Archives for April 2011

What Is A Short Rate Penalty For Workers Comp Policies?

April 29, 2011 By JL Risk Management Consultants

The Short Rate Penalty Can Be Significant

A short rate penalty is applied by insurers when a Workers’ Compensation insurance policy is cancelled by the insured before the expiration date of the policy. In the early days of the policy this penalty is steep. It will gradually taper off the closer the policy gets to the expiration date.

picture of coin stacking Short Rate Penalty Concept

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The workers compensation insurance industry created the short rate penalty to prevent an insured from having a large accident or a spate of accidents and then moving to another policy without any type of financial penalty. The insured hopping from one policy to another is monetarily discouraged heavily. This offsets the insurance carriers from having to assume uncompensated risk.

NCCI, WCIRB and the other rating bureaus have a chart that covers how carriers are to charge for short rate penalties. Cancelling a policy within the first two months will cause a large premium penalty. Likewise, canceling in the last two months of a policy incurs a comparably smaller penalty.

An insurance carrier may rarely allow an insured to cancel out of a policy without facing this penalty. Moving to a new carrier on policy renewal will avoid any type of short rate penalty.

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Carve Out Programs Look To Reduce Disputes and Costs

April 28, 2011 By JL Risk Management Consultants

Term Of The Day – Carve Out

Workers Comp Carve Out tis a hybrid benefit package that applies to just the Workers Comp Policy.

Wikimedia Commons – U.S. Government Accountability Office

An option allowed in some states, including California, where an employer and the union for the employer’s workers agree to collectively bargain a separate schedule of Workers’ Compensation benefits. This schedule of benefits differs from the statutory program imposed by the state.

Certain states do not allow this type of program as they wish to have uniform Workers Compensation benefit rules and laws. According to the State of California Department of Industrial Relations a key feature of most carve-outs is an alternative dispute resolution process.

The goals of a carve-out may include:

Improve safety programs and have fewer injury and illness claims.
Increase access to quality medical providers and medical evaluators.
Lower costs of medical care.
Reduce disputes.
Improve collaboration between unions and employers.
Increase satisfaction of all parties.
Provide the opportunity for continuous improvement by renegotiating the terms of the carve-out on an as-needed basis.

California’s programs are geared towards the construction industry. Everything that exists in a carve out program should be pre-negotiated including a list of treating physicians and how to handle disputes between parties.

Adjusting claims for these arrangements requires the adjuster to follow a predefined set of rules that may differ from regular Workers Compensation adjusting.

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Workers Comp Medical Only Claims – Your Money Down Toilet

April 27, 2011 By JL Risk Management Consultants

Workers Comp Medical Only Claims And Claims Festering(c)

Certain Workers Comp Medical Only Claims snowball into uncontrolled Lost Time Claims for employers and carriers. My last post on Medical Only claims pointed out the pitfalls and concerns of medical only claims. I promised that I would get back to how employers should monitor medical only claims.

Picture Of Doctor And Patient Workers Comp Medical Only Claims Shaking Hands

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One of the huge mistakes by employers and carriers is the medical only claims are allowed to fester for many weeks and months and not receive the proper attention. I have seen many medical only claims turn out to be an employer’s worst nightmare.

A medical only claim has really had no investigation performed and is usually more of a medical only claim processor’s job. A lost time adjuster may never see a medical only claim until it turns serious, such as a physician’s office calling for authorization for a major back surgery. By that time, it is almost too late to do anything that would resemble a good investigation of the claim.

Medical only claims are not that hard to monitor. Avoiding a delayed investigation by the Workers Comp adjuster is the goal.

Excel Spreadsheet Workers Comp Medical Only Claims Screenshot

Wikimedia

An Excel spreadsheet can be used as a diary system. An Outlook or some type of calendar program will work even better. After filing the First Report of Injury for a medical only claim, calendar a follow up with the employee at 30 days, 90 days, 6 months, and one year. If they have an email address, that is the easiest method to contact them.

The others side of the coin, so to speak, is what info is flowing to your insurance carrier or TPA without your knowledge. Medical providers often send the bills and reports directly to the claims office. You should ask that a copy of the medical bills and reports are also sent to your office. If the report points out the employee’s condition is worsening or surgery is anticipated, you will be able to point this out to your Workers Comp claims department.

One of the most heavily posted recommendations by me is having online access to your claims. You can easily see what is occurring in the claim and to see how the carrier is handling the medical only claims. You may also be able to see scans of the medical reports or medical charges paid.

Using these two simple techniques will avoid you surprising your claims adjuster. Do not rely solely on your Workers Comp claims department to catch everything on medical only claims. A surprised claims adjuster may set your Workers Comp reserves very high, which means your E-Mod will be higher, which is money down the toilet.

