Archives for April 2010

Is IBNR Incurred But Not Reported Accurate Figure?

April 30, 2010 By JL Risk Management Consultants

What Is Incurred But Not Reported

Incurred But Not Reported (IBNR)- An estimate of the amount of an insurer’s (or self-insurer’s) liability for claim-generating events that have taken place but have not yet been reported to the insurer or self-insurer. The sum of IBNR losses plus incurred losses provides an estimate of the insurer’s eventual liabilities for losses during a given period.

Picture Of Hand Gesture Incurred But Not Reported With Dollar Sign And Money

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I am not a proponent of IBNR as the estimates for IBNR always seem to be somewhat inaccurate. This is especially true for first dollar Workers Comp policies.

An actuary calculates IBNR in most cases. No standard estimation calculation exists in the actuarial world. Actuaries use very differing methods for IBNR calculations.

Self-insureds should view IBNR very carefully. If the figure seems excessive, the employer should contact the actuarial firm or the individual actuary that created the estimate. IBENR (Incurred But Not Enough Reported) brings overly small reserves set by adjusters, The acronym IBENR means the adjuster had not reserved the file high enough.

I do not usually agree with IBENR as the reserving function by adjusters takes this situation into account. If one sees this term, they heavily review the calculation.

There can be a few instances where IBENR is applicable. A file that is going up through the claims department authority levels (Supervisor, Manager, and VP) may have a reserve recommendation. A file may be closed too early in some cases.

IBENR differs greatly from IBNR – Incurred But Not Reported.

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Is Loss Development Factor LDF Calculation Really Worth It?

April 29, 2010 By JL Risk Management Consultants

Term Of The Day – Loss Development Factor

The Loss Development Factor also is known as LDF is an element used to adjust losses to reflect the Incurred But Not Reported losses (IBNR) under the retrospective method of rating.

Calculating Loss Development Factor using calculator with pen and paper on the table

Wikimedia Commons – Steve Buissinne

Where I have seen LDF’s used the most are for Workers Comp Self Insureds. The LDF is somewhat analogous to the Experience Modification Factors (E-Mod or X-Mods). LDF’s are usually calculated using the actuarial Triangulation Method. I have calculated LDF’s for self-insureds for up to 10 years in the future.

During self-insured presentations, the great concern comes over me when I ask for a show of hands as to which self-insured organization knows their LDF. Many say they do not have one calculated for their company or organization. This is a BIG MISTAKE. Your company is operating your Self-insured Risk Management and safety without a map or GPS.

I give presentations on LDF’s and E-Mods (X-Mods) often. LDFs stretch over a five to 10-year span of time. They have similarities to Mods. They also differ from Mods greatly. The inputs to a Loss Development Factor should be considered as part opinion and part calculated numbers.

We have two current customers that use software to calculate their own LDFs. They sometimes call me to ask my opinion on the inputs to the formula and which test would be the best for their situations. A manufacturer’s LDF likely varies from, for example, a school system.

If you are self-insured and do not have an LDF, it is best to have one for future forecasting of the IBNR and existing claims. There are software packages that will calculate the LDF’s, but the info to be input may need to be adjusted to your specific Workers Comp situation. One size does not fit all with Loss Development Factors.

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What Is An Experience Modification Factor in Workers Compensation?

April 28, 2010 By JL Risk Management Consultants

Experience Modification Factor E-ModCan Be Debit, Credit or Neutral

There has been much discussion in the last week on the Experience Modification Factor (E-Mod or X-Mods). My definition is your company’s Workers Comp credit score.

Vector Graphic Of Employees Experience Modification Factor Presentation

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From NCCI – Experience modifier (mod) is a multiplier applied to the premium of a qualifying policy and provides an incentive for loss prevention. The mod represents either a credit or debit that is applied to the premium before discounts. If your company’s loss experience is more costly on the average than other company’s loss experience in your industry, the result is a debit mod, or surcharge, on premiums. If your company’s experience is less costly than the industry average, you will receive a credit mod, or discount, on your premium. The acronyms are Mod, E-Mod, or Emod.

