Archives for November 2008

Will New Administration Change Workers Compensation System?

November 27, 2008 By JL Risk Management Consultants

New Administration Changes = Federalization?

I have received a few questions since the elections concerning any new administration changes that may take place.

USA New Administration Social Security Emblem

Wikipedia – U.S. Government

In my opinion, there will not be very many changes as long as each state regulates its Workers Compensation system. I do not think that Workers Comp will be under a Federal program any time soon. There would be too much of a backlash if it became a federal system.

This is one of the most appealing times for proponents of federalizing the Workers Compensation system to consider a system that would be overseen by a bureaucracy. With the bailout of AIG and other insurance companies, the federal government would end up owning more of a stake in insurance companies than at any other time in the history of Workers Comp. There may be some rhetoric produced about how that states could not properly oversee their insurance companies, so a federal program would be more appealing.

One main point is that AIG’s insurance operations WERE NOT failing. It was the investment side of AIG that failed miserably. It is my opinion that insurance carriers that are failing should not be bailed out for their insurance operations. As was in the past, the insurance company would go into receivership in each state, and the Insurance Commission would move in to assist or divest the carrier. That model worked. Can one imagine the mess if there was a federal overseer for the state insurance commissions? The term “nightmare” would be a compliment.

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Workers Comp Claim Medical Costs – Fast Way To Reduce?

November 24, 2008 By JL Risk Management Consultants

Workers Comp Claim Medical Treatment

Do the Workers Comp claim medical treatment costs affect my claims cost the most?

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In my opinion, controlling the workers comp claim medical treatment is the quickest way to cut your Workers Comp costs. Controlling the medical costs not only means using the medical networks to reduce the cost of the medical bills, but to control the doctors that treat your injured workers. A great industrial-minded treating doctor can also control the weeks out of work and the permanent disability rating.

As I have commented quite a few times in this blog and in my presentations, the main reason to maintain control of the employees’ medical treatment in a Workers Comp claim is that all Workers Comp courts, state bureaus, etc. consider the treating physician as being the only impartial witness in the claim. The medical testimony is usually going to be the “ultimate decider” in the claims process.

I have never seen the Workers Comp judge throw out the treating doctor’s medical testimony completely. So, the bottom line is “Control the medical treatment and your company will control the claim costs.” I have performed quite a few studies that shows this to be very true.

California started using MPN’s (Medical Provider Networks) in 2005. That is the one of the reasons for the sharp decreases in Workers Comp insurance rates in CA.

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Ohio BWC (Bureau of Workers Compensation) Loses Major Court Case

November 22, 2008 By JL Risk Management Consultants

Ohio map stamp Ohio BWC Bureau Of Workers Compensation

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Ohio BWC Loses Court Case On Interesting Premium Calculations

I had previously posted about how the Ohio BWC is not acting as a true insurer and is using number voodoo to charge smaller employers outrageous premiums while giving certain employer groups enormous discounts. Ohio small businesses were being discriminated against due to their size in the area of Workers Compensation premiums.

Smaller employers do take a hit when looking at cost per unit of coverage. Of course, small companies always pay more per unit for anything from pens to building rent.

Last week, a judge ruled against the Ohio BWC and issued a restraining order blocking the Ohio Bureau of Workers’ Compensation from implementing its prospective group rating plan for policies incepting next year.

The bureau must implement a retrospective rating plan based on loss history for group policies rather than its established method of determining premiums by anticipating future losses. I still do not understand how they can predict future losses without looking at the prior losses. As I said earlier, it was all number voodoo.

Picture Of Judge Watching Ohio BWC Prosecution In Court

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Insurance based on the future only without looking at the past is call naive forecasting. The Ohio BWC attempted to go outside of the rating infrastructure that has been in place since the 1930’s. Viable alternatives to insurance seem to appear every year. The Ohio BWC plan was not one of them.

As I have said many times before in this blog, monopolistic state funds are becoming dinosaurs in the area of Workers Compensation. If a private insurance carrier operated in the same manner as the WSI in North Dakota or the BWC in Ohio, the insurance commissioner would fine them and/or place them in receivership.

