Archives for June 2011

Is CMS Overpricing Workers Comp Future Pharmacy Benefits?

June 29, 2011 By JL Risk Management Consultants

Is CMS Overpricing Workers Comp Future Pharmacy Benefits?

Does the CMS inflate Workers Comp future pharmacy payouts? A trend in Workers Comp claim settlements is slowly changing the landscape of closing out files. Many insurance carriers, TPA’s, Captives, etc. are rejecting the Center for Medicare/Medicaid Service’s (CMS) valuation of prescription benefits and just leaving the files open.

Picture Of Man Workers Comp Future Pharmacy

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We have come across this more often with our client base over the last two years. This article from Business Insurance reinforced what I had thought all along. There are two areas of concern with how CMS calculates the future RX benefit:

CMS may not be taking into account that name brand medications will have generic alternatives in the future and price the prescriptions with name brand medications
CMS may not take into account the finite period for prescription medications thus projecting all prescriptions as lifetime.

The other concern is with the comment from CMS at a recent congressional hearing that there was a savings incurred of $50 billion over the last ten years. That comment, to me, is highly inaccurate.

The CMS has actually just shifted costs from the government back to the employers which in turn will cause the employers to cost shift the money for Workers Comp insurance premiums or budgets for self insureds. This will cause a lowering of the tax base which in turn will cost the government in the long term.

The CMS may just be attempting to lessen their liabilities, but at what cost? I have been often criticized for saying that the Feds want to control Workers Comp on a national basis. I will cover that next time.

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Workers Compensation Is Zero Sum Game

June 28, 2011 By JL Risk Management Consultants

WC Is A Zero Sum Game Of Sorts

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

Picture Of Patient On Wheelchair Zero Sum Game Listening To Physical Therapy

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

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

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

Physician Holding Stethoscope Zero Sum Game Picture

Wikimedia Commons – Alex Proimos

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

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

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Monopolistic State Funds vs Competitive State Funds

June 27, 2011 By JL Risk Management Consultants

Monopolistic vs Competitive State Funds

All competitive state funds are a hybrid sort of insurance carrier.

A few weeks ago, I posted on whether State Funds are necessary for Workers Compensation coverage. One of the blog readers posted a response which pointed out that State Funds should be analyzed by splitting the group into Monopolistic and Competitive. I think that was a great request.

Monopolistic

Wikimedia Commons – Frydolin

Monopolistic state funds do not have competitors attempting to write Workers Comp coverage. Employers must secure policies from a quasi-governmental agency. Monopolistic state funds have fallen out of favor due to misappropriation or mishandling of funds such as in the case of the BWC in Ohio.

The remaining four states that are still monopolistic are North Dakota, Ohio, Washington, and Wyoming. Washington has recently passed new Workers Compensation legislation. Unless, I am mistaken, Washington did not open their market to the free market system.

I am not a big proponent of monopolistic state funds. This is likely due to the transformation of Nevada and West Virginia to open markets for Workers Compensation. These two states have been very successful in opening their Workers Compensation system to the voluntary insurance market.

Competitive

Wikimedia Commons – PaulaD.MezaD

Competitive State Funds compete with other insurers as part of a free voluntary market system. The states with these funds are Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, and Utah.

Often, competitive state funds function as the insurer of last resort when the employer has an E-Mod or X-Mod that is too high to place in the voluntary market. The other time a competitive state fund functions as the insurer of last resort is when the voluntary market will not write a certain group of employers such as trucking companies or temporary employment agencies.

California’s SCIF is the largest competitive state fund. At one time, SCIF was the largest writer of Workers Comp in the nation. One of the main complaints against competitive state funds from the voluntary market is that they are competing against the taxpayers of a state when trying to underwrite a quote for a certain employer.

One of the things that I have noticed about competitive state funds is they seem to be much more expensive than their voluntary market counterparts.

The bottom line is that Competitive State Funds do have their place in a voluntary free market Workers Compensation insurance system. I am not so sure of a monopolistic system due to the successes of WV and NV in converting to a free market system.