If your Mod is equal to 1.0, you have a neutral Mod. A neutral Mod means that you receive no credit or debit from the Mod part of your calculation. Your company has the average Experience Mod for your industry judged from your associated Classification Codes. The rating bureaus such as NCCI, WCIRB, or an independent rating bureau publishes and often updates the class codes in your company’s states of operation.

From CA’s WCIRB – which are expressed as a percentage, compare the loss or claims history of one company to all other companies in the same industry. Generally, an experience modification factor of less than 100% reflects a better-than-average experience, while the same number that exceeds 100% reflects a worse-than-average experience. Accordingly, an experience modification factor that is greater than 100% usually increases the cost of your workers’ compensation premiums, while an experience modification that is less than 100% usually decreases the cost of your workers’ compensation premiums. The acronym is X-Mod or Xmod.

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Oklahoma and Feds Crackdown On Subcontractors

April 27, 2010 By JL Risk Management Consultants

The Feds Crackdown Down On Subcontractors

The State of Oklahoma and Feds crackdown on dishonest subcontractors. Oklahoma organizations that misclassify employees as independent contractors are the target of new legislation approved by the Oklahoma House of Representatives.

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Senate Bill 1384 would allow the Oklahoma Tax Commission, the Oklahoma Workers’ Compensation Court, and the Oklahoma Employment Security Commission. to share information in order to identify employers who fraudulently classify workers as independent contractors instead of employees in order to evade taxes and workers’ compensation claims.

The Department of Labor announced that $12 million of its 2011 budget will go towards increasing enforcement of wage and overtime laws involving misclassification of employees. Currently, misclassification is not against the law, but its practices often violate labor and tax laws, such as failing to pay employees overtime or minimum wage.

As I have posted often in the past, this does not mean that a company should not dispute the classification codes for their employees if they feel the codes are incorrect. Classification codes have very little to do with the misclassification of employees versus subcontractors. Those are two different subjects.

Your Workers Comp policy spells out how to initiate a dispute if you believe you have been overcharged premiums. When Oklahoma and Feds Crackdown, companies do not have to worry about Workers Comp Class Codes being the subject of the investigations.

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Total Incurred – Two Very Different Definitions – NCCI vs Loss Runs

April 27, 2010 By JL Risk Management Consultants

Total Incurred Means Two Different Things In Two Different Places

The Total Incurred part of claims reserves consists of the indemnity reserve added to medical reserves for reporting to the rate bureaus. The figure does not include ALAE better known as an allocated expense.

Wikimedia Commons – Kelly Bailey

Distinguishing expenses from medical incurred is very critical. The employer should not have ALAE included in their E-Mods.

Therefore, one cannot match the total incurred on the worker’s comp loss runs and on the UNISTAT reports for the rating bureaus.

I have posted on this term previously. It is the sum of the amount paid and the Workers Comp claim reserves. The figures are included in employers’ rating bureau reports. Total Incurred is the most critical part of an employer’s E-Mod.

The insurance carrier or TPA denotes the figure with somewhat differing terms. I have seen it called Total Reserves and a few other terms.

The official definition – which is really the formula Reserves + Paid = Total Incurred. The sum of incurred medical and indemnity benefits and others for lost-time claims is also a definition.

Reserves consist of what the adjuster or claims staff considers the predicted amount that will be paid out over the life of the claim. An efficient adjuster reviews their reserves at least every 60 days and when there is a major file development such as a surgery recommendation by the treating physician; a return to work; or final settlements all as examples.

The paid part of the above equation results in much more difficult reviews known as leakage audits. Leakage audits require a consultant or employee with a heavy financial and adjusting background and usually seven years adjusting experience in their backgrounds.

Next time that you receive a loss run for your company, highlight the column that reads Total Incurred.

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Workers Comp Acronyms That Are Used Everyday – Long List

April 26, 2010 By JL Risk Management Consultants

Workers Comp Acronyms Often Used In Documentation

The correct workers comp acronyms are critical to Workers Comp communications.

