Workers Comp Statistic Combined Ratio Best In 50 Years – NCCI

August 8, 2017 By JL Risk Management Consultants

NCCI Workers Comp Statistic

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.

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Filed Under: combined ratio, NCCI Tagged With: carriers, investment, State Advisory Forum

Should Workers Compensation Premiums Be Considered A Tax?

September 17, 2014 By JL Risk Management Consultants

Workers Compensation Premiums As A Business Tax

Should Workers Compensation Premiums be considered as a tax? Premiums and taxes are similar in some respects. Workers Compensation premiums and taxes are also very different when compared to each other.

One of the ways that premiums and business taxes differ greatly is that premiums are regressive. As more payroll is covered in an employer’s account, the unit cost of providing those benefits reduces more than proportionally .

The tax system is progressive. As business or personal income increases the per unit rate of taxes increases up to a prescribed amount.

The more a corporation or individual earns results in a progressively higher tax rate. WC premium rates are not structured in that manner. The larger employers tend to pay less per unit for WC premiums.

The WC system is structured as regressive due to larger employers tend to hire safety personnel. A large amount of payroll can absorb a large or many claims much easier than smaller employers.

The bottom line is Workers Compensation should be looked at more of an investment in the company and its workers. Even though an employer may not see a return on investment, the possibility of a catastrophic loss can be avoided. I have often referred to Workers comp premiums as a zero based investment.

For example, the Tax Tables for Corporations is as follows:

Taxable income over     Not over      Tax rate

$         0        $    50,000        15%
     50,000             75,000        25%
     75,000            100,000        34%
    100,000            335,000        39%
    335,000         10,000,000        34%
 10,000,000         15,000,000        35%
 15,000,000         18,333,333        38%
 18,333,333         ..........        35%

 This is the Table Table for Married Individuals

Filing Separately - 2014:

      Taxable income:                   Tax:
  Over     But not over         Tax       +%   On amount over            

$      0     $  9,075        $    0.00   10       $      0
   9,075       36,900           907.50   15          9,075
  36,900       74,425         5,081.25   25         36,900
  74,425      113,425        14,462.50   28         74,425
 113,425      202,550        25,382.50   33        113,425
 202,550      228,800        54,793.75   35        202,550
 228,800      .......        63,981.25  39.6       228,800

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Filed Under: premium, regressive, tax Tagged With: investment, personal income, taxable

Top 10 Challenge Areas – Expanded Part I

June 19, 2014 By JL Risk Management Consultants

Top 10 Challenge Areas – The First Five

The article on the Top 10 Challenges for Workers Compensation received a large amount of inter-buzz.

Two readers suggested an expansion (better explanation) of my list. I will split the Top 10 into two articles.

The first five of My Top 10 areas of challenge are:

Harder market – without investment returns, WC cannot sustain lowering price pressures
Captives/Alternative Insurance – every company wants out of the current WC system
States that have legalized marijuana – now what does that do for the workplace?
Employers need to monitor next year’s premium
Affordable Care Act- the elephant in the room for any healthcare discussion

Harder Market vs. Hard Market

I rarely disagree with NCCI. However, a few weeks ago, the published an article on the underwriting cycle that I did not agree with overall. Investment returns besides a minuscule rate of rate on interest bearing accounts drive the insurance markets. To NCCI’s credit, the current situation with a low rate of return (interest) is not enough to sustain a market. The stock markets have been doing very well. Other than bonds, carriers can produce a great rate of return on premium dollars invested in the stock market in the long term.

If the stock markets take a hard downturn and the interest rates stay low deflation would rule the day. Carriers have nowhere to go for a decent rate of return. They will have to look to their policyholders which would equate to a hard market.

Captives/Alternate Insurance

As companies grow, there now seems to be a large push to examine other methods to find WC coverage such as captives, PEO‘s and small/large deductibles. Alternative insuring arrangement do carry a large risk especially if a company is going to retain a large amount of the premiums. The alternative market must examined with caution.