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Workers Compensation Premium Audit Bill – Your Four Choices

June 23, 2011 By JL Risk Management Consultants

Four Choices For A WC Premium Audit Bill

Over the years, we have received the most communications from employers when a premium audit bill has hit their desk and the payment is now due. Often, the bill has been sitting for a few weeks and the insurance carrier is now sending a second notice for payment.

Graphic of Calculator And Form Four Choices Premium Audit Bill

There are four choices on what to do with the bill:

Ignore it
Review it and ask questions
Dispute it
Pay it without even a review

There are very detrimental effects on three of the four actions. I will cover each one in more detail.

Ignore It

Ignoring a premium audit bill just delays the inevitable. A bill (sometimes large) is due. One of the warnings here is that in most states, you will lose certain rights if you ignore the bill too long. The longer a bill sits, the more unlikely a carrier will be amicable to any questions on the bill or a very late dispute.

Most bills will instruct you to please pay it in 1o or 14 days. Your policy will usually note that you have 30 days to pay the bill. If you wait until the 29th day, this will not help your company if you have questions on the audit bill.

If you have the same carrier for your new policy as the one that is billing you for the premium audit, your company or organization will likely receive a cancellation notice. With the economy as it is, insurance carriers are becoming very stringent on cancelling your new policy and not extending any deadlines.

Review It And Ask Questions

We recommend reviewing the bill immediately and asking questions if there is something that seems amiss. Phone calls are great, but everything should be put in writing to your insurance carrier with a cc: to your agent.

Picture of Auditor Four Choices Premium Audit

Writing your agent only may not necessarily protect your rights and remedies if you later wish to dispute the premium bill. Emails are OK, but I recommend sending certified return receipt letters. This may later save you great headaches.

If you feel something is wrong on your premium audit bill, that is usually a big red flag. I always say that a gut feeling is the best indicator that your concerns may be valid. There is a list of Red Flags you may wish to review on this blog.

Dispute It

If you still feel after asking questions to your carrier about the premium audit bill that there is something wrong, you always have the right to dispute the bill – within certain deadlines. The three things that will irritate your carrier:

After paying the bill, then waiting months and months before deciding to dispute a bill – it is possible to do this, but your dispute will not be received well
Disputing a bill with no reasons or data to back up your dispute – this is when you may wish to call in a premium consultant – yes, that was shameless promotion
Disputing a bill just to delay payment – this often results in an even higher premium audit bill and may ruin the working relationship with your agent and carrier.

Paying It Without Even A Review

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Paying a premium audit without even looking back over your associated policy and the auditor’s work papers to me is the worst of the four. You are not giving your company a fair shake if you just rubber-stamp pay it as a part of doing business.

I would say at least cover the Red Flags post that I referenced earlier in this post. A link to the post is provided there. Looking over your policy, audit, and premium bill does not really take that much time for at least a cursory review. You may be surprised by what you find there.

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Workers Compensation Safety Programs – Are They Really Worth It?

June 22, 2011 By JL Risk Management Consultants

Workers Compensation Safety Programs – Best Way To Save $$$

Workers Compensation safety programs are always worth the expended funds. One of the areas that employers seem to sharply decrease their budgets during economic downturns is safety. As Treasurer of the NC Mid State Safety Council, I can attest to this fact. The number of safety personnel has shrunk heavily in the last few months

Graphic of Employee With Umbrella workers compensation Safety Programs Under The Rain

One of the main ways to reduce an employer’s E-Mod is with a good safety program. I have previously posted on how safety programs will reduce E-Mods quite a few times. One of the most misunderstood areas on Workers Comp safety program is the effect on Schedule Debits/Credits.

Employers will sometimes “throw in the towel” on their safety programs if it does not show immediate results. As I have posted very often, the E-Mod system and even the LDF estimations are delayed measurements. An excellent safety program may not show great results for up to four years after it is revamped or established.

