Archives for September 2012

Will The Upcoming Elections Have Any Effect on Workers Comp?

September 27, 2012 By JL Risk Management Consultants

Upcoming Elections – Effect On WC

Will the Upcoming Elections have any effects on Workers Comp? This is now the most popular question that I receive from our readers. This question pops up often when there is a Presidential election.

Graphic of Romney tag and Obama Tag Upcoming Elections In Street Sign

The answer is yes and no. I am sorry to be so vague. The election may have some type of effect depending on the business client after the elections. As we all know, the business climate is touchy at best. As with most businesses, the Workers Comp environment will spin off removing any unknown variables.

If the business climate changes for the better, the insurance carriers will be able to better invest the premiums they receive which will soften the market. The market as of now is still somewhat soft.

However, the market cannot stay soft for very much longer. Almost all the insurance execs think the market will harden over the next few years. In my opinion, if an insurance carrier can receive a higher return on investment, they will look to be even more competitive as they can make more $$ off investing the premiums in the stock market.

The bond market and savings rates have been and will be anemic for years to come. The carriers will look to invest in the stock market heavily at some point in the future. I am sure we can all remember a time when even a mediocre stock mutual fund was returning over 10%.

Diagram with Increase arrow Upcoming Elections and coins at back

I am unsure if it really makes a difference whether Obama is reelected or Romney serves his first term in office. I am looking at the numbers, not the politics.

My final answer, (and I am sticking to it) is Workers Comp is so heavily based on the economy of each state. For instance, Senate Bill 863 out of California is unto itself on how the CA Workers Comp market will be affected in the next few years.

How about the new NCCI split points? They will have much more of an effect than any election might have on rates. North Carolina just came out with a laundry list of rule changes that will affect Workers Comp, but only in North Carolina.

I try to keep up with all of the changes nationwide in Workers Comp. It can be dizzying at best. I subscribe to and read over 20 newsletters a day along with various blogs on WC. I wish I could write on every change in every state. I am unable to come even close to that old goal.

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Split Point Question Concerning E-Mods and NCCI Changes

September 27, 2012 By JL Risk Management Consultants

E-Mods Concern – NCCI Split Point

Many of the split point changes by NCCI are starting to hit the radar screens. I received this question last week from one of our blog readers on split points.

“We have a .98 E-Mod. Our E-Mod has always been between .90 and 1.0 since we have been in business.

Picture of Man Pointing Both Side Split Point Concept

Will the new rules concerning E-Mods cause ours to go over 1.0?

If so, we would look a large chunk of our business as we would no longer be able to bid on government contracts that require a 1.0 or less Mod. ”

My answer – Your E-Mod could go over 1.0 without the new NCCI rules if you had a bad claims year. If not, then from everything I have seen, the answer would be no.

You may want to check my initial post on the NCCI split point updates that I posted a few months ago. The NCCI rules are not designed to penalize a safe employer.

Picture Woman Consoling Her Troubled Husband Split Point Concern

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Your company has a Mod of less than 1.0 which means you are safer than the same company doing the same type of work. Your safety program is to be commended.

NCCI and the State Rating Bureaus have always structured their E-Mod (X-Mod in California) to penalize the unsafe employers that have many accidents.

Their view is the more accidents a company has over time, the more likely that a few of them will turn into serious claims. I have seen this occur in files for years.

You may want to check out my earlier post on Loss Limitations. Even if you have one serious accident, you are not penalized that heavily.

If your company has many accidents compared to a similar company, the E-Mod system will increase your premiums over time.

We assist many employers with after-the-fact E-Mod reductions. The best way to reduce your E-Mod or to keep it under 1.0 is to keep your safety program in place.

I have seen many employers reduce or even eliminate their safety and risk management departments due to this rather rough economy. This is a sure way to have your Mod increase to an unacceptable level.

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Large Loss Caps – How Do They Affect E-Mods (X-Mods)?

September 24, 2012 By JL Risk Management Consultants

The Large Loss Caps Effect On Premiums

Capping the large losses incurred by an employer is one way for a State Rating Bureau or NCCI to help control Workers Comp costs. Large loss caps function as a stop gap measure to keep one claim from completely harming an employer’s EMod (XMod).

Picture of Workers Doing Large Loss Caps Concept

For instance, if an adjuster sets the reserves on a serious file to $385,000, the complete amount will never impact the employer’s Mod. If the state’s cap on any loss is $175,000, then the employers E-Mod will never be impacted fully. The $175,000 would be the loss that is input into the EMod formula.

As I have mentioned very often in the past, the idea of the Experience Modification system is to penalize the unsafe employers with repetitive injuries and to lessen the impact of one or two very serious claims.

I was recently reading that NCCI had increased Illinois large loss caps (limitations) almost 300% in the last 11 years from $133,000 to $370,500. Unless I am mistaken, IL now has the highest ones in the nation.

Picture Businessman Watching Computer Screens Large Loss Caps Back View

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The loss caps can be viewed as another method of keeping a safe employer with one bad accident from paying out more premiums than an employer with large group of smaller accidents. The State Rating Bureaus and the NCCI have this concept as one of the underpinnings of their respective E-Mod systems.