States That Have Legalized Marijuana

Two recent New Mexico court decisions have shined a bright light on the problem of marijuana in the workplace. California issued a similar decision a few years ago. If marijuana is a prescribed medication by a physician, will it be considered the same as any employee that happens to be taking a prescription while on-the-job? Will an employee file a “drug discrimination” grievance in that instance?

Employers Overpaying Premiums At Policy Inception

There are many articles in this blog concerning the level of payroll decreasing for certain employers. If your company has a 20% reduction in workforce, why would you pay the same premium base as last year?

Affordable Health Care Act

As I have written so much on this subject, I will refer to this article (click on heading) on how the changes in healthcare will affect WC.

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Filed Under: captive, hard market, marijuana, Obamacare Tagged With: alternative insurance, investment, legalized, overpaying

National Association of Medicare Set Aside Professionals – NAMSAP May 8- 9

May 7, 2014 By JL Risk Management Consultants

National Association of Medicare Set Aside Professionals

I am traveling to the National Association of Medicare Set Aside Professionals NAMSAP Conference in Las Vegas. I am working with two investment groups that see the Medicaid/Medicare set asides as a possible great place to invest in certain companies. I will be more of an observer and report back to the companies. I decided to become a member

Looking over the group of attendees, there is no one group that dominates the conference. Many of the presenters seem to be attorneys. The conference is more of a melting pot of many different disciplines.

The conference does start very early each day, especially for a Las Vegas conference. Below is the agenda if you are interested in coming to next years’ conference or joining as a member. I will try to post a few of the highlights from the National Association of Medicare Set Aside Professionals conference.

Agenda

Thursday, May 8, 2014

7:00 am – 7:45 am

Continental Breakfast in the Exhibit Hall

7:45 am – 8:00 am

Conference Welcome: Year Review & Future Goals Douglas Shaw, Medivest, NAMSAP President

Leslie Schumacher, PlanPoint, LLC, NAMSAP President-Elect

8:00 am – 9:15 am

Evidence Based Medicine in the MSA World: How does it Factor into National Policy?

Evidence Based Medicine is a policy NAMSAP has endorsed since 2012. Our panelists will discuss the implications of adopting Evidence Based Medicine guidelines/standards within the MSA review process. A national standard has the potential to bring a sense of uniformity to the MSA review process.

Panelists

Beth Hostetler, MSP Compliance Manager, Safeway

Ken Eichler, Work Loss Data Institute

Shari M. Ling, M.D., Deputy Chief Medical Officer, CMS

Mary Nix, Project Officer, National Guideline Clearinghouse

9:15 am – 9:45 am

Break with Exhibitors

9:45 am – 10:45 am

Professionalism in the MSA Industry

Where do we draw the ethical line as MSP professionals when we are assisting our clients navigate their claims? We have all been in situations where our obligation to assist our customers switches from that of an MSP practitioner to more of a legal question. Our panel of experts will discuss when MSP opinions should cease, and legal advice should be sought.

Panelists

Preston Holloway, Swift, Currie, McGhee & Hiers, LLP David

Jankosky, Goodwill Southern California

Leta R. Sharkey, Medical Settlement Advantage, LLC

10:45 am – 11:45 am

Medication – How it May Impact Your MSA / Settlement

You will not want to miss this update on the latest trends in the pharmacy arena. Our panelist will discuss recent trends at CMS regarding Part D prescriptions, and other issues that affect the accuracy of an MSA.

Panelists

Dr. Marcos Iglesias, Midwest Employers Casualty Co.

Kayla Tortorich, WellComp Pharmacy Melissa Woitalewicz, Crete Carrier Corp.

11:45 am – 1:15 pm

NAMSAP Networking Lunch

1:15 pm – 2:15 pm

Workers’ Compensation with Liability Component Case Study

Our experts will conduct a case study from start to finish on strategies for handling the MSP element of a claim involving both workers’ compensation and personal injury components.

Panelists

William Delaney, Nyhan Bambrick Kinzie & Lowry

Jill G. Schroeder, Baylor Evnen, Curtiss, Grimit & Witt, LLP

2:15 pm – 3:15 pm

Dual Eligibility and MSAs within SNTs

The presence of both Medicare and Medicaid within a claim can present a host of issues, and require special attention to assure both benefits remain intact. Our expert panelists will discuss situations in which both benefits can exist, and strategies to address and protect a beneficiary’s eligibility for both programs.