The main goal of a safety program is to avoid or reduce repetitive accidents. Repetition is the killer of any decent E-Mod or LDF. The E-Mod/X-Mod system allows for one serious accident. It does not allow for a series of accidents that even cost as little as $5,000.

Businessman Embracing Workers Compensation Safety Programs Dollar Sign

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For instance, 10 $5,000 accidents are much more detrimental to the E-Mod/X-Mod or LDF than one $50,000 claim. NCCI and the Rating Bureaus have established that when you have 10 accidents, there is a much higher risk of more than one of those claims becoming very large claims. I agree totally with this concept.

Safety programs have always been the best way to avoid a large number of accidents in a given period of time. There are many post-accident loss reduction strategies. Reducing a Workers Comp loss is a very difficult task. The old saying “A loss is still a loss” applies here.

The bottom line is the best way to lower an E-Mod or LDF is the accident that did not happen. Safety programs are very well worth the investment if allowed to work over a longer time span.

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Top Four Self Insured Workers Compensation Success Measurements

June 21, 2011 By JL Risk Management Consultants

Top Four WC Success Measurements Easily Acquired

The Top Four success measurements for self insureds are easy to find in your Workers Comp materials.

Graphic of Green Apple With Tape Measure Success Measurements Concept

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In my last two posts, I covered how to measure the success (or failure) of a Workers Compensation program. I want to be fair to self insureds as I am often reminded to include the self insurance angle on my posts. The measurements for self insureds are:

Loss Development Factors (LDF’s)
Current reserve levels (including all claims)
TPA Statistics
Bottom line – payments made over the life of the claim

Loss Development Factor (LDF)

The LDF, in my opinion, is one of the least understood of all variables in the Workers Compensation process. The LDF is analogous to the E-Mod. The LDF will usually cover a 10 year time frame. There are many software packages that will calculate LDF’s.

One inherent risk with LDF software is knowing which variables need to be adjusted before inputting the loss data. I have seen LDF’s vary greatly even though the same software was used for the calculations. Incurred But Not Reported (IBNR) is one of the main parts of the LDF statistic. IBNR is an estimation of any claims that have occurred but have not been reported.

Current Reserve Levels (For All Current Claims)

Stethoscope Success Measurements on the table

Wikimedia Commons – Pkd2016

The current reserve levels for a self insured employer is just as important for one that pays a premium for their Workers Compensation coverage. If the reserve levels are inadequate, the LDF will be inaccurate and the self insured will not set aside a large enough budget to pay future Workers Compensation claims and payments. If the reserves are too high, there may be too large of an amount of funds appropriated for Workers Compensation payments that could have been used elsewhere in the organization’s budget.

Statistics Provided By The TPA

I had already mentioned this subject in my last note. I did want to again bring up the fact that the person or persons that are setting your reserves – the adjusters – have many ranking statistics for how their clients are performing in such areas as delayed first reports of injury, return to work, etc. Most TPA’s will provide you with the information if you request it free of charge.

Bottom Line – payments made over the life of the claim

The huge difference between a Workers Compensation program with an insurance carrier and a TPA is that certain claims are not counted into the E-Mod system. Open claims are ALL counted when calculating a LDF. All payments made on any claim at any time are counted into your Workers Comp budget.

Money And Calculator Success Measurements Budget Concept

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A different tact has to be used when reviewing TPA loss runs versus an insurance carrier’s loss run. One thing to watch is an old claim that is reopened for payment and then closed again. I have seen many of our clients concentrate on only the open claims or getting the claims closed. One piece of advice that we give is that payments made are just as important as the reserves.

The TPA and the self insured have a direct fiduciary relationship. I always tell our self insured clients the TPA is spending directly out of your budgeted account. Loss reduction strategies can make or break a self insured program. There are hundreds of posts in this blog on loss reduction strategies.

As I have posted often, self insureds have told me that they are out of the Workers Compensation system. Actually, self insureds are more in the system than insured paying premiums to an insurance carrier. Self insureds have no buffer for a huge claim or for a large number of claims.