An insurance system cannot be operated like a government agency in the current Workers Comp marketplace. There are four monopolistic state funds. I wonder how long they can survive.

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Two Monopolistic State Funds Strike Again Recently

November 22, 2008 By JL Risk Management Consultants

Ohio And North Dakota Monopolistic State Funds

I do not wish to pick on any of the monopolistic state funds. I have passed over commenting on quite a few articles referring to Ohio and North Dakota. However, these two news items were too major to ignore.

Vector of hands with dollar sign Monopolistic State Funds Concept

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North Dakota – A Monopolistic State

The State Fund’s (WSI) reserve levels topped out at $174 million. The Attorney General of North Dakota had commented that WSI is figuring the surplus figures incorrectly. The WSI has refunded quite a large amount of the surplus to the policyholders by way of dividends.

Dividends are another name for refunds to policyholders. They are not to be confused with dividends on investments that are not refunds.

I am of the opinion that a large surplus indicates that the WSI or any carrier is charging too much premium to their policyholders. Instead of receiving a multi-year free interest loan from the policyholders and then refunding it back, it is best to set premium levels at a fair rate. As I see it, there should be a very small amount of surplus in a government-backed agency.

I will cover Ohio tomorrow, as I have to research the situation a little more. A judge has made a ruling against the BWC.

2020 Update – Ohio and North Dakota remain as two of the last monopolistic state funds. North Dakota’s WSI and Ohio’s BWC have not allowed any type of private market competition.

One has to wonder how long they will remain completely monopolistic. Both have experienced extreme difficulties in administering one-source workers compensation insurance.

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Records Storage Question From California Reader

November 19, 2008 By JL Risk Management Consultants

Workers Comp Records Storage For Documents

Workers Comp records storage tends to be one of the least mentioned subjects.

One of my blog readers from California asks how long should records for Workers Comp be stored before being destroyed.

Graphic of Records Storage documents Folder

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My answer actually applies to all states with all types of Workers Compensation coverage – even self insureds.

My opinion is that no insurance documents of any type, whether or not it is pertaining to Workers Comp should ever be destroyed. Back in the prior years, destroying documents after 10 years might have been OK to keep from drowning in paper. With the advent of multi-page scanners, there is no reason to have any documents on paper for many years. I recommend scanning all documents more than seven years old and saving them to a pen-drive or a thumb drive. This includes the associated payroll records. I recommend then backing up the pen-drive or thumb drive with burning a CD of the information.

Why would I recommend saving insurance documents more than 5 years old? We are now reviewing the premiums for insureds in West Virginia and New Jersey that involved old contractor sub-contractor agreements. The one that we are reviewing in New Jersey requires us to go back 11 years, as there was an ownership change that will likely make a difference on how the companies are structured. This makes a big difference on the client’s Workers Compensation premiums right up to today.

We have some clients that scan everything and are basically paperless. That is a great way to save space, aggravation, and paper. The main thing we recommended to those clients is to backup the scans to two different backup places.

Picture Of Records Storage Files Documents

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If your company does not have a multi-page scanner, you can purchase one very reasonably on EBay. Most copiers now have scanning capabilities, even the low-end budget all-in-one machines.

Why I posted on this subject is the lack of documentation of prior Workers Compensation information has cost some of our clients dearly. A thumb drive has saved me many times when I needed old data.

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Assigned Risk Pools Generated Large Number of Questions

November 17, 2008 By JL Risk Management Consultants

Questions About Assigned Risk Pools

Last week, I posted a short note about the Assigned Risk Pools for Workers Compensation in West Virginia.

Question mark Icons Assigned Risk Pools Questions

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I received quite a few questions about the Assigned Risk Pool from West Virginia and other states. It seems that quite a few additional employers are being placed into the Pools that even have good E-Mods. I will try to answer some of the questions in this and the next few posts.

A good E-Mod is one that is less than or equal to 1.0. A good E-Mod can even go up to a 1.2 under certain circumstances.