Panelists

Kristen Behrens, Begley Law Group

Shannon Laymon-Pecoraro, Hook Law Center

3:15 pm – 3:45 pm

Break with Exhibitors

3:45 pm – 4:45 pm

Developments in the MSA Courtroom

MSP compliance situations continue to present themselves in courtrooms across the country. Our panelists will bring you up to speed on recent cases effecting MSP policy.

Panelists

Chelsie Allan, Lindner Marsack

Patrick Czuprynski, Nyhan, Bambrick, Kinzie & Lowry

Jennifer Santoro, Cassiday Schade

4:45 pm – 5:00 pm

Take the Hill Recap Speaker

Allison Haley, O’Meara, Leer, Wagner & Kohl, P.A.

5:00 pm – 7:00 pm

Reception / Dinner on your own

Friday, May 9, 2014

7:00 am -8:00 am

Continental Breakfast in the Exhibit Hall

8:00 am – 9:00 am

Transitioning to ICD-10 – How it is Going to Affect Your Practice

ICD-10 coding is right around the corner. Our panelists will introduce you to this latest coding method and prepare you for some of the changes that will be in place. Panelists

Marci Moorhead, Professional Resource Network

Carlos Navarro, Innovative Claims Strategies

9:00 am – 10:00 am

Problematic Area in MSP Compliance

Our panel of experts will identify key areas of MSP compliance where dangerous pitfalls exist. The panelists will provide tips and insight that will assist the MSP practitioner avoid needless delays and hiccups in the MSA process.

Panelists

Lavonya Chapman, Arthur J. Gallagher Risk Management Services

Stephanie Ragsdale, HSLI

Linda Wolden, Assured Med-Legal Solutions

10:00 am – 10:30 am

Break with Exhibitors

10:30 am – 11:30 am

Future Medicare Entitlement: What Outside Factors can Affect the Distribution of MSA Funds?

It is widely assumed that an MSA fund is untouchable, but are there any situations in which funds within an MSA trust can be disbursed for items other than future Medicare allowable and injury related care? Our panelists will discuss situations in which MSA funds might not be as safe as you think.

Panelists

Gregg Chapman, National Settlement Consultants Danielle Marone, Schmidt, Dailey & O’Neill, LLC Daniel Simones, Nyhan, Bambrick, Kinzie & Lowry

11:30 am – 12:00 pm

Conference Wrap Up – Business Partner Giveaways, Grand Prize Giveaway

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Filed Under: Las Vegas, Medicaid, Medicare, Medicare Set Aside, NAMSAP Tagged With: attendees, companies, investment

Six Ways To Leverage Your Workers Comp Premiums For Savings

August 22, 2013 By JL Risk Management Consultants

Six Ways To Leverage What Premiums Are Paid Out

The six ways to leverage your Workers Comp premiums are listed below. Workers Compensation is almost always considered an expense. What if an employer decided to analyze WC as an investment?

The definition of leverage in this case is borrowing or using other funds to increase the rate of return on an investment. How does one leverage Workers Comp premiums? The following ideas on leverage are based on Workers Comp as an investment. They will not work when viewed as an expense.

1. Self-Insurance – by not paying the insurance company’s fees and overhead, the employer can retain this capital to invest elsewhere. This is a great way to reduce capital outlays if an employer does not experience a spate of bad accidents. The risk and reward are both high.

2. PEO’s (Professional Employment Organization) An employer can leverage their premium outlays by the pay-go concept. Workers Comp is only paid as payroll is incurred. There are no huge outlays upfront. PEO’s are one of my favorite risk-shifting techniques.

3. Large deductibles – basically modified self insurance. The main difference from self insurance is the carrier will still report Mods to the rating bureaus. The claims handling fees can be much more expensive than with pure self insurance.

4. Examine past policies and audits – recovering already expended funds can be looked at as “found money.” Employers are able to reinvest these funds into the company. One of the lower risk high returns of Workers Comp.