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Mid-policy Assessments Endorsements – Becoming Larger Trend?

April 27, 2011 By JL Risk Management Consultants

Mid-policy Assessments and Endorsements

We have received a larger than normal number of calls and emails on mid-policy assessments and/or endorsements. A mid-policy assessment or endorsement should be examined very carefully. A past post on Red Flags that you may have been overcharged lists this as an area of concern.

Office Table With Mid-policy Assessments Documents

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When an insurance carrier decides to change a policy mid-term it should be considered a change of contract. I often see where our clients and employers have filed away the endorsements or assessments without reading them. If your company changed your employment contract, would you not read that info?

Mid-policy assessments or endorsements are not the same as a yearly workers compensation premium audit. We recently received a premium audit statement that was noted as an endorsement. The yearly premium audit usually occurs 30 – 60 days after the end of your policy period.

The fastest way to screen whether or not the endorsement caused an increase is to review anything that is referred to as a premium adjustment. Your company may not be billed right away.

The receipt of an endorsement should be explained to you by your agent or broker if you contact them. As I have posted very often in this blog, DO NOT wait to contact your agent or insurance carrier about the endorsement. Certain states have time limits on when you can raise a dispute.

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Assigned Risk Adjustment Program (ARAP) – Does It Hurt Our Company?

April 27, 2011 By JL Risk Management Consultants

Assigned Risk Adjustment Program – Term Of The Day

The assigned risk adjustment program is an additional debit charge placed on Assigned Risk policies with experience modification factors higher than 1.00.. It is applicable to the NCCI jurisdiction states.

Employees Doing Assigned Risk Adjustment program ARAP picture of outline

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The notable exception is Massachusetts, where ARAP stands for All Risk Adjustment Factor. This is a surcharge that increases premiums over and above the experience modifier, and in MA the ARAP can be levied against all employers, not just those in the Assigned Risk Plan.

If you are in an Assigned Risk Plan, it is advisable to examine your policy to see how much the debit was that you incurred from the ARAP.

That figure alone has made many employers pump more funds into their safety programs. One clarification that needs to be made here is that being in an assigned risk pool may not originate from being a high risk employer.

Certain markets such as truckers and temp to perm employment agencies do not have carriers willing to write their WC coverage in the voluntary market. As I have said very often, get out your policy and read it over even if it is in the assigned risk pool.

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Declaration Of Readiness To Proceed

April 26, 2011 By JL Risk Management Consultants

Declaration Of Readiness To Proceed -California Work Comp Form

The Declaration Of Readiness to Proceed resolves disputes in California. Another of the forms required in California. It is a form used to request a hearing before a workers’ compensation judge when an injured employee is ready to resolve a dispute. This form cannot be filed unless an Application For Adjudication Of Claim has already been processed.

Picture Of Judge Holding Gavel Declaration Of Readiness In Court

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Application For Adjudication Of Claim

April 25, 2011 By JL Risk Management Consultants

Term Of The Day – Application For Adjudication Of Claim

The Application for Adjudication Of Claim is the primary Workers Comp appeal form in California. This term of the day is one from the WCAB in California. It is a form an injured employee files to open a case at the local Workers’ Compensation Appeals Board (WCAB) office if there is a disagreement with the insurance company about the claim. It must be filed first before any other forms are filed.

Graphic Of Papers And Pen Adjudication Of Claim With USA Flag Background

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How Do I Obtain Associate in Reinsurance (ARe)?

April 22, 2011 By JL Risk Management Consultants

Term Of The Day – Associate in Reinsurance (ARe)

The Associate in Reinsurance designation generates little discussion in the Workers Comp world. Without reinsurance some self insured employers would find themselves in deep trouble. One of the most misunderstood areas of insurance is reinsurance. More than one Workers Compensation insurance carrier has failed by not properly securing reinsurance or not properly or untimely reporting the risk of the large claims to the reinsurer.