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Four Workers Compensation Success Measurements

June 16, 2011 By JL Risk Management Consultants

Four Workers Compensation Measurements Of Success

My last post had covered the four Workers Compensation measurements of success or failure. Instead of combining both voluntary market and self insureds into one post I thought it best to separate them into two posts. The four measurements of success for the voluntary market where an insured pays a premium are:

Arrow signage Four Workers Compensation Success

Wikimedia Commons – Keith Ramsey

E-Mods/X-Mods
Current reserve levels for claims included in the Experience Period
Employer measurements provided by insurance carriers such as lag time, etc.
Bottom line – premium

E-Mods/X-Mods

Unfortunately (of possibly, fortunately), the Experience Mod system is like a credit score but much worse. When you apply for a loan, you are usually judged on just one number from the three credit bureaus. The same can be said when a company applies for Workers Comp insurance.

Hand Emphasizing Four Workers Compensation Risk Management

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I have seen so many safety professionals and Risk Managers that are judged by this one number. There are so many other variables that indicate how an employer’s Workers Comp program is functioning. A complicating factor is that many employers bidding on contracts are required to have an E-Mod of 1.0 or less.

I realize there has to be a cutoff point. Is an employer with a .99 E-Mod that much safer than one with an E-Mod of 1.1? That is almost statistically insignificant. The company with the 1.1 E-Mod would not even be allowed to bid. The safety manager, risk manager, and CFO of the 1.1 E-Mod company would be under tremendous pressure to reduce their E-Mod. Most E-Mods are based on a three-year set of data. One good year or even two may not reduce the E-Mod enough if the employer had one extremely bad claims year up to four years ago.

Current Reserve Levels

The E-Mod system can be a good measurement of how a company performed on safety and loss reduction in the past. How would a company judge how they are doing presently? I would think it is the current reserve levels of all claims. Reserves = Total Incurred – Paid. I would be remiss if I did not count in what is paid on the closed claims as part of this figure. Calculating the effectiveness of a Workers Compensation program using the paid amounts on closed claims can be complex.

Graphic of Gavel And Carrier Liability Document Four Workers Compensation Concept

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A Workers Comp adjuster setting reserves will usually consider the reputation of the employer. Please check out the Six Quick Methods To Reduce Your E-Mod Part I and II as some of the variables that establish an employer’s reputation with an adjuster. If your company does not have a working relationship with your adjuster, it can be a very expensive missed opportunity. Does your company have a written plan of action on how to handle Workers Comp claims – more importantly, have you shared those with the carrier’s claims staff?

One variable that will throw off this measurement is the claims that are less than 90 days old. An adjuster may set a very large reserve upfront and then reduce it 60 – 90 days into the claim. There would need to be a cutoff point for new claims.

Insurance Carrier’s Employer Data

Most insurance carriers’ claims departments track the performance of an employer on such goals as lag time, which is the number of days an employer takes to file the first report. There are many other employer variables tracked over time. Your claims adjuster is fed those figures constantly. What does your company’s performance variables say about your Workers Comp reputation? Most carriers will provide you with the data if you request it.

Bottom Line – Premium

Woman Counting Four Workers Compensation Money Bundled

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This is the tell-all figure. Premiums paid should always be the focus of the performance. There are inherent dangers in using this figure only. If your company grows by 300% (congrats), then your premiums are going to grow significantly. We receive calls/emails from employers very often when their premium audit increased the premium by a large amount just due to a payroll shift or change in the classification of employees.

In the case of downsizing or payroll growth, a factor needs to be built that would lessen the effect of a payroll change. We have now come full circle as that would be your E-Mod. As I have posted previously, if you want to win the E-Mod game, you must play by the rating bureaus’ rules.

This post was more of a summary of a much larger post. I will post on the four measurements of success if you are self insured next time.