In one of the LinkedIn Workers Comp blogs today, quite a few of the posters were talking about why an injured employee is called a claimant. I agree that the term sounds like the start of a controversy. A few of the posters had mentioned the need for consistency in acronyms.

Capitalized Workers Comp Acronyms letters

Wikimedia Commons – Flickr

Every Workers Comp insurance carrier or TPA has its own list of acronyms. I will provide a list of them. I was trying to figure out who to credit for them. These are so widespread I have no idea who to credit. If any insurance personnel uses an acronym that you do not understand, email them and ask for a list of the acronyms they use in their notes.

Workers Compensation Acronyms

ACOEM – American College of Occupational and Environmental Medicine

ADA – Americans with Disabilities Act (Federal)

ADL – Activities of daily living

ALJ – Administrative Law Judge

AMA – American Medical Association

AOE/COE – Arising out of employment and occurring in the course of employment

AWL – actual wage loss

AWW – average weekly wages

BRB – Benefits Review Board

CFS – chronic fatigue syndrome

COLA – Cost of living adjustment

CRPS – complex regional pain syndrome

CT – cumulative trauma

CTS – carpal tunnel syndrome

DBE – diagnostic-based estimates

DCO – diffusing capacity for carbon monoxide

DIP – distal interphalangeal joint

DoA – date of accident

DOI – date of injury

DRE – diagnosis-related estimates

DSM-IV – Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition

DVT – deep vein thrombosis

DWC – division of workers’ compensation

EBM – evidence based medicine

E/C – employer/carrier

FAS – functional acuity score

FEC – future earning capacity

FEV1 – forced expiratory volume in the first second

FFS – functional field score

FL – functional limitation

FVC – forced vital capacity

GAF – global assessment of functioning (indicated in Axis V in DSM-IV diagnosis)

HCO – health care organization

IDL – industrial disability leave

IME – independent medical examination

IP – interphalangeal joint

Documentation Of Workers Comp Acronyms Folder

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IQR – inter-quartile range

LDP – last day paid

LDW – last day worked

LEC – loss of earning capacity

LEI – lower extremity impairment

LHWCA – Longshore and Harbor Workers’ Compensation Act

LT – lost time

MET – resting/exercise metabolic energy testing (See AMA Guides Chapter 3)

MDT – multiple disabilities table

MMI – maximum medical improvement

MPN – medical provider network

NCCI – National Council on Compensation Insurance

NCV – nerve conduction velocity testing

ND – nonwork disability

NEL – noneconomic loss

NSAIDS – non-steroidal anti-inflammatory drugs

NYHA – New York Heart Association

OCC – occupation

OD – occupational disease

OSHA – Occupational Safety and Health Act

PCR – prevention, compensation, and rehabilitation

PD – permanent disability

PDRS – permanent disability rating schedule

PI – permanent impairment

PIP – proximal interphalangeal joint

PPD – permanent partial disability

P&S – permanent and stationary

PTD – permanent total disability

PTHS – post-traumatic head syndrome

PTSD – post-traumatic stress syndrome

RADS – reactive airways dysfunction syndrome

RAND – Rand Corporation

Lady Workers Comp Acronyms Holding Documents and Pencil

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RFC – residual functional capacity

ROM – range of motion

RSD – reflex sympathetic dystrophy

RTW – return to work

SIADH – syndrome of inappropriate antidiuretic hormone secretion

SIF – Subsequent Injuries Fund or State Insurance Fund

SLR – straight leg raising test

SOL – statute of limitations

SSA – Social Security Administration

SSD – Social Security Disability

SSDI – Social Security Disability Indemnity

SSI – Supplemental Security Income (Social Security welfare benefit payable to disabled and poor person)

SSR – Social Security Retirement

SWAG – scientific wild-ass guess

TD – temporary disability

TPA – third party administrator

TPD – temporary partial disability

TTD – temporary total disability

UEI – upper extremity impairment

UI – unemployment insurance

VA – Veteran’s Administration

VAS – visual acuity score

VFS – visual field score

VR – vocational rehabilitation

WC – workers’ compensation

WD – work disability

WL – wage loss

WLDI – Work Loss Data Institute

WPI – whole person impairment scale

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Is Remuneration Definition Same As Payroll?

