Archives for September 2009

California Worker’s Classification Code Changed Walking Thru Plant

September 30, 2009 By JL Risk Management Consultants

California Worker’s Classification Code Oddity

This Classification code for the trapped employee. A recent review by our company showed that a premium auditor in California reclassified a worker just for the fact that the employee had to walk through the plant to get to his workstation as an administrative assistant (class code 8810). This reclassification was one of the oddest ones that I had seen in quite some time.

Graphic Of Money Plant Classification Code In Green Color

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This type of premium audit reclassification in California was likely a response to employers trying to stack all workers into the Standard Exception Code 8810 – Administrative Workers.

The employer had decided not to start a premium dispute as they wanted to keep on good terms with their current insurance carrier. Usually, most insurance carriers will not cancel a policy just because of a premium audit dispute.

There is no other path that the employee could have taken unless he crawled through an office window. The employee was reclassified as a manufacturing worker even though he never touches any of the equipment. Should the employer have to build a special covered walkway just for this employee? I will cover this later in the week

Update – The classification code turned out to not be 8810. Why? The employee was deemed to be a Computer Programmer. In California, that would place him in Class Code 8859

The 8859 Class Code rates represent a much lower rate than the Manufacturing Class Code he was place under at premium audit time.

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ObamaComp Prediction Now Lives In US Senate Combining Coverages

September 28, 2009 By JL Risk Management Consultants

ObamaComp (r) Prediction Combines Health, Workers Comp and Auto Insurance

The ObamaComp prediction now possibly becomes part of a larger combination of personal and industrial coverages. I am not one to say that I told you so, but now there is now a live bill in the Senate that would merge Auto, Workers Compensation, and healthcare into a 24-hour health coverage plan. Of course, the property and casualty insurers are going to fight the bill. The provision was proposed last week by Sen. Jay Rockefeller, D-W.Va.

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In an article from the National Underwriter – According to a lobbyist for the American Insurance Association, the amendment is not likely to be taken up by the committee, although it has been officially filed. In a bulletin to members, the Independent Insurance Agents and Brokers of America said the work on language in the legislation in the Senate panel was supposed to be completed this week, but “the markup could very well slip into next week and potentially beyond.”

The industry’s stated opposition was contained in a letter delivered today to all members of the Senate Finance Committee. One of the more stark areas in the article was that Workers Compensation was not the driving force behind the letter. The letter centered on automobile insurance’s interplay with health insurance. I am not sure of the impact of the letter, but would it leave open an area to combine Workers Compensation and health coverage like ObamaComp?

Regardless, I do agree with a passage in the letter “In light of the serious damage it would do to our nation’s workers’ compensation and auto insurance systems, we respectfully urge the Finance Committee not to add the Rockefeller Amendment to the pending bill.”

Wikimedia Commons – White House

I had pointed out in my last few posts on the ObamaComp prediction that 24 hour health care had been attempted before and failed miserably. The letter to the Senate finance committee pointed to several states that experimented with pilot projects (California, Kentucky, and Oregon) and were not successful.

The bottom line of this post is that while this may not be added to the bill, there are now going to be open discussions about combining different coverages and will likely be discussed more in the future.

I have been informing our clients whether they are brokers, self-insureds, governmental agencies, or private companies that there is already a federal program that is currently controlling many Workers Compensation settlements. It is the CMS and Medicare Set Asides that they must approve. I will comment on medical set asides in my next post. Yes, the federal government has been heavily involved for quite some time in Workers Comp settlements.

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Claims Data and Payroll – Two Headed Workers Comp Monster

September 24, 2009 By JL Risk Management Consultants

Workers Comp Claims Data and Payroll

Workers Comp claims data and payroll must be important. I have received many inquiries about what changes are upcoming on 10/1/09 for E-Mod/X-Mod calculations. There are changes coming and they are not minor. Believe me, they cannot be ignored unless your company has limitless funds. Your Experience Modification Sheets whether promulgated by the NCCI, WCIRB, or a State Rating Bureau are going to be even more confusing than they are now. I have examined sample ones and my head started to spin.

Graphic Of Claims Data and Payroll Calculating

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Accurate claims data including reserves used to be just as important as payroll, but not as important as Workers Compensation Classification Codes. The claims data including reserves may now be the most important thing to your bottom line and could exceed Class Codes as being the most important set of data for your Workers Comp premiums. The fact is that no one knows how it will affect any company’s premiums as the new rules are not yet in place. If this does not scare you, then just open up the checkbook and use your best pen to write a big check.