Picture of Man on Chair And Man standing Carrying Umbrella Associate in Reinsurance In Field Background

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The core courses are:

ARe 143 – Primary Insurance Coverages

Personal Insurance Overview; Automobile Insurance and Society; Personal Auto Policy: Liability, Medical Payments, and Uninsured Motorist Coverage; Personal Auto Policy: Physical Damage, Duties After an Accident, Endorsements, and General Provisions; Homeowners Property Coverage; Homeowners Liability Coverage and Personal Umbrella Coverage; Overview of Commercial Insurance and Commercial Property Insurance; Commercial Property Insurance; Business Income Insurance; Inland and Ocean Marine Insurance; Commercial General Liability Insurance; Commercial Auto Insurance; Workers Compensation and Employers Liability Insurance; and Miscellaneous Commercial Coverages

ARe 144 – Reinsurance Principles and Practices

Introduction to Reinsurance, Types of Reinsurance and Reinsurance Program Design, The Reinsurance Placement Process, Common Reinsurance Treaty Clauses, Quota Share Treaties, Surplus Share Treaties, Property Per Risk Excess of Loss Treaties, Casualty Excess of Loss Treaties, Catastrophe Reinsurance, Aggregate Excess of Loss Treaties, Reinsurance Audits, Reinsurance Regulation, Reinsurance Aspects of the NAIC Annual Statement, and Reserves.

ARe 145 – Readings in Reinsurance Issues and Developments

Students examine reinsurance topics from contemporary journals and periodicals.

As with most of the AICPCU designations, an Ethics course will be included in the future.

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What Is The Residual Market For Workers Comp?

April 21, 2011 By JL Risk Management Consultants

Residual Market – Critical Under The Radar Coverage

In insurance industry they need residual market for Workers Comp.Companies or industries that are considered high risk (for instance with an E-Mod of 1.7 and above) may not be able to obtain Workers Compensation insurance through the regular voluntary markets.

The chart shows the differing level of the residual markets compared to the whole workers comp market. The bars enumerate the insurance crises of the 1990’s. One can see the residual market represented almost half of the market. The crises quickly subsided over the next few years.

(The term “high risk” applies to individuals or individual businesses with a poor loss record due to inadequate safety measures; certain kinds of businesses or professions where the nature of the work is hazardous or where the risk of lawsuits is high; and specific locations where the risk of theft, vandalism or severe storm damage is substantial.)

To make basic coverage more readily available to everyone who wants or needs insurance, special insurance plans, known as residual, shared or involuntary markets, have been set up by state regulators working with the insurance industry.

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When Is A Claim Compensable – Each State Has Its Own Inputs

April 20, 2011 By JL Risk Management Consultants

Compensable Claims Are State Specific

An injury that meets the statutory qualification standard in a Workers Comp policy. It is the term used when an injured employee is qualified to receive workers compensation benefits. The term compensable also applies to work related illnesses.

Picture Of Supreme Court Compensable In USA

Wikimedia – Jeff Kubina

Each state generates its own level of compensability. What may be compensable in Texas may not be in Ohio. Workers Compensation rules and laws have a commonality among all states. However, deeming a claim as payable or not is very state-specific.

This may turn on a dime when a State Court of Appeals or Supreme Court hands down a major decision. Workers comp adjusters make the compensability decision within a certain state-prescribed timespan after a thorough and complete investigation.

Once the decision is made on whether a claim is compensable or not, each state has very specific forms to inform all parties involved on the compensability decision. Many insureds require a review of each large claim as to its compensability. The requirement exists especially with a self insured that has a TPA adjusting its claims.

The dictionaries generically define it as entitling one to compensation. The origin of the word comes from the French.

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What Is Assumption Of Risk Doctrine?

April 19, 2011 By JL Risk Management Consultants

Term Of The Day – Assumption Of Risk

The Assumption of Risk term creates a lessening of liability in certain situations.. Workers Compensation usually does not allow any defendants to use this type of defense due to the “no-fault ” provisions built into the Workers Compensation system Some states do allow a reduction in benefits to an injured employee in certain cases. I have never seen it happen, though.

Wikimedia Commons – Bulbul Ahmed Photography

Situations that encompass assumption of the risk have been classified in three broad categories. The plaintiff:

In advance, has consented to relieve the defendant of an obligation of conduct toward him or her and to take a chance of injury from a known risk ensuing from what the defendant is to do or leave undone. The consequence is that the defendant is unburdened of all legal duty to the plaintiff and, therefore, cannot be held liable in negligence.
Voluntarily enters into some relation with the defendant, knowing that the defendant will not safeguard the plaintiff against the risk. The plaintiff can then be viewed as tacitly or implicitly consenting to the negligence, as in the case of riding in a car with knowledge that the steering apparatus is defective, which relieves the defendant of the duty that would ordinarily exist.
Cognizant of a risk previously created by the negligence of the defendant, proceeds voluntarily to confront it, as when he or she has been provided with an article that the plaintiff knows to be hazardous and continues to use after the danger has been detected. If this is a voluntary choice, the plaintiff is deemed to have accepted the situation and assented to free the defendant of all obligations.

