days for claims supervisor
- 6 months for Claims VP or Examiner
AdHoc – As needed – reserves are increased when:
- Reserves not sufficient to pay benefits or medical/expense bills
- Claim risk changes – usually an increase in severity
Varied Timetable – not all insurance carrier and Third Party Administrator claim reserve timetables match the above exactly. The overall idea is to have the employers participate in the process. The final claim reserves should have input from the employer before setting them.

Employer Responsibilities

The employer responsibilities to keep claim reserves in check are:

Establishing a business relationship with your adjusters – one of the quiet cost savers on claims. Adjusters who know their employer and vice-versa will always have lower reserves on those claims. Do not forget the critical medical only claims adjusters – another quiet cost saver.
Information flow – make sure the claims staff has all the information you receive on the claim ASAP. Investigate the claim occurrence onsite if possible. The more great info an employer can provide the adjuster before the 60 days Final Claim Reserves, the better the outcome. Do not make the adjuster go into protection mode on the reserves.
Avoid Twilight Zone phone calls from medical providers and the injured employee. These will result in tremendous reserves. Trust me on that one. I can remember those phone calls from the 1980’s.
Make sure the adjuster knows (overall and on the specific claim) that you have followed my Six Keys To Cut Workers Comp Costs.
Negotiate at policy renewal (if possible) a contact from the claims department is reserves are increased by X amount ($25,000 recommended). Many TPA’s have this built right into their systems.
Online claims access – you can check the progression of the claim without having to contact the claims adjuster. Do this – it will pay off in the long run. A knowledgeable employer always has lower reserves.

Filed Under: Reserves, Workers Compensation Expense Reserves Tagged With: Claims Adjuster, claims supervisor

What Is A Guaranteed Cost Program In Workers Compensation?

September 20, 2018 By JL Risk Management Consultants

Article Reader Asks Good Basic Question on Guaranteed Cost Program

What is a guaranteed cost program? Is that the type of policy I have in place now? A great question on a basic subject was emailed in by one of our new newsletter subscribers.

Pic of old workers compensation guaranteed cost program policy

Wikimedia Public License

A Guaranteed Cost program means that you will pay a flat fee of sorts for a given policy period. The policy is not adjusted for losses as in a loss sensitive program. Most small and medium-sized businesses will usually find a guaranteed cost program as the most desirable insurance policy to cover their workers compensation losses.

The basic guaranteed cost program premium is calculated from a rate multiplied per 100 dollars of the employer’s payroll. The final workers compensation bill for the policy period occurs after the premium audit for that policy year.

Once the policy is issued with the rates per $100 of payroll, those rates usually cannot change during the policy as with a loss sensitive program.

Loss sensitive program variables can be adjusted during a policy year depending on the amount of losses incurred during the policy year.

Guaranteed cost programs transfer the risk of the insured and administrative costs directly to the carrier once the policy is issued. The total transfer of risk guarantees the cost at a certain level.

As businesses grow, the need to retain part of their losses for a lower premium can lead to an employer to use deductible programs such as a large deductible. The large deductible policy level will usually be $250,000 per claim.

The large deductible policies require the employer to “guarantee” more of the cost and not the insurance carrier.

The employer should always not just accept one guaranteed cost program as the cheapest policy. Comparing at least three quotes per year may generate surprising results.

As your company is a small but growing company, a guaranteed cost program will likely be the best method to control your workers compensation costs. Your company cannot likely bear the brunt of financing a large claim other than guaranteed cost.

Filed Under: Guaranteed Cost Tagged With: Large Deductible Program, Loss Sensitive

Switching Workers Comp Carriers Early Can Be Expensive

September 19, 2018 By JL Risk Management Consultants

Switching Workers Comp Carriers Too Early Very Costly

Switching workers comp carriers can be a trying task at renewal. During the year, that option can be very costly due to the Short Rate Penalty. The various state insurance departments decided to eliminate or at least heavily discourage employer jumping from policy to policy to find a better deal.

Bringing in another carrier may save some premium. However, the employer has to weigh out the cost/benefit of making such a major move. The charts below – one from Rhode Island/California shows the devastating effect of these midterm changes.

Switching Workers Comp carriers in the first month in California or Rhode Island:

California and Rhode Island have very different workers compensation systems. The chart for the short rate penalty is exactly the same for the two states.

Looking at the chart, one can see that the canceling the first day of the policy costs 5% of the total policy. Yes, there are many calculations to the process of the carrier assigning a short rate penalty. The main thing the chart shows is that switching workers comp carriers will incur a large penalty for a small number of days covered by the carrier.

Switching workers comp policies after a premium audit dispute costs employers dearly in some cases. The percentages level out after six months into the policy. By then, the carriers figure they have collected enough premium to spread it over the risk, especially the IBNR (Incurred But Not Reported) claims.