5. Safety Enhancement – while some employers consider adding in or enhancing a safety program as too expensive, we have seen a 4 to 1 return on investment when a new or improved safety program has been initiated. Keeping employees safe and out of the claims system reaps rewards for all involved.

6. Captives – the “cutting edge” method of leveraging premiums. Offshore captives allow for certain tax benefits. Employers are able to use funds that would have been invested in premiums in other parts of their business. There are many options for employers using captive arrangements.

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Filed Under: premium Tagged With: investment, tax benefits

Rehab Nurses Risk Management Technique – Sixteen and One Half Suggestions

May 7, 2013 By JL Risk Management Consultants

Rehab Nurses As a Great Risk Management Technique

One of my long-standing Risk Management technique is the prudent use of medical and vocational rehab nurses (also known as case managers). A great in-field rehab nurse can save thousands if not tens of thousands of reserves and payouts on a file.

Our clients have actually sent in files that have reserves on them of over $200,000 (quite a large portion already paid) with no rehabilitation nurse assigned. We had a group of 20 of them last year.The usual return on investment (ROI) has been 7 to 1 for the cases I have studied over the years. That is not a bad investment – if used properly.

Many years back I actually worked for a carrier that did not allow nurse assignments “as the adjuster” could handle it. In another insurance carrier position, I vehemently protested assigning a nurse to each file. That, to me, is overuse of a good risk management technique.

I have always used these suggestions as a guide for assigning medical rehabilitation nurses (if you have any more suggestions, please comment):

Make sure the nurse is familiar with the surrounding territory and medical practitioners involved with the file. Familiarity will save much time, aggravation, and $$.
Make sure that at the rehab nurse assignment time, the nurse receives ALL medical reports even if they are physical therapy notes, etc. This will save you many headaches down the road such as having to dig through a file to find a note to send that was crucial last month.
Similar to number one, make sure the driving times are no more than 1.5 hours each way. If a rehab nurse is sent three hours away, most companies do charge hourly and mileage. You do not want to receive a massive rehab bill. I still remember having to explain a $3,000 rehab bill to an insured client. That was not pretty.
There are triage rehab nurses for very serious claims. A great triage nurse will enhance the medical control from the hospital to MMI. Triage nurses are much more expensive than regular rehab nurses and worth it.
Listen to what your rehab nurse says as sometimes that info is not necessarily going to be in the report. It may seem trivial at the moment.
Read the rehab reports – usually a summary section if you are overloaded.
Rehab nurses are not adjusters and vice-versa.
Plaintiff attorneys are starting to scour over the reports presently. If you want to be on the same playing field as the attorney, you will have to read the report beyond the summary.
Some rehab nurses are better at certain things than others – almost goes without saying.
Along with #7, the claims staff needs to control the file. The rehab nurse needs to be a team member, not the controlling factor except possibly for triage nurses.
Do not move any rehab nurse calls or reports to the bottom of your to-do list. This can cost you dearly on the file.
Breaking with my communication recommendations, I would say that phone calls may be the best way to communicate with rehab nurses.
There are certain legalities that come with rehab nurses that vary night-and-day state to state. If you are dealing with a multi-state claim, this may become complicated.
The cardinal sin – forgetting to have the rehab nurse cc: the plaintiff attorney on all reports. This can sour any later dealing with the plaintiff attorneys. If you have an attorney on the file, then they should also be cc:’ed.
There are state-by-state peculiarities that may not agree with this list. I was looking at more of a national scope.
I know all fifteen of these as at some time, I have broken all of them – and sometimes lived to regret it.
Bonus – the rehab nurse usually summarizes the medical reports – a real timesaver if you do not want to read every medical report.

I did not exactly cover vocational case managers. The list would be very similar. This list was growing long enough.

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Filed Under: rehabilitation nurse, triage nurse, vocational nurse Tagged With: insurance carrier, investment, vocational

Sequestration – Any Effect on Workers Comp?

February 26, 2013 By JL Risk Management Consultants

Workers Comp Sequestration

The Sequestration has made the rounds in the press as almost a doomsday scenario. Is there going to be any lasting effect on Workers Comp if the imaginary fiscal cliff is reached?