April 26, 2010 By JL Risk Management Consultants

Term Of The Day – Remuneration

This is an archaic word at best. It is still used in Workers Comp vernacular as opposed to payroll, etc. Please note that this is a generic list and may not apply to all jurisdictions. Remuneration is not another Workers Comp term for payroll. After examining this list, one can see why the premium auditors want complete records.

Picture Of Hand Carrying Plant Remuneration Grow With Money

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Remuneration consists of gross wages, or other compensation, before withholding taxes or other deductions including:

• Retroactive wages or salaries
• Total cash received by employees for commissions and draws against commissions
• Bonuses including stock bonus plans
• Extra pay for overtime work (with some exceptions)
• Pay for holidays, vacations or periods of sickness
• Payment by an employer of amounts otherwise required by law to be paid by employees to statutory insurance or pension plans, such as the Federal Social Security Act
• Payment to employees on any basis other than time worked, such as piecework, profit sharing or incentive plans
• Payment or allowance for hand tools or power tools used by hand provided by employers either directly or through a third party and used in their work or operations for the insured

Standing Woman With Remuneration Big Dollar Sign

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• The rental value of an apartment or a house provided for an employee based on comparable accommodations
• The value of lodging, other than an apartment or house, received by employees as part of their pay, to the extent shown in the insured’s records
• The value of meals received by employees as part of their pay to the extent shown in the insured’s records
• The value of store certificates, merchandise, credits or any other substitute for money received by employees as part of their pay
• Payments for salary reduction, employee savings plans, retirement or cafeteria plans that are made through employee authorized salary deductions from the employee’s gross pay
• Wages paid to employees as salary in conjunction with the Davis-Bacon Act or other prevailing wage laws
• Annuity plans
• Expense reimbursements to employees to the extent that an employer’s records do not substantiate that the expense was incurred as a valid business expense
• Payment for filming of commercials, excluding subsequent residuals that are earned by the commercial’s participant(s) each time the commercial appears in print or is broadcast.

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Workers Comp Premium Audit Necessary For All Policies?

April 23, 2010 By JL Risk Management Consultants

Term Of The Day – Workers Comp Premium Audit

A Workers Comp Premium Audit – A methodical examination of an insured’s operations, records and books of account. The audit is performed to determine the actual insurance exposures for the coverage provided and concluded with a report of the findings.

Vector Graphic Of Files workers comp Premium Audit Document

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A premium audit will be conducted on your Workers’ Compensation or other commercial insurance policy. The primary function of the audit process is to determine the actual payroll, sales, subcontract cost, or other exposure used in calculating the final premium on your policy. Your premium will be adjusted as a result of the audit. If exposures have been underestimated, an additional billing will result. If exposures have been overestimated, a billing credit will result.

There are three types of Workers Comp premium audits – mail, telephone, and physical . Policies with large premiums will usually require a physical audit. Premium audits are usually completed 30 – 60 days after a workers compensation policy expires. The Workers Compensation premium audit bill will usually arrive within 30 days after the premium audit.

Please remember that you are on a time clock to either pay or dispute the bill.

An audit can be disputed if they employer disagrees with one or more parts of the way the business was audited by the premium auditor.

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Premium Auditor Description – Who Is He/She Job Description

April 22, 2010 By JL Risk Management Consultants

Premium Auditor Definition

Workers Comp Premium Auditor – an individual who performs the audit of remuneration at the end of a policy period. The premium auditor may be an employee of the insurance company or a contractor hired by the insurance company.

Picture of premium auditor Using Magnifying Glass

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He or she contacts the insured, on behalf of the company, to determine the actual exposure that occurred during the policy period. The determination may include viewing the appropriate business records either at the insured’s or accountant’s office, or they may request verification through the mail.

The auditor has the right to view all business records. It is recommended that an employer run full payroll reports and a summary report for the premium auditor. Any subcontractors should be pointed out on the reports and verified by a Workers Compensation certificate of insurance.