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Workers Comp Success (or Failure) Bottom Line Measurements

June 15, 2011 By JL Risk Management Consultants

Workers Comp Success Bottom Line Measurements

Workers Comp success (or failure) bottom line measurements are readily available for employers. I have read on a few blogs and received questions recently concerning how a Workers Compensation program can most easily measure its success or need for improvement. This is a very complex measurement as there are so many variables that are not in control of the personnel or departments that administrate over the program.

Picture Of Businessman In Finish Bottom Line workers comp Success

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I am not a great advocate of benchmarks as each company operates differently. That is the nature of the business world. I have seen many benchmarking studies that have basically tried to compare apples with oranges using the same comparison system.

There are basically four sets of numbers that measure how a Workers Compensation program is working. They are:

E-Mods/X-Mods
Current reserve levels for claims included in the Experience Period
Employer measurements provided by insurance carriers such as lag time, etc.
Bottom line – premium

I want to be fair to self insureds as I am often reminded to include the self insurance angle on my posts. The measurements for self insureds are:

Loss Development Factors (LDF’s)
Current reserve levels (including all claims)
Same as above #3
Bottom line – payments made over the life of the claim

Picture Of Workers Comp Success Crossing Winning line

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There are differences between measuring the voluntary market where a premium is paid and a self insurance program. The two types of programs should never use the same internal measurements. Other programs such as large deductibles and captives should use a hybrid mixture of the two lists.

The one area that ALL comparisons should possess is a consistent measurement. I have seen Risk Managers actually lose their jobs over a very high E-Mod even though the RM was not even on the job when the variables were set in place. After the RM was terminated, the E-Mod then decreased sharply. As I have posted often, Workers Comp is a heavily delayed-results system.

Whether we like it or not, the E-Mod or LDF is the “proof is in the pudding” measurement. It is the system in place. As Charles Givens wrote in Super Self, “If you want to win, you must play by their rules.”

I will cover the two lists in the next post. Workers Comp can be boring. I do not want to add even more to that boredom this evening.

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Assigned Risk Pool With a .85 E-Mod – How Can This Happen?

June 15, 2011 By JL Risk Management Consultants

Assigned Risk Pool E-Mod With A Low E-Mod

The Assigned Risk Pool looks like a failure even with a low E-Mod. I recently received two calls on a very sore subject with certain groups of employers. One exact question was – How in the world can my company be placed into the Assigned Risk Pool with a very low Ex-Mod? (Their E-Mod was .85).

Picture Of Trucks With Cars Above Assigned Risk Pool Trucking Companies

Wikipedia – transport-auto.com

The Workers Compensation voluntary market is a very strange animal at times. I have seen employers with an E-Mod of .78 being placed into the pool. Certain market segments such as trucking, movers, temporary employment agencies, lawn services, delivery services, and oil companies have really taken a beating over the last few years. The voluntary market will just decide to not write a certain market segment regardless of the companies’ E-Mods.

Trucking companies and employment agencies have always had a very difficult time being underwritten without being placed into the assigned risk pool. Usually, the assigned risk pool has a rate structure that is 350% higher than the regular voluntary market. The reason for the much higher rates is the assigned carrier must take on the risk regardless of the company’s Emod or loss history.

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Ironically, some companies have found the rates cheaper in the Pool than in the voluntary market. That is one of the “under the radar” secrets for certain companies. The insurance carriers in the voluntary market can file rate deviations that can be significantly higher than the advisory loss costs.

There are many different techniques to avoid being placed in the assigned risk pool. Having a dedicated safety program is a very proactive approach to reduce future X-Mods/E-Mods. Once your company has been informed that insurance can only be found in the Assigned Risk Pool, the choices are very limited.

There are alternative insurance programs available in most states. Some states even allow companies to opt out of Workers Comp coverage such as Texas and now Oklahoma. Captives are also another great alternative.

The bottom line is that insurance carriers do practice market segmentation. They are in business to make $$. If your company has a very low E-mod, the type of industry can make all the difference.