Workers Compensation insurance profitability has centered on long term investment returns by the insurance carriers. As long term investment has suffered, the losses on Workers Comp have been diluted by writing a “full package” of coverage. Insurance carriers can then take the “WC hit” by not underwriting Workers Comp as a standalone policy.

Companion Insurance is a perfect example of very conservative underwriting. Companion decided a few years ago to stop writing Workers Comp as a standalone product. Best Insurance Ratings gave them an A (Excellent) with a stable outlook two weeks ago. The strategy seems to have worked on at least a medium-term basis.

Most insurance carriers have followed Companion’s example of not attempting to be profitable by writing just Workers Comp coverage. Most carriers are losing approximately 10 cents for every dollar underwritten in WC.

The sequestration is a short term problem at its worst. Workers Comp is a delayed system where the true profitability/loss on a policy is not seen for up to four years in the future. The sequestration will likely just be a radar blip when examined from that far into the future. If the sequestration was a planned series of events, then the insurance markets would show an effect.

The one area of concern may be if a policyholder is renewing their Workers Compensation policy during the next few weeks. As the sequestration is a short-term malady, the insurance and financial markets may show a moderate amount of stress for the next month.

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Filed Under: AM Best, Companion Insurance, sequestration Tagged With: investment, sequestration, Workers Compensation Insurance

Reinsurance/Excess Insurance Market Hardens

February 11, 2013 By JL Risk Management Consultants

Reinsurance Market No Longer Soft

The reinsurance/excess Insurance Market has started to change from a commodity marketplace. The excess insurance market is usually the bellwether for the rest of the marketplaces.

Reinsurance/Excess Insurance is basically defined as a risk management technique. The employer will purchase this type of insurance to cover claims that exceed a certain payout per claim or an overall claims total known as an aggregate.

According to a recent article in Business Insurance, the employers may not be able to choose their Third Party Administrator (TPA) and then just pursue the lowest priced reinsurance. Reinsurers are starting to use more predictive analysis when underwriting a risk.

Insurance companies are not offering the same standalone product for reinsurance as in the past. The reinsurance/excess insurance market is now operating with ever-thin margins due to the return on investment the carriers are receiving for premium invested in stable investments such as money market funds.

The striking quote from article is that employers should expect a 10% increase in their excess insurance premiums. The other change is that re insurers are going to require employers to endure the same process as other insurance coverages.

The 10% increase is also for the employers with normal loss histories. Employers may see more severe increases with higher Mods or Loss Development Factors (LDF’s). The re insurers will likely analyze the same variables as normal Workers Comp carriers. One area that will receive more attention is whether or not an employer has a full safety and loss prevention program in place.

The one component that keeps the reinsurance market from actually being deemed hard is the availability of reinsurance. There are many carriers still offering reinsurance.

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Filed Under: E-Mod X-Mod, Excess Loss, hard market, LDF, reinsurance Tagged With: insurance market, investment, marketplace

Workers Compensation Premiums – An Investment?

February 6, 2013 By JL Risk Management Consultants

Workers Compensation Premiums

Workers Compensation premiums of any type are almost always viewed as an expense. I actually changed my career path due to the question in the title. Workers Compensation premiums should be viewed as an investment, whether a company pays premiums or is self-insured.

Mark Walls, who runs the Work Comp Analysis Group on LinkedIn recently wrote an article on the upcoming Workers Compensation changes in 2013. One of the passages in the article reads as:

If you get the time, the Work Comp Analysis group in LinkedIn is worth following on a weekly or daily basis.

I do hope that more companies will view Workers Compensation as an investment. The old “a penny saved is a penny earned” would be very applicable. The return on investment (ROI) is that saving Workers Comp premium allows an employer to reinvest those funds directly back in their budget.

That is one of my reasons for changing my insurance education from a CPCU to a ChFC track. The ChFC curriculum allowed me to analyze insurance as an investment. Once employers begin treating premiums of any type as an investment rather than an expense, the justification for WC risk management techniques become much more valuable.

Employers that wish to reduce their future liabilities are willing to pay sums at the front-end of claims as to avoid the “claims snowball rolling down the hill.” Loading up the risk management techniques at the start of a claim will always pay off in the long run.