Always make sure to obtain a copy of his/her business card. Your company may need to contact the auditor at a later date in some cases. Emailing the auditor is the preferable method of contact.

The auditors are not licensed as are agents and adjusters. There has been much discussion over whether premium auditors should be licensed. To date, no states have made this requirement

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Do Schedule Credits Reward Safety – Yes They Do

April 21, 2010 By JL Risk Management Consultants

Schedule Credits Can Save Big on Premiums

Schedule Credits – discretionary premium adjustment based on underwriters evaluation of special characteristics of a risk not reflected in the E-Mod. The opposite adjustment is schedule debits.

graphic of schedule credits or debits balancing

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I have seen where the Schedule Credits or Debits can cause a 25% increase or a decrease to an employer’s premium. Most of the credits involve safety issues such as housekeeping, guards in place, etc. The Schedule Credits can offset part of the premium increase caused by a higher E-Mod. Each state has its own specific set of criteria. The rating bureaus will usually have the most comprehensive tables.

For a safety officer, this can be one of the most powerful parts of your employment file. A properly documented list of safety accomplishments and programs should always be presented to the Workers Comp underwriter when a new policy is written each year.

There are credits for such areas as housekeeping, clean work areas, updated safety manual, hearing protection, and other safety considerations.

If you are self insured, presenting the same material to the actuary when an Loss Development Factor (LDF) is being calculated. The safety information can always be a method to lower a schedule debit or increase schedule credits.

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California Workers Comp Rates Stay Low

April 18, 2010 By JL Risk Management Consultants

California Workers Comp Rates

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The California Workers Comp Rates will be staying low for 2010. The Workers Compensation Insurance Rating Bureau of California (WCIRB) recently released the December 31, 2009 Summary of Insurer Experience. One of the most interesting statistics was the Average Insurer Rate per $100 of Payroll.

The average of $2.35 per $100 of Payroll was the lowest rate for employers since 1999 which was before the recent California insurance crisis. The highest amount during the last 15 years was $6.45 per $100 at the end of 2003.

These rates are the advisory rates. Any Workers Compensation insurance carrier can vary these rates greatly if the WCIRB approves the deviation. The WCIRB almost always approves the insurance companies’ rate deviations. The main requirement is that the rates are filed timely with the WCIRB and the California Insurance Commissioner.

The WCIRB has recommended increases of over 20% over the last few years. The California Insurance Commissioner has decided to not approve the recommended increases. Is this bad for the California Workers Compensation insurance environment? I think it depends on who you ask as to what will be the answer.

I will cover that next time.

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Federalization of Workers Comp – Senator Thinks So

April 16, 2010 By JL Risk Management Consultants

Senator Thinks of WC Federalization

The Federalization of Workers Comp the Senator was think so.I have been told by many in the insurance industry how I was so far off the mark in coining the phrase the Federalization of Insurance including Workers Compensation. As you read this please remember that the House has already passed a bill creating the Federal Insurance Office. (FIO)

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I read a great article in the National Underwriter that Sen. Ben Nelson, D-Neb., is withholding support of financial services regulation. He fears it could unnecessarily regulate insurers. He said he is not backing the bill in its current form believing that certain provisions could regulate insurers on matters unrelated to the financial crisis.

For insurers, the Senate bill creates an Office of National Insurance (ONI), makes systemically risky insurers subject to federal oversight and contains provisions similar to the House financial services reform bill that would modernize and streamline the surplus lines and reinsurance industry by facilitating regulation of such insurers by the state they are domiciled in.

Under the bill, federal oversight, in addition to current state oversight, would be applied to non-bank financial companies that are determined by a two thirds majority vote of the Financial Stability Oversight Council to be subject to prudential supervision by the Board of Governors of the Federal Reserve System.

Graphic Capitol Hill Senator Federalization

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Under the bill, the Office of National Insurance created would have limited powers, such as authority to seek information from state regulators about the health of the industry and particular insurers. The ONI would also have the authority to recommend to systemic risk regulators that a particular institution is insolvent or needs stronger oversight.