Believe me, I am not saying that the new rules will discriminate against any one company or group of companies. That is just not true. Companies with inaccurate claims data and reserving are now going to feel the financial effects very rapidly. Your Workers Comp loss runs are now golden to you. If your company ignores them, please see the last sentence in the previous paragraph.

Picture Businesswoman with Binary Digits Claims Data and Payroll Experience Modification

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The new E-Mod/X-Mod calculations are going to make the unsafe companies take on more of a burden and pay a larger share. There used to be two variables that mattered – the number of claims and their severity. Now there are going to be more than 10 data inputs that are going make your E-Mod/X-Mod more specific to your company.

I wish that I could go more into the analysis. No one has seen a live version applied to a real company yet. Simulations are not real world examples.

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Work Comp Classification Codes Are Critical To Your Policy

September 22, 2009 By JL Risk Management Consultants

Your Company’s Work Comp Classification Codes Are Important

Your Work Comp classification codes are very critical to your premiums.

Picture of Hand Holding Paper Work Comp Classification Codes With Audit Graphic

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We have received quite a few inquiries over the last few weeks about Classification Codes during premium audits by the insurance carriers. The Classification Codes are not SIC codes. However, there is some correlation between the Classification Codes and the SIC or NAIC codes. Classification codes are often called Class Codes, or NCCI Codes or State Rating Bureau codes.

One of the main red flags to look for in any premium audit by the insurance carrier is that the Classification Codes were changed or new ones were added at audit. This is a true red flag. It may be your best course of action to seek out a specialist in this area such as J&L when this happens. You are likely being overcharged on your premiums in this case.

Picture Hand Presenting Business Security Work Comp Classification Codes Light Bulb Concept

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The premium auditors do not know your business as well as you do. Like most insurance company employees, auditors are under time constraints and pressures. They may not have the time to study your business and to see all of the job functions in detail. As I have said very often, do not blame the individual premium auditor – blame the Workers Comp insurance system as a whole.

If you feel something is wrong – a gut feeling that your workers compensation program may be in error, then that should be considered another type of red flag. I have written many articles and spoke on the subject many times – your gut feeling as a Risk Manager, company owner, or in charge of your insurance – is always the best measure of whether something is amiss or not.

Start asking questions if you think your company has the incorrect work comp classification codes.

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EMod XMod Changes Coming Soon – Very Important

September 17, 2009 By JL Risk Management Consultants

EMod XMod Changes Upcoming Will Change Premium Audits

WC EMod XMod changes upcoming may cause a new type of review. As I had posted a few months ago, the NCCI(R) has invented a new way to promulgate (calculate) Experience Modification Factors (E-Mod/X-Mod). I just received notice that the rating bureau for California -WCIRB- is preparing to follow suit. The new E-Mods are based somewhat on a different set of statistics. Will all companies’ E-Mods change from the former calculation? This is a yes and no answer.

Picture of tree XMod Emod changes upcoming workers comp

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If your company does not have any claims, the E-Mods/X-Mods will not change significantly. If you have more than one or two claims, it will change dramatically. This is going to change the rules on how companies such as ours perform Premium Audit reviews for employers. The way that it is being done now will be a thing of the past.

What one area will employers and companies such as J&L have to be very versed in to be able to do accurate Workers Compensation premium audits for employers? How I found out was by reading the statistical study used as a basis for the change. It was buried deep in the study.

I am glad that we are strong in that area and have been doing very similar reviews for 14 years. We were lucky. You heard it here first.

EMod XMod Calculations Changing 10-1 Will Indirectly Affect Premium Audits

Premium audits structure changes soon. The structure of doing premium audits and E-Mod/X-Mod reviews are Changing October 1st. All the rating bureaus will be changing how they calculate E-Mods including California. As I said in the last post, there are some major components of claims that will need to be examined more closely after the new changes.

Picture of Hand Holding Magnifying Glass Premium Audits Graphic On screen

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Without becoming too technical, a claims review background will now be needed to fully understand how companies’ E-Mods/X-Mods are calculated. The E-Mod/X-Mod calculation sheets will even look different. Unfortunately, the formula for calculating the E-Mods/X-Mods will now be more complicated. The new rules will add on multiple columns of claims information where before there was only an injury code, status code, and the total incurred figure.