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Plain Language Laws In Workers Comp and Other Policies

April 18, 2011 By JL Risk Management Consultants

Plain Language Laws Is a Misnomer Term

The Plain language laws have failed at making insurance policies readable.Many insureds, including Workers Comp, complain vehemently that insurance policies are almost impossible to read. Some states have laws that require insurance policies to be written in layperson’s terms. As most, if not all, insurance policies are designed and written by attorneys, this is usually not the case.

Vector Graphic of Two People Thinking Comment Icon Plain Language Laws Insurance Policies

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We receive a large number of emails and phone calls from employers that have questions on a policy provision. The main area of questions comes from the Premium Audit part of the policy or the Declarations Page.

Just reading the back of a traffic ticket can make your head spin. Realty possesses a large amount of plain language laws. Each state requires a real estate agent to use generic forms that are state-approved.

Plain language laws have failed at making policies readable. I sometimes receive endorsements to my personal and business polices that make no sense except to the lawyer that wrote them. If you ask your insurance agent, sometimes even they do not know what certain policy provisions mean to you as an insured.

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Will the Illinois House Scrap Workers Comp?

April 18, 2011 By JL Risk Management Consultants

Illinois House Debates Scrapping Workers Comp Program – What?

If the Illinois House scraps the state’s Workers Compensation System, what will happen to the businesses and their employees? The system has been much criticized, but should these businesses and employees have to battle in court for payment for workplace injuries? There was tentative approval for legislation in a voice vote on Thursday. Rep. John Bradley, D-Marion, plans to hold the final vote as soon as possible. During a debate Bradley admitted that what they’ve been doing so far just wasn’t working. He wants to try something else by giving the courts a chance.

Wikimedia – FEMA

Rep. Bradley has been the leader in trying to overhaul the system and says that this proposed scrapping is not just a stunt to try to shake things up. There have been complaints that the Illinois system is among the costliest in the nation and some would rather see it lost completely rather than having the system gutted. The major allegations from businesses are that it is possible for workers to win payments without providing real proof that an injury is, in fact, job related. There are also arguments that medical care prices are set too high and that the system revolves disputes in the favor of the worker.

Labor groups seem to see no reason to change things at all. They admit that the system is slow and inefficient. Without it, they say injured employees would be wiped out by medical bills and lost wages and would face long, expensive court battles.

Medical groups also are resistant to change. Could this be because these members are paid to take care of injured workers?

Wikimedia – Palmer, Alfred T.

The Illinois Chamber of Commerce’s opinion is that there are a few businesses who would “take the deal”. But on the whole, the Chamber is of the opinion that it would create more problems than it would solve, and that there are too many unknowns.

There is a proposal by Democratic Governor Pat Quinn that would limit payments for things such as carpal tunnel syndrome and would deny payments to claimants that were drunk at the time of the injury. It would also require tougher reviews before authorization. But this proposal does not address the demand by business that injuries must be proven to be job-related.

Federal Prosecutors have become involved after newspaper reports stated that hundreds of employees at one prison received awards. Some of the arbitrators who decide Workers Comp disputes received awards as well.

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What Does Designation APA (Associate In Premium Auditing) Mean?

April 15, 2011 By JL Risk Management Consultants

Term Of The Day – Associate In Premium Auditing

APA or Associate in Premium Auditing is a professional designation awarded by the Insurance Institute of America (IIA). The goal is to Increase the premium auditor’s knowledge of auditing procedures.

From the IIA Brochure –

Picture Of Hand Presenting Associate In Premium Auditing Icon

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You will increase your overall insurance knowledge and become familiar with proper auditing procedures for a variety of situations. The program enables you to perform premium audits in an organized and professional manner. Specifically, you will increase your knowledge of insurance contracts, auditing procedures appropriate to a variety of complex situations, principles of insurance accounting, and the relationship of premium auditing to other insurance operations.

Required Courses – APA 91, APA 92, and CPCU 520 plus either CPCU 540 or 552 are required to earn this designation.

APA 91-Principles of Premium Auditing: Insurance Operations, Underwriting,Premium Audit Report, Law, Planning & Designing Premium Audits, Evaluating Accounting Systems, Insured’s Operations/Employees, Automation.

APA 92-Premium Auditing Applications: Insurance Rates and Rate Regulation; Workers’ Compensation Insurance and Premium Determination; Workers’ Compensation – Construction Operations; Maritime Workers’ Compensation Insurance and Premium Determination; Commercial General Liability Insurance, Classification, and Audit Procedures; Business Auto Insurance and Premium Determination; Motor Carrier Insurance and Premium Determination; Garage Insurance and Premium Determination; Commercial Property/Inland Marine Insurance and Premium Determination; and Other Premium Auditor Roles.