PEO’s As An Alternative

The Assigned Risk Pool represents a very tight spot in Workers Comp. We often receive calls and emails from employers as they are about to go into their state’s Workers Compensation risk pool or State Fund – sometimes called Assigned Risk. The function of the risk pool/state fund is as an agent of last resort.

The employer will be assigned to a certain carrier. The carrier has to take on a riskier client. The employer has to pay exorbitant fees to have coverage.

There are various reasons why the employer may not have been able to find coverage in the normal insurance marketplace. The usual reasons are:

Experience Mod Factor is too high – 1.25 or higher
Carriers are not writing coverage for that type of business – trucking industry in 2002
Type of business is a very high risk – asbestos removal company

There are other reasons. The above are the ones we see most often.

What can an employer do to stop from going into a risk pool? Actually, once the company is headed into the risk pool, there is not much that can be done right away. Changing your safety program is the long term solution if your company’s Experience Mod is high.

They quickest way to avoid Assigned Risk Pool is to look for alternative coverages such as self insurance, captives, or PEO’s. Self insurance and captives take too long to set up and administer if you are within 120 days of being placed into an assigned risk situation.

Your company may find that PEO’s are the quickest and most economical way to avoid the Assigned Risk Pool. We have found PEO’s to be a great alternative, but make sure you know with whom you are dealing with as PEO’s were very not very regulated in the past. Understanding how PEO’s work would be your first step.

Assigned Risk Pool Easily Driven By Market Forces

The Assigned Risk Pool (ARP) remains one of the most confusing aspects to workers compensation policy ratings. I have often heard this expression – ABC Company is in the ARP. They must have had a high E-Mod or a really bad Workers Comp accident. Nothing could be further from the truth. There are many employers with an E-Mod less than .9 (a good risk) and/or have had no serious claims that are in the Assigned Risk Pool.

Picture of Three Employees Assigned Risk Pool Writing With Rating Board On Side

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Often, there are just no Workers Comp insurance carriers that will write a certain type of employer in a certain state at a certain time. We have seen trucking companies, staffing agencies, and other companies not being underwritten by the regular insurance market. There is sometimes no rhyme or reason to why a workers comp insurance market for a certain type of employer dries up almost overnight.

The NCCI out of Boca Raton, FL administrates most of the ARP’s in the nation. The states remain involved with setting rates and many of the functions. Independent bureau states fully administer theirs on pools.

Many alternatives exist to the ARPs such as PEO’s, self insurance, and captives. Be very careful when looking to cover your employees with alternatives that exist in today’s marketplace. Each alternative comes with its own risks.

One of my main concerns about the Pool is the overwhelming cost of being in it. The assigned risk rates can be up to 700% more expensive than in the regular insurance market. No matter how safe an employer is, being in the Pool will result in a much larger insurance budget. The Assigned Risk Pool is a very necessary evil. Without it, there may be many companies that could not acquire Workers Compensation coverage for their employees.

Very Important Upcoming Date For January 1 Policies

June 10, 2011 By JL Risk Management Consultants

Important Upcoming Date For January 1 Policies Renewal

Over the last few months, I had been covering a plan on how to reduce E-Mods. The important upcoming date for January 1 renewals is your Unit Stat date. The Total Incurred (Paid + Reserves) is tallied six months after your policy inception for your NEXT policy period.

Christmas Graphic of Important Upcoming Date January First

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If you have been following my recommended Action Plan, you should have by now

obtained a copy of your loss run (online preferred)
analyzed the loss run for any files that seem over-reserved or should have been closed
contacted your Workers Comp adjuster
negotiated the reserves
obtained an additional loss run to make sure the changes were made

The best way to finish the analysis is to obtain a copy of your loss run the last week of this month. Go over all the Total Incurred figures to make sure they match the negotiated reserves. If the changes were different than expected or were not made, the Total Incurred amounts on your claims are stamped in stone. Usually, after close of business on June 30th, the insurance carriers will not change the values.

The Total Incurred will be reported to the Rating Bureaus using the June 30th amounts. If your policy does not have a January 1 renewal, then just add six months onto your policy inception date for your Unit Stat date. For example if your renewal date is 4/1/11, then your Unit Stat date is 09/30/11.