A loss run review is now even more important. Pulling or requesting a current loss run will make reviewing the loss run easier. I have posted numerous times about having online access to your claims information. This will now even be more important. Having inaccurate claims information will be very costly.

I will post more on this situation after the first of next month when the changes become effective.

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ObamaComp 24 Hour Coverage – Are We That Far Away From It?

September 10, 2009 By JL Risk Management Consultants

ObamaComp – The New 24 Hour Coverage

Picture of 24 Hours Clock obamacomp Coverage

Wikimedia Commons – Morio

The ObamaComp health care program are we far from it ? Before I start this blog, I wanted to say that there are no political views being expressed here. I am posting only from an analytical viewpoint.

I decided to coin a new term to save space on blogging about the national health care debate and its impact on Workers Compensation insurance premiums. ObamaComp is a 24-hour health care program that covers an individual if they are hurt on or off the job Actually, ObamaComp is the Workers Comp portion of the 24-hour health care program.

Anyone that works in an insurance based job might want to pay attention to the evolving healthcare situation. If one thinks about it, there would not be much of a leap from nationalized healthcare to 24 hour healthcare.

I have read many articles where the federal government wants to have a nationalized insurance office. There have been many bills introduced over the last 20 years that would initiate a federal insurance office. There was a benefit in most of the bills as agents would be able to write coverage in multiple states.

The formula works like this [National Insurance Office + Nationalized Healthcare + On The Job Injury Care = 24 Hour Healthcare}.

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I had received many questions on this subject when I posted on it in the past. One of them was “Yes, I see your point on medical coverage, but how would the weekly benefits, and other non-medical compensation benefits be handled? That is a good question. The answer is that the federal government could plug in the AFLAC(R) model as they provide very similar benefits to Workers Compensation.

The bottom line is this may never happen. However, I always think that a company or governmental body that has to make a very small leap to initiate something will likely follow that path.

What would this scenario look like?

The Model Combines Workers Comp and Health Insurances

I thought it would be best to post after talking with a few of my peers and receiving questions when I coined ObamaComp. The scenario could possibly resemble a monopolistic state fund on a much larger scale. As I have mentioned often, I have not and will not politicize this blog. I am only analyzing past, current, and future trends.

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If we have a Federal Insurance Office, or for the purposes of this post, a Federal Workers Compensation Office, the amount of reporting would skyrocket. The state jurisdiction would not just fade away. Much like the current tax system, the State and Federal systems would complement each other. Agents would have to file federal and state forms when they write coverage for an employer.

The positive outcome would be that an agent could place Workers Comp coverage nationally and write coverage in different states in addition to the agent’s home state. That would require federal licensing and still require licensing in the agent’s home state. Would this cause an enormous amount of red tape and jurisdictional confusion?

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Policies would be written for 24 hour coverage. How would an agent or insurance company price this model? What would they require an agent and the employer to submit? Would it possibly be all the medical data on each of their employees? Would that violate HIPAA or would it have to be changed to encompass the new Federal Insurance and Workers Compensation office?

Would it feed data back and forth with the Nationalized Health Plan or would the Federal Workers Compensation plan be part of the Nationalized Healthcare Plan? This is already an office in place under the Deparment of Labor called the OWCP, so there is already a national Workers Comp office but without jurisdiction over the states (yet).

Where would the Workers Compensation carriers figure into the model? I will cover that next time. Once again, I am not for or against anything mentioned in this or other posts about ObamaComp. I just want our readers to recognize and be prepared for changes in the current system.

Workers Compensation Insurance Carriers – Can They Fit The Model?

The Obamacomp effect on a nationalization of Workers Compensation insurance carriers would have to revolved around 24 hour coverage. As I have mentioned in few prior posts, the ObamaComp Model would have three main characteristics:

Graphic of Workers Compensation Insurance Carriers Icons

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Center on 24 hour coverage – the leap from nationalized healthcare to 24 hour healthcare is a small one.
Workers Comp insurance carriers would have to adopt a AFLAC(R) type of insurance coverage or companies such as AFLAC could team up with or start a Workers Compensation carrier
There would be a Federal Insurance Office

Workers Compensation carriers would not look like or operate like they do now. Their actuaries would have to factor in many variables into a very complicated formula to be able to price the model, or would the Federal Insurance Office set the rates? How would the State Rating Bureaus or NCCI function within this type of arrangement? How would Self Insureds function and could companies opt-out of the coverage?