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Is Vocational Rehabilitation Good For Claim?

April 14, 2011 By JL Risk Management Consultants

Term Of The Day – Vocational Rehabilitation

Vocational rehabilitation can include a plethora of services that are offered to injured employees to help them return to work following a work injury. VR may involve transferable skills assessments, educational courses, job search assistance, and many other vocational aids. Vocational rehabilitation is sometimes also referred to as “occupational rehabilitation.”

Graphic of Vocational Rehabilitation Putting People and Solutions to Work

kentucky.gov

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West Virginia Risk Pool Is Expanding To Include Workers Comp

April 13, 2011 By JL Risk Management Consultants

Greenbrier County Joins West Virginia Risk Pool

Originally, the West Virginia Risk Pool was created to provide property and liability coverage to its counties all around the state. Recently, though, there is a movement to include Workers Compensation coverage.

Graphic Map of West Virginia Risk Pool Greenbrier County

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Formed 3 years ago by just 19 counties, the West Virginia Counties Group Self-Insurance Risk Pool, Inc. provided liability and property coverage. Some of the coverage the pool offers is vehicle fleet coverage and power equipment and machine coverage.

As of today, the pool has grown from 19 chartered counties to 41 county related authorities in addition to 34 county commissions. One of the 19 charter members is Greenbrier County who recently voted to include workers compensation in its current coverage.

Greenbrier County was one of the largest risks in the pool and now is reaping the benefits. Risk pool officials estimate the county will receive $3,200 in the form of a rebate. According to the officials, losses were lower than anticipated and the risk pool now has a surplus of $1.75 million.

Along with rebates, the risk pool is expected to lower rates. This is a plus for its members. The risk pool currently sets rates for its workers’ compensation coverage, which should be available to Greenbrier, effective June 1. I’m sure it will only be a matter of time before all of West Virginia will follow Greenbrier County’s lead.

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Medical Only Claims – Worst Type May Go Unnoticed Festering

April 13, 2011 By JL Risk Management Consultants

The Very Worst Workers Comp Medical Only Claims

Recently, I posted on the pitfalls of Workers Comp medical only claims. That article is here. The worst medical only claims nightmare results from claims festering – or an unknown claim that sits with undiscovered liability.

Picture Of Doctor Medical Only Claims Explaining In Patient

Wikimedia Commons – Jorgejesus4

There is a very small window of time where a claim can be investigated – regardless of whether it is a medical only or a lost time Workers Comp claim. The three point contact (Employer, Employee, and Medical Provider) must be made within 24 hours. This allows for a timely and proper accept/deny decision.

If an employee has not drawn Workers Comp benefits, these claims are usually lumped into the Medical Only category. There are a few exceptions.

Medical benefits are paid timely, but the claim is becoming more serious without any monitoring. The medical bill expense may not necessarily signal any problems if the injured employee keeps working and only has medical office visit and prescription expenses. The claims staff usually does not contact the injured employee in these cases.

Doctor Talking To Patient Medical Only Claims In Hospital Bed

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Who monitors these claims? The answer is usually no one. The medical bills are processed and the claims just keeps growing and growing with no intervention.

Yes, there is a med-only adjuster than may alert their supervisors on a few of this type of claim. They are usually too overloaded with volume to read every medical report.

Medical Only Claims Adjuster Is Key

A talented Medical Only claims adjuster spots this type of claim early in the process. Do not ever think these adjusters are not that important. Heading off a very serious case of claims festering(c) saves massive claim payouts in the future.

The ability to spot these claims is an art unto itself. How does an employer monitor these claims? I will cover that next time.

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Federalization – Is Workers Comp Next Line of Insurance?

April 13, 2011 By JL Risk Management Consultants

Is Workers Comp Next For Federalization?

The Federalization of malpractice makes one think that Workers Comp is the next step. Federal medical malpractice reform hit the insurance airwaves very heavily last week. The bill is named HR5 – “Help Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act of 2011.”

Picture of Stethoscope and Gavel Federalization malpractice

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The bill sharply limits all civil suits against health care providers, including nursing homes, hospitals, and insurance companies. If this is not the federalization of insurance, I must have missed something. It even says insurance companies would have a limit on the amount of the lawsuit.

I have written often about the high probability of at least a partial federalization of Workers Comp insurance. HR5 seems to be another step in that direction. The nonpartisan National Conference of State Legislators (NCSL) has informed Congress of its “strong, bipartisan opposition” to the enactment of H.R. 5″. A letter was written to the House subcommittee to voice strong bi-partisan opposition to enacting the bill. You can see the letter here.