The bill would also require that a person with expertise in insurance issues be appointed to the Council by the president.

Is this not the House and Senate agreeing on federalizing the oversight of the insurance industry? If I am not correct, please email me and let me know.

A quick thought – what would be a systematically risky insurance company – all insurance involves an element of a possibly proportionally high risk. Would the National Flood Insurance Program not be a very risky program?

Premium Auditor Conference in Nashville TN

April 16, 2010 By JL Risk Management Consultants

Nashville TN – Premium Auditor Conference

I recently attended an annual insurance premium auditor conference in Nashville, TN. I had contemplated attending the conference for a number of years.

Picture of Empty Premium Auditor Conference Room

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The group is called the National Society of Insurance Premium Auditors (NSIPA). The conference was very informative. Their website is here.

NSIPA publishes a quarterly magazine for members on the current subjects in the premium auditing business.

There are also local insurance premium auditor organizations that are too numerous to list. One of the main things I liked about the conference is most of the presenters also covered auditing liability policies.

The following are the regional premium auditor associations across the US. The webpage for their websites is here.

Insurance Auditors Association of the West (IAAW)

Insurance Auditors Association of the Central States (IAACS)

Northeast Region Insurance Auditors Association (NRIAA)

Insurance Auditors Association of the Southeast (IAASE)

Insurance Auditors Association of the Southwest (IAASW)

The newest national meeting for NSIPA is in April at the LINQ hotel in Las Vegas. If you are in the premium auditing business, you should make an attempt to attend or at least join their membership for NSIPA for very reasonable fees.

Workers Comp Subrogation – Risk Management Diary Recommendation

April 13, 2010 By JL Risk Management Consultants

Risk Management Diary For Workers Comp Subrogation

The Workers Comp Subrogation handlers should have a risk management diary. A few posts ago I analyzed the Workers Compensation adjuster situation in handling third party liability claims. In defense of the Workers Comp adjuster, a requirement for the job is NOT a background in liability claims. That is an understood fact.

Graphic Of Risk Management Workers Comp Subrogation Infographic

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What can a Risk Manager or company officer do to possibly track the outcomes of an accident where a third party may be liable for a reimbursement for all or part of a Workers Comp claim? I would suggest setting up a subrogation diary to track the outcomes of a liability claim against the third party. As I said in the last post, we have noticed in our file performance reviews that subrogation or subro is/has not been properly handled in the claims.

The subro diary can be easily interfaced with any of the diary programs such as Microsoft Outlook(r). The main thing is to track if and when the subrogation claim is being pursued and how the funds have been handled along with how the insurance carrier has reported the reimbursement to the rating bureaus.

Some of the areas to track are:

When did the adjuster send the original notification letter to the responsible party’s insurance carrier? Make sure that letter went out to all responsible parties’ insurance companies.
Did the adjuster for the responsible party acknowledge and respond to the notification letter?
Negotiation status on settling the workers’ compensation lien
Important – Legal proceedings – if lawsuit filed
Was a subrogation check received by the Workers’ Comp adjuster. If so, were the funds credited back to the file?
Did the insurance carrier (if not self-insured) report the reserve reduction to the rating bureau?

I recommend not contacting the adjuster for the third party directly. Let the Workers’ Compensation adjuster do their job.

I try not to do very long posts. I will stop there. If you have any more questions on a subro diary, please use the Contact Us page to reach us.

Workers Comp Large Deductibles And Rating Bureaus

April 11, 2010 By JL Risk Management Consultants

Workers Comp Large Deductibles Still Have E-Mod – Shocker

The Workers Comp Large Deductibles have always been reported to the rating bureaus.

Extra effort Workers Comp Large Deductibles work

Wikimedia Commons – Rasheedhrasheed

Reader Question – We have a large deductible. Our Company is basically self insured. We have heard this comment often lately as larger employers seek to control their Workers Compensation costs by entering into large deductible arrangements.