The trucking industry had experienced that situation a few years ago. A trucking client of ours had an E-Mod of .89 and was placed into the Pool. This was due to the market tightening/hardening on risk. They are now out of the ARP even though their E-Mod had increased to a 1.19 due to a few severe accidents!

We were consulted by an asbestos removal company that tried to get out of the ARP. There was no market to place them in, even though they had not had an accident or occupational illness in the last 10 years.

The quickest way to get out of the Assigned Risk Pool is to heavily shop the insurance market for your Workers Compensation coverage. If you are in West Virginia, you are free to choose a carrier besides Brickstreet, but if you are assigned to the Risk Pool, you must take whatever carrier you are placed with by the Insurance Commissioner and NCCI.

Hand Holding Small Rope Businessman Vector Walking On Rope Assigned Risk Pools Illustrating

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The best way to get out of and stay out of the Assigned Risk Pool is to increase the safety standards that you have in place for your company. If your E-Mod is above 1.1, you are headed to the Assigned Risk Pool. The key to a great E-Mod is not avoiding the one big accident–it is avoiding accident repetition. That is the way the Workers Compensation Experience Modification system has been built. Right or wrong, the system penalizes frequency much more than severity.

My next post will cover Five Keys to Reducing Your Workers Comp Claims, which in turn will quickly bring down your E-Mod.

West Virginia Assigned Risk Pool

November 14, 2008 By JL Risk Management Consultants

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West Virginia Assigned Risk Pool Still Exists

Employers may be placed in the West Virginia Assigned Risk Pool. As of 1/1/09, Brickstreet will have the option to not renew Workers Compensation policies with certain employers.

The West Virginia Assigned Risk Pool is where a group of insurance companies will be assigned to provide coverage for employers that could not find coverage in the voluntary/regular market. The carriers will accept the employers placed in the Assigned Risk Pool, but will charge the employers a much higher premium versus the same employer in the voluntary market.

Fraying Rope Illustrating West Virginia Assigned Risk Pool Black Background

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At the West Virginia NCCI conference that I attended on 11/12, the presenter said there were three carriers that would accept assigned risks. Surprisingly, Brickstreet was not one of those carriers. I had to step away from the conference and did not hear who the Assigned Risk Pool carriers were going to be as of 1/1/09.

If you are placed in the Assigned Risk Pool, that does not mean that your company is a bad risk for Workers Compensation. It could result from the carriers in the voluntary market not wishing to write Workers Comp policies for a certain type of employer. For example, trucking companies could not find policies without being placed into the Assigned Risk Pool, even though some of their E-Mods were less than .8!

In quite a few of my previous posts, I pointed out how to get out of the Assigned Risk Pool. You should do everything in your power to get your company out of the Pool, as the rates for the Assigned Risk Pool can be very steep. If your E-Mod is over 1.5, a safety program will need to be instituted as soon as possible.

With 190 carriers that are or will write voluntary coverage in West Virginia, there are many options other than the Assigned Risk Pool.

Monopolistic States Correction Removes Nevada From List

November 7, 2008 By JL Risk Management Consultants

Monopolistic States Number Correction Removes Nevada

I had posted incorrectly earlier on monopolistic states.

Picture of man hand holding Monopolistic States Fund Graphic

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I posted a blog a few months ago that indicated there were six Workers Compensation Monopolistic states. At the time, I had included Nevada. Nevada had already become an open market system. That would leave five in total.

A monopolistic state for Workers Compensation does not allow any insurance carriers to cover the employers in their respective states. The Workers Comp claims are handled by a state agency or a quasi-state agency.

West Virginia became an open market state as of 7/1/08. The removal of West Virginia leaves the count at four. They are:

Ohio
Wyoming
North Dakota
Washington

As I mentioned in a few earlier posts, North Dakota and Ohio both had severe problems with their monopolistic funds.

The likelihood that any of the remaining four monopolistic states will switch to an open competitive marketplace is, in my opinion, very low. That is regardless of whether these four states are actually helping their employers or not.

Thanks to a Chartered Property Casualty Underwriting Designee (CPCU) from Missouri for pointing out my error. I received an email from her correcting my previous article.