I have seen very little carrier leeway with the percentages charged for the short rate penalty. Sometimes, it may be better to ride out the policy and then non-renew with the carrier.

As mentioned earlier, a cost-benefit analysis would be the best way to see if switching workers comp carriers mid-policy will be worth the money and hassle.

Filed Under: Short Rate Penalty Tagged With: California, cost benefit analysis, Rhode Island

Personal Sensitivity Claims A Complicated Workers Compensation Matter

September 6, 2018 By JL Risk Management Consultants

Personal Sensitivity Claims – Frustrating For Employees and Adjusters

A large number of personal sensitivity claims have created a large chasm between workers compensation adjusters and employees who report this type of claim.

picture of personal sensitivity claims rash

Wikimedia Commons License – Skoch3

General sensitivity claims can be defined as where the employee reports a claim that may have been caused by exposures that the general public faces and are not specific to the job.

The maddest employees with the smallest workers comp claims come into play when adjusters assess a claim – usually medical only claims – as not being specific to the risks of the employee’s job.

The best example:

Part of an employee’s job involves washing down a workspace. The cleaner used is nothing more than Dawn soap and warm water.
The employee reports a claim that the Dawn soap irritated their hands and caused a rash on their arms.
The employee seeks medical treatment for the irritation and rash
The medical only adjuster receives the first report of injury.
The medical only or lost time adjuster denies the claim as personal sensitivity
The employee becomes very upset that the claim is not paid under Workers Compensation even though they may have health benefits.
These claims have been litigated in certain states.

Is it a better risk management technique to accept this claim and pay it rather than have a disgruntled claimant on their hands?

If the company that processes the claim is a Third Party Administrator (TPA), then the employer should have a large say as to whether they claim is paid instead of creating a disgruntled employee situation. Remember, an adjuster that works in a TPA environment is spending the money out of a self insured’s account.

I remember having an agreement with certain self insureds that personal sensitivity claims are to be paid and not denied. Some of those very small claims have turned into much worse claims that could not be denied later in the claim.

This type of claim has been ruled on in many jurisdictions. I cannot make a blanket statement as to which states allow or do not allow the claim.

This situation is one that should be run by the defense attorneys that the adjuster usually works with on their claims. Personal sensitivity claims may seem too insignificant to speak with a defense counsel. It will be well worth your time to know the answer even if you have not handled personal sensitivity claims.

I wanted to bring this issue to the attention of claims departments, safety managers, risk managers, and our other 7,000 weekly newsletter readers.

Filed Under: Medical Only Claims Tagged With: Claims Adjuster, injured employee

Civil Engineer Asks Great Worker Compensation Class Code Question

September 6, 2018 By JL Risk Management Consultants

Civil Engineer Was On The Right Track With Workers Compensation Codes

A civil engineer was looking over the house that I am presently selling. He had asked me what I do for a living. I had told him that I am a workers compensation consultant.

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The civil engineer posed this question –

I work as a civil engineer. My company is moving all the civil engineers from a remote location into the main plant. Today we were told that they are setting up an offsite trailer for us with a barrier fence between the plant and us.

Why would they put us so far away from the plant and build a fence between the trailer and the plant? Is it some risk factor?

I said – “Well your plant manager did not do that because he does not like the civil engineers. It could be due to the Workers Compensation rating system. ”

I went on to explain that the civil engineers working inside the actual plant would likely cost the company a large amount of workers compensation premiums as the civil engineers could be grouped into a plant workers classification code.

The plant manufacturers large metal pipes so the difference would be huge in the Workers Compensation rate. I pulled out my trusty smartphone and pulled up the North Carolina Rate Bureau advisory lost costs.

Class Code – 8742 (Civil Engineer that does not handle material manufactured) – .26 per $100 – very low rate
Class Code- 3022 – (Pipe Mfg) – 4.81 per $100 – much higher rate

Comparing those two classification codes = 4.81 / .26 = 18.5 or 1850% more expensive if the civil engineer group was included in the pipe manufacturing Class Code. Ouch!

He said so you are telling me that there is an 1850% difference if we work directly inside the manufacturing plant even though we are not involved in the manufacturing process? I said yes.

One has to remember that these are advisory rates and not the insurance carriers rates due to the Loss Cost Multipliers filed by all workers compensation insurance carriers.

The average civil engineer salary is $83,750. Let us take that a step further.

83, 750 * (.26/100) = $217.75 in yearly premiums for Civil Engineer

83,750 * (4.81/100) = $4,028.38 in yearly premiums for Civil Engineer working in plant

And yes, I have made a ton of assumptions, but the idea is the same. The plant manager and likely the CFO were smart not to bring the civil engineers into the plant. I am sure there were many other considerations. Workers Comp rates would have likely been one of the considerations.

Filed Under: classification code