Self-insuring for Workers Comp can be a way to cut comp costs if done properly. However, when you are insured with a large deductible, the rating bureaus still promulgate your Experience Modification Factor which can be accessed by almost anyone.

A self insured employer will “drop off the radar screen” with the rating bureau. As no insurance carrier is covering the employer, there is no Unit Stat report filed with the rating bureau. Quite a large number of our current clients are shocked when I tell them that I can pull their E-Mod even while they had or have been in a large deductible program. Your company’s E-Mod will not revert to 1.0 if you decide to end your large deductible program. Companies that are fully self insured will not usually have an E-Mod.

Picture Businesswoman Pulling Giant Briefcase with Cash Inside Workers Comp Large Deductibles The Rating Bureaus

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Many companies have signed on with a large deductible program thinking their high E-Mod will fade away. We recently had a manufacturing client contact us as they decided to end their large deductible program and go back to the open market with a regular Workers Comp insurance policy. After examining many variables, we had advised them if they ended their large deductible program, they would start with an E-Mod of 1.45.

Our client would have ended up being put into the risk pool with much higher rates then before they began their large deductible program. They decided to stay with the large deductible and we are now working with them to see if they can be fully self insured. Their bottom line savings on becoming self insured even from a large deductible is about 19%.

Subrogation – Workers Comp Money Left On Table

April 7, 2010 By JL Risk Management Consultants

Workers Comp Money – Subrogation Concerns

Sometimes Subrogation turns into the Workers Comp money left on the table. I have covered subrogation a few times in prior posts. I am bringing it up again due to our recent Workers Comp file reviews. One area that we have noticed a lack of training or knowledge in Workers Comp files is subrogation.

Wikimedia Commons – DEA Emploee

One of our trucking clients had left $240,000 on the table due to the TPA not pursuing subrogation before the statutes tolled. Many of my readers will likely know the definition of subrogation. I will not use the classic definitions as they are confusing.

An example of subrogation is when a delivery driver is rear-ended in an auto accident while making his/her deliveries. He/she suffers injuries and files a Workers Comp claim for benefits. The driver of the other car is responsible for reimbursement of the benefits to the Workers Comp carrier. The Workers Comp carrier has the responsibility to protect their client’s interests and to pursue subrogation. This is an easy example.

There are many instances that we find in files where the situation is more complicated, or the initial notice letter to the responsible party is sent, but then there is no follow-up. We also see where the subro check is received by the carrier, but is not properly credited to the file. This can cost an insured many times over as their E-Mod would be affected.

Picture Worried Businessman at Table with Wad of Cash in Mouse Trap Subrogation Concerns

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Why does this happen? I think it is that Workers Comp adjusters have such a hybrid job to do from a regular liability adjuster. How often does a liability adjuster have to make sure that an injured employee’s weekly check made it to them? The volume of communications or mail is huge for a Workers Comp adjuster.

The bottom line is that they are so busy, it is just part of the file that cannot be tended to in their normal job duties. I have also noticed that liability adjusters receive a large amount of training in subrogation while the Workers Comp adjuster does not receive that much training in third party liability.

I think that I may have come upon a solution. Check back with me on the next post. I try not write posts that are too long as insurance is not the most exciting subject.

Montana Is Second Most Expensive State For Workers Comp

April 5, 2010 By JL Risk Management Consultants

Second Most Expensive State Is M0ntana

Wikimedia Commons – Perry-Castañeda Library

I noticed that the 2nd most expensive state is Montana. I have not posted for some time on the state funds. One article that caught my eye was on the Workers Compensation situation in the state of Montana. Montana had been off the news radar for a long time.

Please note that Montana is not a monopolistic state fund. <<Correction

Now, Montana has been ranked as the second most expensive state for Workers Compensation in the nation. I thought that I would look at what would cause this increase in rates when compared to other states.

One main consideration for high rates is that there exists a state fund such as Montana that writes a majority of the Workers Comp policies. The State Fund writes work-comp insurance, which insures businesses against on-the-job injuries, for 68 percent of Montana companies. This is a major percentage. Montana is not what one would call an open-market system. When the market is written by a State Fund that has more than 50% of the market, the usual insurance market system is not balanced.