Filed Under: ChFC, CPCU, LinkedIn, ROI, Work Comp Analysis Tagged With: investment, Mark Walls

E-Mods and X-Mods Affected By Lack of Technology

November 29, 2012 By JL Risk Management Consultants

Lack Of Technology – E-Mods and X-Mods

All E-Mods and X-Mods are affected directly by technology. In my last post, one of the statistics that jumped off the page caused me to write this blog separately as there is a study that finally relates the lack of technology by Workers Comp carriers and higher Emods (Xmods in CA).

The exact quote from the article is:

While 92% of the claims executives we surveyed said they could reduce loss costs by increasing consistency in claims handling, most of them are not in a position to do so because their core claims systems are either too old or not adapted

I found this quote startling on its own merits. The other area of concern is the high level of agreement at 92%. I was never able to correlate outdated Workers Comp claims systems with the likelihood that loss costs (therefore Mods). After reviewing a large number of claims on different systems, I can understand why this number was so high.

Over the past few years, I have posted very often on why having online access to all claims data is so important. If your company or organization does not have online access to your data, it may be a prime time to investigate if you have access privileges. The responsibility to have accurate claims data often rests with the employer.

Your E-Mods and X-Mods are tied directly to the claims data. The claims data (Total Incurred) is what is reported to the NCCI, WCIRB, or State Rating Bureau to calculate your Mod. Consistency is claims handling and the resulting data is becoming ever important as employers look to cut workers comp costs in this tough economy.

Investment company clients along with our employer clients always ask me the #1 concern I have for the Workers Comp market in the future. One of my main concerns that I always address is the lag time for Workers Comp claim system updates. How can an adjuster that is accessing five different claims systems actually be that consistent with claims handling?

As I pointed out in the last post, there are some adjusters that have to access eight claims systems to process a claim. That is an enormous burden. The adjusters’ time could be better used elsewhere – plain and simple.

Why am I so concerned about this one area? I used to be a systems engineer for two different computer companies. There are better claims systems out there even if the migration from one system to another is seen as a large barrier.

Filed Under: E-Mod X-Mod, NCCI, WCIRB, X-Mod Tagged With: adjuster, claim system, claims data, investment, Lost Costs, merits

Workers Comp Systems Are Antiquated At Best

November 26, 2012 By JL Risk Management Consultants

Workers Comp Systems

One of my main concerns in working with clients is the basically outdated Workers Comp systems that have to be trudged through to even perform basic operations. This article on outdated Workers Comp systems analyzed what Workers Comp claims workers already knew – most systems are severely outdated.

When we advise investment groups or are analyzing a claims system, I am sometimes shocked at the system in place. Workers Comp systems are actually even worse. When I attended the recent LRP National Workers Compensation Conference in Las Vegas this year and last, I was searching for something new in the claim processing arena. While there are great system providers, I still did not see one that I would call cutting-edge.

The aforementioned article centered on a study of claims executives. Some of these are not necessarily directly related to Workers Comp. However, there are some that are “spot on. ” Some of the almost shocking results were:

83% of claims executives thought their systems were outdated and they needed the IT departments help to make any changes
Half (54 percent) of those surveyed say their core claims systems are more than five years old and almost one-third (32 percent) of respondents say they rely on more than five different applications to process claims. How can someone be productive if they have to run five different systems? I know of one carrier that presently uses eight.
More than three-quarters (78 percent) of respondents say they are on a path to upgrade their claims systems; among these respondents, almost one-third (31 percent) say the last major upgrade was made more than three years ago.
Two-thirds (66 percent) of claims executives surveyed think their claims systems are not optimized to collect and analyze the growing volume of data available – such as insights about consumers from social media and usage data collected by means of telemetry and Global Positioning System – which would enable them to refine and improve claims management.
More than three-quarters (78 percent) of respondents say their claims organization is not equipped to manage new forms and level of risks such as cyber-crime, terrorism, increased frequency of severity of natural catastrophes.

I will cover one statistic in my next post that will have employers and some claim adjusters shouting at their screens. It is a shocker.