I will post next time on how to get your E-Mod report months in advance of when it is released.

Two Questions on EMR From One Of Our Readers

June 10, 2011 By JL Risk Management Consultants

Two Questions on EMR

One of our readers had two good questions on EMR.

I often see you write about the E-Mods or X-Mods in your blog. Is an EMR the same thing as the E-Mod? This was a good question from one of our newsletter readers.

Graphic of EMR Two Questions Star Rate Heart Thumbs Up

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The Workers Compensation Experience Modification Factor has many acronyms such as:

E-Mod
Ex-Mod
X-Mod
EMR

The EMR or Experience Modification Rating is the same as an E-Mod. It is just a different and slightly archaic acronym. The X-Mod usually refers to a California Experience Modification Factor.

The second question was – Can I calculate my own E-Mod anytime during the year without having to wait for NCCI or The Rating Bureau to publish our E-Mod. Yes, you can calculate your E-Mod anytime during a policy year. There are a few great software packages that will allow you to calculate your E-Mod.

The one dangerous thing is that when you calculate your E-Mod right after policy renewal or any other time during the year, the E-Mod may not be that accurate. The Workers Comp rating systems by NCCI and the Rating Bureaus are a delayed system. Your Workers Compensation reserves do not really begin to affect your E-Mod until the policy period after the claim occurred.

A good question to ask your agent and carrier concerns when your Workers Comp E-Mod is calculated and from what data. This will give you a check figure to go against so that you are comparing apples to apples. Do not be surprised if quite a few insurance personnel do not understand the exact data that is used to calculate your E-Mod.

Workers Comp Costs – Six Quick Methods To Start Reduction

June 2, 2011 By JL Risk Management Consultants

Six Quick Methods To Lower Workers Comp Costs (Part I)

The Six Workers Comp Costs reduction methods are listed in two articles. My last article post pointed out that there are six ways to save on Workers Comp costs.

Hand Illustrating Chart Workers Comp Costs Concept

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They are:

1. Filing First Reports of Injury (FROI) Timely – Insurance companies measure how long it takes an employer to report a claim by filing a FROI. The measurement is known as lag time. Lag times are reported to the adjuster handling the claims. As an employer, would you not want the person setting your reserves to have a favorable opinion of your company’s Workers Comp program? Filing a FROI very late is basically asking for a large reserve on the file in question and other files in the future. Most insurance carriers have an online reporting system. If they do, use it as much as possible.

2. Physician Network – Your company should have two different general practitioners and the preferred specialists (orthopedists, etc.) that you wish to treat your injured employees. This will vary from state to state on the legal requirements. Studies have shown that even if the employee has the choice of treating doctors, they will often treat with the suggested physician. This is a critical cost saver. If the claims adjuster knows you have a medical treatment network in place, your reserves will tend to be lower. The medical network is not necessarily the one that gives you a discount for using their facility.

Picture of Employee flaming shoes Quick Methods Workers Comp Costs

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3.Treat injured employees as regular employees. This recommendation seems to lower the incidence rate of attorney involvement. The best way that some of our clients have found to initiate the contact is with a phone call followed up with an e-card. E-card services such as Hallmark and American Greeting charge $13 a year or less for a year of sending an unlimited amount of e-cards. If employees can access their company email, this gives them a sense of still being in the company.

4.Return To Work Program (RTWP) – we often see where new clients have a return to work program down on paper. The follow through on this recommendation is the key. All supervisory employees need to understand that your company or organization has a RTWP in place. As mentioned in the previous two recommendations, the claims adjuster that is setting your reserves should also know you have a RTWP in place. The adjuster will realize you will bring an injured employee back to work when setting the reserves on the file. Your physician network should also know you have a RTWP in place. Employers end up paying big premiums when the treating physician writes an employee out of work for an extended period of time.