The excerpts are:

Picture of Gavel and Money Federalization Medical Malpractice

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Medical malpractice, product liability and other areas of tort reform are areas of law that have been traditionally and successfully regulated by the states. Since the country’s inception, states have addressed the myriad of substantive and regulatory issues regarding licensure, insurance, court procedures, victim compensation, civil liability, medical records and related matters. In the past two decades, all states have explored various aspects of medical malpractice and products liability and chosen various means for remedying identified problems. Over the past several years, states have continued to revise and refine their medical malpractice laws and procedures…

Federal medical malpractice legislation inappropriately seeks to preempt various areas of state law. All 50 states have statutes of limitations for medical malpractice suits. All 50 states have rules of civil procedure governing the admissibility of evidence and the use of expert witnesses. Many states have caps on noneconomic damages and limitations on attorney’s fees in medical malpractice cases…

Picture Of Money Federalization In Money Clip

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NCSL’s opposition will extend to any bill or amendment that directly or indirectly preempts any state law governing the awarding of damages by mandatory, uniform amounts or the awarding of attorney’s fees. Our opposition also extends to any provision affecting the drafting of pleadings, the introduction of evidence and statutes of limitations. Furthermore, NCSL opposes any federal legislation that would undermine the capacity of aggrieved parties to seek full and fair redress in state courts for physical harm done to them due to the negligence of others.”

I think the NCSL is saying what we will be commenting on in reference to Workers Compensation in the future. I have underlined what sounds very similar to Workers Compensation. Even the State Legislators are concerned on a bi-partisan basis about the reach of Federal legislation.

I will keep posting articles when I see one that seems to be a step towards insurance Federalization. Thanks to 7th Amendment Advocate for their assistance.

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How Long Is Extended Reporting Period?

April 13, 2011 By JL Risk Management Consultants

Term Of The Day – Extended Reporting Period

The Extended Reporting Period never renews its provisions. This is from one of our claims made policies that we have or previously had in place. This is not necessarily exactly Workers Compensation related.

However, i have been involved very often consulting on purchasing the tail claims on a Workers Compensation bid. Purchasing tail claims is an art as TPA’s have been sunk by underbidding the tail claims part of a response to an RFP.

Picture Of Gavel And Law Scale Extended Reporting Period Graphic

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Most of the time you will see this clause in a claims-made policy simply which extends the period of time, beyond the expiration of the policy, during which a claim can be made against the insured and reported to the company. In order for coverage to be activated under an this provision Provision, the following conditions must be present:

The wrongful act must have occurred during the time the policy was in force and after the retroactive date. There is no coverage for acts that occur during the Extended Reporting Period.
The claim must be first made and the insurance carrier must be informed during the Extended Reporting Period.

This policy addition applies for only a limited period of time; with most professional liability policies the period runs from 1 to 3 years and cannot be renewed.

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How Much Is Ultimate Loss For Claim?

April 12, 2011 By JL Risk Management Consultants

Term Of The Day – Ultimate Loss

The ultimate loss contains two basic definitions.

Picture of Two People Jumping at Riverside Ultimate Loss Reinsurance

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In reinsurance, the unit of loss to which the reinsurance applies, as determined by the reinsurance agreement. In other words, the gross loss.

In liability insurance, the amount actually paid or payable for the settlement of a claim for which the reinsured is liable (including or excluding defense costs).

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Aggregate Excess Insurance

April 11, 2011 By JL Risk Management Consultants

Term Of The Day – Aggregate Excess Insurance

This type of insurance is critical for Workers Comp self insureds. Even if a self insured has no large claims, a substantial number of claims can be devastating to their insurance budget.

secured Aggregate Excess Insurance benefits

Wikimedia Commons – Fructibus

Aggregate Excess Insurance places a limit on the amount an employer pays for all claims incurred during a given time period. If a company has a year in which it experiences more than the anticipated level of claims activity, it is protected.

Is Cumulative Trauma An Injury in Workers Compensation?

April 8, 2011 By JL Risk Management Consultants

Term Of The Day – Cumulative Trauma

An injury diagnosed by a physician as occurring without bodily injury being the direct cause of loss. Cumulative Trauma includes injury caused by continual stress and strain. Such injury may be casually related to a person’s job and may be due to repetitive traumatic acts.

Picture Of Hand With Cumulative Trauma Scars

Wikimedia Commons – HenrykGerlach

The classic cumulative trauma injury for many years was Carpal Tunnel Syndrome and and the associated very paniful DeQuervains Syndrome. Fortunately, these two injuries were addressed by the employer community. The incident rates dropped by 50%.

The bane of many adjusters resulted from determining whether or not cumulative injuries were compensable under their state’s Workers Compensation Act.