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Montana put the state fund’s actuary on the job to see what he could find as a reason. Only 9 percent of claims are permanent partial disability, but they account for 70 percent of overall work-comp costs, he said. The actuary said that PPDs in Montana occur at a rate 50 percent higher than the average in other states and that medical costs for such claims are twice as much as other states. If the number of PPD claims and their medical costs in Montana were at national averages, work-comp rates would be 30 percent lower, and Montana would fall to 20th-highest in the nation.

We shall see whether changing the PPD laws will have any effect. I think changing the Workers Comp market dynamics would help greatly.

Death of Workers Comp – 10 Ways To Prepare Just In Case

April 2, 2010 By JL Risk Management Consultants

Ten Ways To Prepare for the Death Of Workers Comp

This Ten ways to prepare for the Death of Workers Comp comes from how to keep your job. I have waited to return to this subject due to another blogger’s opinion who claims to be a health and Workers’ Comp expert. I never said that the health bill would result in the disappearance of Workers Comp.

Visualizing Death of Workers Comp cemetery

Wikimedia Commons – U.S Government

I was compared to a tea leaves reader; a black swan; and even the teller of urban legends. I do not outwardly claim to be a guru on Workers Comp as the song says “If I claim to be a wise man, it surely means that I don’t know.” (Kansas – Point of Know Return). The expert/guru moniker is up to the reader, not the writer.

I think that I touched a nerve in the Workers Comp community. That is fine as I will now cover how to be prepared if Workers Comp is completely federalized. As I have said often in the past, there are steps that the federal government has taken to federalize a state-run Workers Compensation system (Federal Insurance Office; CMS having a database of all Workers Comp data by January 2011; the Health Insurance bill, etc.) To say that the forest does not exist when the trees are already there could be a mistake.

OK, enough about the past, how does one prepare for the future if their career is centered around Workers Comp?

1. Further your designations and degrees. I know of at least five good friends that started their ARM, CPCU, AIC, etc. but have not finished. This would be a great time if you are reimbursed by your current employer.

2. Your boss is your main customer. I will leave that one alone as it is very obvious.

Picture Businessmen Pulling Colleague's Leg at Office Death of Workers Comp Prepare Just In Case

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3. Join a Workers Comp based association and make it to conferences. You can never network too much. A very easy way to network is by joining LinkedIn. One of the groups that I am in can be joined at http://www.linkedin.com/groups?gid=1328307&trk=myg_ugrp_ovr You will have to sign up for free if you are not already a member.

4. Subscribe to and read all Workers Compensation publications. I subscribe to over 20 different ones. Knowing the environment you work in can never hurt.

5. Realize that the Federalization of Workers Comp does not mean that your job will change that much overall. The variables might change, but it is very unlikely that the process will change.

Drawing Of Human Body ways to prepare In Injure With Yellow Helmet

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6. Monitor everything the CMS (Centers for Medicaid/Medicare Services) does in relation to Workers Comp. I think they are going to be a major game changer in the future.

7 . Keep abreast of all the changes in Workers Comp in all states. I often receive the question – How does what happens in another state affect me in the state in which I operate? The answer is no one has reinvented the wheel. For example, the huge legislative changes a few years ago in California were modeled after Florida and other states.

8. An employer needs to increase their level of job safety for their employees. If and when everything begins to inflate, the market will harden and insurance carriers’ underwriting departments will become very picky about which companies they will cover for Workers Comp. A claim that never happens is the best loss control possible.

9. As in #1, keep track of what the Federal Insurance Office (FIO) is doing, especially if they begin expanding their role in insurance. I think they will become a major warehouse for insurance data on a national basis including Workers Comp.

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10 . Join an Association or Trade Group where you can share ideas and receive feedback from like-minded individuals. There are many associations and groups that charge little or no fees to join. There are also many free conferences that can be a great place to see what is occurring more globally than just your niche. A great upcoming free conference on safety in North Carolina is http://www.ncsafetyconference.com/ It is a free three day conference.