5. Know how and exactly when your E-Mod (X-Mod, Ex-Mod, EMR) and audited premiums are calculated each year. Even if you follow each one of my other five recommendations, your company needs to understand how your E-Mod was calculated. There are dozens of posts on how your E-Mod is calculated in this blog. Use the search box on the right margin to find them. The same can be said for the audited premiums. We receive many phone calls and emails from companies that just received a premium audit bill. That is almost too late to try to contain the premiums.

6. Your company must adopt some type of reduction program ASAP. You may have a written plan, but that does not mean it has been adopted and used in your company or organization. The fastest way to reduce your Workers Comp budget is by simply paying attention to it. When I look back through the client we have helped, the one thing that I always notice is companies that make Workers Comp a priority sees a reduction in their E-Mod.

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Workers Compensation is not the most exciting subject. I will just post on the first three of the six as not to have a boring blog. How long after being in the insurance business did I come up with these three – less than one year – and I always have talked about these three over and over again for 25 years.

Three Ways Experience Mods Can Penalize Your Company

June 1, 2011 By JL Risk Management Consultants

Three Ways To Penalize Your Company’s Experience Mods

Actually, E-Mods (X-Mod, Ex-Mods) do not actually directly penalize your company’s Workers Compensation premiums. However, there are a few situations where your company’s E-Mod can experience a very sharp increase. I thought I would list three. There are others.

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Having numerous claims – nothing wrecks your E-Mod like having a large number of claims. The E-Mod systems have built in reductions if your company experiences one large claim. If your company experiences many claims, your E-Mod is usually going to skyrocket. This comes about due to the Primary Losses (up to $5,000 each) are not reduced whatsoever when calculating your E-Mod. I often hear “We only have small claims.” As I posted in this article, there is no such thing as a small claim.
Not monitoring your claims loss runs – Your loss runs have so much info on them that can be useful in keeping your E-Mod in check. As I have posted often, having online claims access is golden for monitoring your loss runs as you can check on your claim reserves every day if you wish.
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Ignoring the Six Keys To Cutting Your Workers Comp Costs. I have studied Workers Compensation claims and premium audits over the last 20 + years and found some trends with employers or governmental agencies that have increased or already high E-Mods. I have noted six ways that employers drown themselves in claims and/or cost themselves big premium $$. I started with three and added in three over the last few years due to the changes in the Workers Comp environment. I posted the six on LinkedIn recently. I will go over each of the six next time.

Three Top Ways Experience Mod System Can Help Your Company

June 1, 2011 By JL Risk Management Consultants

The Experience Mod System’s Hidden Good Side

The Experience Mod system can actually silently help your company. The Workers Compensation Experience Modification Factor (E-Mod/X-Mod/Ex-Mod) system can seem complicated and cause very high premiums at times. Three times over the last few weeks, I have heard or read different inaccurate comments about the E-Mod system.

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I thought I would post a reply to those comments by pointing out how the E-Mod system may actually help your company.

One bad claim can ruin our E-Mod – In most states, The E-Mod system has a maximum claim amount that can be charged to your company’s E-Mod. As I have posted in the past, four $25,000 claims are much harmful than one $100,000 claim. One bad claim will not hurt your company. Rating agencies realize that companies may have one serious accident in the course of doing business.
We pay our small claims out of pocket – The E-Mod system will discount the medical only claims by some factor – usually 70%. There are many dangers when paying your small claims out of pocket such as medical control. The 70% discount was designed to encourage employers to file all Workers Comp claims with their carrier.
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One bad year of claims would ruin our insurance program – The E-Mod system does not balance this out as well as #1 in the list. However, the E-Mod system can keep your company from taking such a hit to your insurance premiums by spreading the risk over three years of Experience data. This is one of the advantages of paying regular insurance premiums and not being a large deductible or self insured unless your company or organization is large.

I am not that big of a fan of the Experience Mod system. It is the one in place. Winning the E-Mod battle means playing by their rules. The E-Mod system does have a few penalties built in for employers that wish to play by their own rules. I will comment on that next time.