I could write another 100 questions at least on how would 24hour coverage and the nationalization of Workers Comp would function. As I have posted in every one of these blogs on ObamaComp, this is an analysis only, not a political statement. I wanted companies and people to start thinking about how this would affect them.

2020 update – The political landscape changed with the election of Donald Trump. Workers’ Compensation insurance will likely be self-regulated as it has been in the past. In other words, no Obamacomp in the near future.

Current State of Workers Comp – Time To Sound Alarm?

September 9, 2009 By JL Risk Management Consultants

A.M. Best Current State Of Workers Comp

Should we sound the alarm for the current state of Workers Comp?

. A.M. Best had recently published a few figures that were worse than I had expected for the Workers Compensation markets. A.M. Best has always seemed to make the best predictions of any of the rating agencies overall. Most of the risk managers and Workers Compensation consultants such as this company had expected a downturn which A.M. Best confirmed completely.

Nationally, the Workers Comp market has been affected in the following manner:

Very rapid Workers Compensation regulatory changes
Carrier and State Fund Net Income fell by 62% – ouch!
Net Premium Premiums Written (NPW) fell by 12% while the rest of the property casualty market only fell 2%.

Quite a few of our risk manager clients and I have identified two areas that A.M. Best also point out in their analysis. Soft pricing and the rise in unemployment seem to be the areas that account for the sharp decrease in the Workers Compensation premiums written. I checked on the true unemployment rate last week, not the governmental rate . The real rate is 16%.

Does this mark the start of a very hard Workers Comp market? I had thought that two years ago. Competition has kept the market very soft.

Social Networking Websites Ruin Workers Compensation Claimants

September 8, 2009 By JL Risk Management Consultants

WC Social Networking Websites – Very Public – No Privacy

Some Workers Comp claimants were not careful when posting to social networking websites.

Graphic Of Social Networking Websites On Big Circle

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I read a very interesting article today on how injured employees are publishing their activities on websites such as Facebook, MySpace, LinkedIn, and others.

I was astounded that with the transparency of the web if these injured employees actually would think that no one is reading the social websites including their employers or private investigators.

An employer, with a little practice, can perform advanced searches on Google that will bring up these websites and some of the entries that have been posted. The whole investigation process takes about 30 minutes to finish.

The article in Business Insurance went on to point out that the injured employees post their sports activities, rock band performances, and even the launching of their new side businesses all while receiving weekly Workers Compensation temporary total benefits. I was shocked to see that the claimants also commented on how they fooled employers by reporting injuries on Monday morning that actually occurred off the job over the weekend.

Map With Social Networking Websites People Icon

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The one area that the injured employees do not seem to take into consideration before posting their private lives online is that the records are permanent. Google stores the data caches for years. Using the colossal Wayback Machine website, an employer can look back at certain website for up to 10 years. Anything posted on a website is very public and easily accessible for many years, even if the user removes the information completely.

Workers Compensation private investigators are becoming very adept at searching the web for information on a claimant’s whereabouts. I know of two PI’s who hired recent college graduates in the field of Information sciences just to perform these types of searches.

The PI’s commented the new online investigators have apps that search that the social networking websites in seconds with full reports.

Most Expensive Workers Compensation Classification Codes California

September 2, 2009 By JL Risk Management Consultants

Most Expensive Workers Compensation Classification Codes California Version

For the most expensive Workers Compensation classification codes California seems to be the highest in the US.

Picture Of Hand Illustrating Classification Codes California Balancing Dollar Signs And Human Figure

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In performing recent premium audits for California employers, I decided to check out which type of employers paid the most for workers compensation coverage in California. The most expensive was not a surprise. The second most expensive was an unexpected one.

There are hundreds of Classification Codes in the California Workers Compensation system. The most expensive classification code in California is:

5552: Roofing —hourly wage below $23.00 per hour

When the insurance crisis in California existed a few years ago, insurers were charging well over $100 per $100 of payroll for Class Code 5552. This is the same as a 100%+ tax on a certain line of business. Why is this Classification Code the highest? The severity and number of accidents that involve roofers are very high compared with all other job types.

One only needs to read the California or national workers comp publications to see Cal-OSHA fining a roofing company for some type of safety violation – usually lack of fall protection.

The next most expensive California Classification Code is:

9185 Carnival or Circus – all workers

The all workers designation means that there are no Standard Exceptions (Class Code 8810 or 8742) with this code. As with roofers, carnival and circus workers expose themselves injuries while performing or while tending to the animals.