Cumulative trauma was more than just diseases of the wrists. The trauma also covered:

Back injuries
Knee strains
Shoulder injuries
Basically any joint stress over time

Many states identified a specific traumatic incident as the determining factor. Over the years, many of these states expanded a traumatic incident over weeks or month instead of one instance in time.

The modifications to the definition usually came from Workers Compensation Board or Appeals Court cases.

One data phenomenon concerns cumulative trauma and plant closing. Repetitive motion injuries spiked due to workers working with their injuries. At the time of a plant closing, the workers would report their cumulative trauma injuries that they worked with over the years.

Each state has specific legal cases or statute that determine whether or not an injury is compensable.

What Is Utilization Management Process?

April 7, 2011 By JL Risk Management Consultants

Term Of The Day – Utilization Management

The Utilization Management on a workers comp claim tends to save funds. However, as in California, the cost may be higher than the benefit even though it is a proven strategy for containing health care costs in Workers Compensation. The goal is to reduce the incidence of medically unnecessary and inappropriate physician care, surgical procedures or hospital admissions. This is done through a pre-certification process.

Picture Of Broken Piggy Bank Utilization Management With Hammer

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Medical Only Claims – Fuse May Be Lit For Huge Loss

April 6, 2011 By JL Risk Management Consultants

Medical Only Claims Festering (c)

Most medical only claims are just that – claims with low dollar values that close within 90 days. They usually do not affect your E-Mod (Ex-Mod) in most situations. There is one area where a simple medical only claim can become your company’s worst nightmare. It is a term that I coined know as claims festering.

picture Of Hand Typing On Laptop Medical Only Claims With Stethoscope

Wikimedia Commons – Daniel Sone

This is not necessarily a set of claims that can be caught with doing an E-Mod reduction review. Medical Only claims must be constantly monitored for adverse development. I have a claim that was sent by a self- insured on the desk in front of me right now. The Total Incurred (Paid + Outstanding Reserves) is over $400,000.

The claim festered in a medical only status for months. From most of our file reviews, med-only claims are not monitored that well. It is the nature of the business. The Risk Management technique for these claims is easy to monitor.

Picture Doctors Medical Only Claims Personnel Posing to Camera

StockUnlimited

If a medical only clam is open for six months, then the claim needs to be monitored heavily. Insert the clams on a diary and inquire about their status on a monthly basis. One cannot let the claim turn into a large claim due to lack of follow up or control. Communication with the medical only claims adjuster is critical for this type of claim. Long-standing medical claims often turn into complex claims with litigation as the eventual outcome.

This task will be much more difficult if you do not have online access to your claims. If your insurance carrier or TPA offers this, sign up for it today. Monitoring medical only claims off paper loss runs will usually not result in any savings.

There is actually a much worse type of medical only claim. I will cover that next time.

Workers’ Comp To Hit Big Time-On Small Screen

April 6, 2011 By JL Risk Management Consultants

Workers’ Comp Debuts On Small Screen

The small screen will host a Workers’ Comp series. I have often thought that, at times, Workers Comp is interesting and challenging. I even dreamed it to be comedic enough to support a TV show. Well, here it is. Eagerly anticipated and much talked about, “Workers Comp”, a 30 minute comedy, is due to begin filming this month.

Graphic of Cubes Small Screen Workers' Comp series

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The premise of the show is a family owned insurance business and the sometimes outrageous Workers Comp claims that are handled by its whacky employees. As if that is not enough there is an internal struggle between mother and daughter for control. Sound familiar? Reports say that the female lead is based on a local Bradenton, Florida business woman and will be played by Morgan Fairchild. The pilot will be shot at the fictitious Pinnacle Workers’ Compensation Insurance Company in Bradenton.

The actual company that the pilot is based on was a PEO and not an insurance company. With over two decades of experience handling Workers Comp Claims, this PEO became one of the most lucrative in the state. Two decades of claims should give the show’s writers plenty of wild tales and tons of opportunities for laughs. The kooky cast will include members of the family who owned the PEO as well as Robert Caradine of “Revenge of the Nerds” fame.

Picture Woman Using Computer Small Screen in Office

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It will be interesting to see how the day to day workings of Workers Compensation will be portrayed by these talented actors. Time will tell just how much poetic license it will take to satisfy the artistic vision of the writers. I have often equated the term outrageous with claims I’ve handled. Whacky, screwy, kooky, or zany, though, have never been on our Terms Of The Day list.

Here’s hoping the pilot is funny enough to be picked up. All of us who deal with Workers Compensation know claims can be challenging and, dare I say it, funny as well. Viewers may not realize that what they are watching is very close to the reality we face everyday.