Filed Under: Claims Journal, Las Vegas, LRP, survey Tagged With: clients, investment, spot on, Workers Comp System

Could Opt Out Programs (Non-Subscriber) End Workers Comp As We Know It?

November 13, 2012 By JL Risk Management Consultants

Non-Subscriber or Opt Out Programs – Work Comp Doom?

The Non-Subscriber or Opt out programs could end Workers Comp? This year’s LRP Workers Comp Conference in Las Vegas was very informative. I was searching out any new technologies, services, or products in the Workers Comp arena.

The vendor area was surprisingly headed towards consolidation. Some of the services that were being added in by consolidation were very interesting. Most of the services and even the new combinations of services had all actually existed in Worker Comp in the past.

One area that was not necessarily new, but was heading towards a very rapid expansion was opt out or non-subscriber services for Workers Compensation. The one area that astounded me was the fact that Workers Comp is treated more like a benefit or investment than a cost of doing business.

One of the reasons I deviated from obtaining a CPCU and pursued a ChFC designation is that I had always considered insurance premiums as more of an investment than a cost. I wanted to understand more fully how insurance fits into the overall budget, not just as a necessary evil of doing business.

There was a section on the last day of the conference on non-subscriber services for Workers Comp. The main two panelists were from Hobby Lobby and Dollar General. I was surprised what the two employers were allowed to do with their Workers Comp programs – all in good way.

The two companies had a history of using a non-subscriber service in TX. The risk manager from Hobby Lobby had mentioned the fact that Oklahoma will likely approve non-subscriber services.

The cost savings between traditional WC and the non-subscriber services was astounding. I will post a story tomorrow or more of the intricacies of how the two companies administrated their programs.

I am traveling all day today and the info on the non-subscriber section is in my checked bag. One thing I wanted to point out is even though non-subscriber services have been in existence in Texas for quite some time, I think many more states than just Oklahoma will look into these services.

There is a report on non-subscriber services by two Workers Comp reporters coming out very soon. I will comment on it after it is published and I have had time to examine it.

Filed Under: ChFC, CPCU, Dollar General, Hobby Lobby, Las Vegas, LRP, non-subscriber, Oklahoma, opt out, Texas Tagged With: investment, premiums, programs, services, vendor

Will The Upcoming Elections Have Any Effect on Workers Comp?

September 27, 2012 By JL Risk Management Consultants

Upcoming Elections – Effect On WC

Will the Upcoming Elections have any effects on Workers Comp? This is now the most popular question that I receive from our readers. This question pops up often when there is a Presidential election.

Graphic of Romney tag and Obama Tag Upcoming Elections In Street Sign

The answer is yes and no. I am sorry to be so vague. The election may have some type of effect depending on the business client after the elections. As we all know, the business climate is touchy at best. As with most businesses, the Workers Comp environment will spin off removing any unknown variables.

If the business climate changes for the better, the insurance carriers will be able to better invest the premiums they receive which will soften the market. The market as of now is still somewhat soft.

However, the market cannot stay soft for very much longer. Almost all the insurance execs think the market will harden over the next few years. In my opinion, if an insurance carrier can receive a higher return on investment, they will look to be even more competitive as they can make more $$ off investing the premiums in the stock market.

The bond market and savings rates have been and will be anemic for years to come. The carriers will look to invest in the stock market heavily at some point in the future. I am sure we can all remember a time when even a mediocre stock mutual fund was returning over 10%.

Diagram with Increase arrow Upcoming Elections and coins at back

I am unsure if it really makes a difference whether Obama in reelected or Romney serves his first term in office. I am looking at the numbers, not the politics.

My final answer, (and I am sticking to it) is Workers Comp is so heavily based on the economy of each state. For instance, Senate Bill 863 out of California is unto itself on how the CA Workers Comp market will be affected in the next few years.

How about the new NCCI split points? They will have much more of an effect than any election might have on rates. North Carolinajust came out with a laundry list of rule changes that will affect Workers Comp, but only in North Carolina.

I try to keep up with all of the changes nationwide in Workers Comp. It can be dizzying at best. I subscribe to and read over 20 newsletters a day along with various blogs on WC. I wish I could write on every change in every state. I am unable to come even close to that old goal.

Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com.

Filed Under: Political Tagged With: environment, investment, presidential election, savings rate

LIBOR Scandal And Hard Markets

July 24, 2012 By JL Risk Management Consultants

Hard Markets And LIBOR Scandal

I was reading a great article on the LIBOR scandal that will likely make Madoff and the Wall Street scandals seem small at best. One of the main concerns that I hear floating around in conferences and among clients is the soft vs. hard market for Workers Compensation.

I do not want to just redo the article in the above link. One of the great quotes from the article is:

If LIBOR was manipulated, the results could be far-reaching. Since LIBOR is the benchmark for many other rates, an inaccurate LIBOR means millions of people all over the globe might have paid more or less interest than they should have. If rates were artificially low, borrowers for things like adjustable-rate mortgages and student loans would have benefited. But investors like cities, mutual funds, and pension plans may have earned less than they should have.

The extent and impact of LIBOR manipulations is still unknown. The effect on the average consumer is probably small, but as the professor in the video above opined, it could be measurable to people with large loans tied to LIBOR, like those with adjustable-rate mortgages.

As you can see, the insurance markets will likely be heavily affected overall. There are insurance investments that were tied to the LIBOR. The overseas investments of the very large carriers and brokerage houses will be affected directly.

In my opinion, the adjustments and corrections to the LIBOR will be felt worldwide. The major overseas index was manipulated so that banks/investment companies such as Barclays could make even more money.

If you notice from the above passage that any large organizations that would have benefited from higher rates received an artificially lower rate of return. The other side of the coin is to say that markets will stay soft now that the correction of the LIBOR is in place.

The overseas investments markets are now very volatile. The volatility of investment markets will make the market more susceptible to a market hardening. Insurance carriers need to have a stable market to properly set rates. One of the major considerations for setting rates is ROI (return on investment). If the markets are not stable, the carriers must look to their policyholders as being the stable element in their portfolio.

Bottom Line – I am not inferring a hard market is coming soon. Carriers may look to underwrite the safer companies, and with the changing of the E-Mod formula, a hard market acceleration could occur very rapidly. The best advice is to be prepared at renewal.

Filed Under: LIBOR Tagged With: E-Mod, experience rating formula, insurance market, investment, Madoff, wall street

Workers Compensation Is A Zero Sum Game

June 28, 2011 By JL Risk Management Consultants

WC Is A Zero Sum Game Of Sorts

I often advise investment groups when they look to invest in the Workers Compensation market – namely ancillary services such as Medicare Set Asides, Physical Therapy (PT), PBM’s, etc. One motto I have stuck with over the years is the Workers Compensation is a zero sum game of sorts. The Latin name for it is ceteris paribus or “all things remaining equal.”

Investment groups are very concerned that – for instance – the allowable amount for each physical therapy is declining due to most states’ fee schedules being based on the Medicaid/Medicare fee schedules. As we all know, the federal fee schedules have been cut dramatically.

Interestingly enough, three years ago, I created a huge Risk Management study for an investment group that was looking to invest in a group of PT clinics in CA. My bottom line conclusion was that everything equals out in Workers Comp as the number of physical therapy visits and procedures per visit increase enough to offset the fee schedule reductions.

This same ceteris paribus was analyzed by NCCI recently. The number of workers compensation claims had fallen, but the severity of the claims had risen. The severity did not necessarily completely offset the lower numbers. I was reading an article in the Insurance Journal this morning that reminded me of this “equalization factor.”

Physician Holding Stethoscope Zero Sum Game Picture

The number of California workers’ compensation insurance claims fell 13 percent between policy years 2007 and 2008 to 358,077 claims. However, a new report by the Workers’ Compensation Insurance Rating Bureau shows that the average incurred loss on a claim 18 months after policy inception rose more than 11 percent in the same period, with the average incurred loss at $9,711.

I may just be noticing the ones that equal out over time. However, when I see the WCIRB and NCCI both show the same results, the subject matter will command my attention.

Filed Under: WCIRB NCCI Insurance Journal ceteris paribus Tagged With: ceteris paribus, investment, PT