Will glory finally come to the Workers Comp Industry? Here’s Hoping. Good luck to the cast and crew of “Workers Comp”.

E-Mod (Ex-Mod) Review – Leave This Part Alone For Best Results

April 6, 2011 By JL Risk Management Consultants

E-Mod (Ex-Mod) Review Of Outstanding Reserves

An E-Mod (Ex-Mod) review is something to leave to the experts. Usually, approximately one third of the Total Incurred value should be Outstanding Reserves. That is a very, very rough approximation.

Picture Of Hand Illustrating E-Mod (Ex-Mod) Review Chart

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I received a few question on this figure.This is an overall estimation on the thousands of premium audits or file reviews that I have done over the years.Your outstanding reserves can change overnight with the payment of one large medical bill.

This is one area where claims adjusting experience is golden.There is no exact formula or method for knowing which files to question the level of outstanding reserves.

Many years ago as a Workers Comp adjuster, I used to actually increase files when a certain file was brought to my attention that was deficient is reserves-often as a result of a claims review with the insured. Most adjusters decide to do a reserve increase review while the file sits in front of them. The

For clarification Total Incurred = Previously Paid $ + Outstanding Reserves. The previously paid figures can be reviewed with leakage audits. Those reviews are totally different task best left to a highly experienced expert. Leakage audits are complex and are not E-Mod (Ex-Mod) reviews.

Most Workers Comp adjusters are drowning in work. Knowing which files to discuss is only 50% of the answer. Knowing which files to leave alone is the other 50%.I often advise client to not ask for a full file review of every open file. I am not advocating any type of deception.

Targeting certain files for an Outstanding Reserve inquiry will make your Workers Comp claims staff appreciate not taking the time to review a claim with an outstanding reserve of $98.67.That is a waste of time and resources for all parties.

One consideration is to not look at just files where the employee lost time from work.The Medical Only claims usually cause more needless funds to be paid out than any other type of claim.

I will cover Medical Only claims in the next article.

What Is A Planned Retention?

April 6, 2011 By JL Risk Management Consultants

Term Of The Day – Planned Retention

This is a risk financing term that refers to retention of losses by an organization or business as a result of a conscious decision. The organization makes a decision to assume the exposure while fully aware of the loss and exposure. Planned retention is also known as Active Retention.

Graphic of Planned Retention Risk Financing

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Experience Account (EA) Rare For Workers Comp Insuring Agreements

April 4, 2011 By JL Risk Management Consultants

Term Of The Day – Experience Account

Experience Account refers to a provision in an insurance or reinsurance contract that, using some function of such policy provisions such as premium, insurer charges, losses paid or payable under the contract, subrogation proceeds, and interest rates, forms the basis of an explicit or notional fund that can then be used to calculate the amount due under an Additional Premium Provision.

Picture of experience account Policy Provisions

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Additional premium provisions, while rare in workers comp, are usually part of a finite insurance agreement. Finite insurance agreements have come under much scrutiny as some of the finite policies are skirting on the edge of not being a truly insurable risk.

The EA can sometimes involve another insurance policy kicking in when reaching some other level of funds. A retro policy is a hybrid situation that would be similar to this type of account. I have not see one that actually had an interest rate condition in a workers comp policy.

I am sure there are alternative workers comp arrangements that do have an Experience account in them.

Update – I have seen some of the offshore captives arranges for Workers Comp have modified experience accounts in them. I actually saw an example of one at the CICA Conference in 2014.

Is A Payout Profile Important?

April 1, 2011 By JL Risk Management Consultants

Payout Profile – Term Of The Day

The payout profile or LDF are important to a company’s return on investment. This is becoming very important to recently founded Captives. The first few years that a Captive is in existence are the make or break years. LDF’s (Loss Development Factors) go hand-in-hand with payout profiles.

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The profile is actually a schedule illustrating the typical rate of dollars paid out in claim settlements over time. The three insurance entities that must see this data as critical are:

Reinsurers – when analyzing the funding risk for their insureds
Captives – the tax advantages can be enormous
Self Insureds – inaccurate funding has contributed to some of their failures

One client that we recently analyzed found that their funding techniques for a large deductible program were not accurate. Their payout profile indicated they were spending 80% of their Workers Comp dollars on claims in their third year. This was due to the settlements of denied claims.

Payout profiles and LDF’s usually have a time horizon of 10 years. I recommend 15 years as a final backstop. A highly accurate LDF or payout profile will enable a company to invest for the maximum ROI (return on investment). As the stock markets have fallen appreciably over the last few years, the margins on investments are very thin.