If you have access to your Workers Comp loss runs, there is a very quick way to tell if your company has had one of the caps limit a loss. Most State Rating Bureaus and the NCCI will note it by a “#” next to the total incurred figure.

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Possible 75% Savings on Workers Comp Premium From My Studies

September 20, 2012 By JL Risk Management Consultants

Possible 75% Savings – Study Results Below

It’s possible to experience a 75% Savings according to the results of my WC studies.

Yesterday, I blogged on predictive modeling in Workers Compensation. I had mentioned there were two studies that I performed in the recent past on a group of 7,000 and 5,000 claims respectively.

Picture of Jar Full Of Coins With Plant 1600% Savings of Workers Comp

The results of the studies were:

Predictive claims modeling relies on psychographics and the healing time of the human body. These two stats were so variable, no statistical conclusions could be drawn
Fraud in workers comp claims could not be predicted as claimant fraud was seen to be a random variable, there were no solid “red flags”
How the employer functioned post-injury did show some relationship to the cost of the claim. The correlation between the action of the employer and the cost of the claim was related

The keys to Workers Comp savings lies with the employer. I came up with the first three on the list over 20 years ago. They saved employers a large number of claim payments. The following is a list of the keys to Workers Comp savings proven by the two studies:

First Reports of Injury need to be filed ASAP. I used to understand delays due to paperwork flow, but that has virtually been eliminated as almost all insurance carriers and TPA’s have online filing of claims.
Treatment network needs to be in place. This does not mean having a PPO network from your bill review provider. Even if you are in a state that does not allow the employer to control the medical treatment, most employees with still go to your physician recommendation
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Return to work program is very critical. The communication between your company and medical providers is very important. Medical providers are not just physicians. Physical therapists are also important providers. Providing a PT with your return to work program can save you a large amount of claims $.
Employee treatment has improved. When I first came up with this list over twenty years ago, many injured employees were treated as outsiders. This area has improved over the years as many employers have come to realize an injured employee is still an employee.
Top management consideration was the latest addition to the list. If an employer’s top management does not take their Workers Compensation seriously, the aforementioned four keys will never be taken that seriously. This is a 100% related statistic.

The first four keys will save an employer 400% each. That is a 75% total savings. They are for the most part all controllable by the employer. I have seen an improvement in those areas over the last decade, but there is still room for more attention to those areas.

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Predictive Modeling For Workers Compensation – Data On Horizon?

September 19, 2012 By JL Risk Management Consultants

Workers Comp Predictive Modeling – Big Data Is The Key

The Workers Comp predictive modeling prognosticators say that predicting workers comp data is on the horizon. I was just reading over Mark Wall’s Work Comp Analysis Group in LinkedIn. If you are in Workers Comp and you do not follow the group, you are missing out on a number of great discussions.

Graphic of Silver Letter of Big Data on Top of Clouds Predictive Modeling Concept

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There was a PHD’er that had a very-well written article on another Workers Comp blog concerning Workers Comp predictive models (PM). I chimed in and then decided to give Mark’s group some exposure – like it needs it with over 11,000 members.

I am for Workers Comp PM as much as anyone else in the Workers Comp business. However, as I mentioned in a posting to the group, property casualty claims (other than crop) have predictive models that are based on fixed variables. (property, auto, etc.)

Workers Compensation has to deal with an individual’s psychographic makeup along with the least predictive variable which is the healing of the human body. I have always noticed the variability of how people heal is nothing other than amazing. There are no two people alike in this respect.

Wikimedia Commons – Camelia.boban

Liberty Mutual is assembling the largest database in history. I hope they share some of their prognostications. Their research will likely be earth-shaking. I am not sure when their PM model will be finished to the point where they can publish any of the results. They may use it as a competitive advantage in the marketplace.

I have undertaken general research on a group of 7,000 and 5,000 files in the past. One group was of public employees while the other was random private companies. I will share what I found in my post tomorrow concerting PM. One hint of what I found was posted by me on Mark’s blog.

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Ghost Policies – Five Minutes Of Work Will Let You Know

September 18, 2012 By JL Risk Management Consultants

Five Minutes Of Work Can Spot Ghost Policies

Ghost policies for Workers Comp coverage have been in existence for quite some time. I have seen so many of them over the years in the construction industry. There is a very easy way to check to see if the policy is a ghost policy.

Businessman Checking Time Ghost Policies On His Watch

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The certificate of insurance may not be that clear. If a business owner obtains a policy then excludes himself/herself, this does not mean the policy is a ghost policy. Regardless, there is a very easy way to make sure:

The policy has not been cancelled mid-term
The number of workers covered
Policy is not a ghost
Proper states covered

When I asked this at a presentation, the #1 response was to call the agent. However, there is a more direct and up-to-the-minute method. The name of the carrier should be prevalent on the certificate.

A very brief online search will give you the WC carrier’s phone number. I have sometimes seen them listed on the certificates. Call the customer service number for the carrier. Using the policy number on the cert, you should be able to verify coverage, etc.

I have seen employers being slammed at premium audit time if the certificates dates do not cover the complete time the subcontractor worked for the employer. Avoiding the Ladder of Insurance(c) claims is another good reason to call the carrier directly.

Why not call the agent? The broker/agent will usually have current information to a point. The up-to-date info would come directly from the carrier. Some carriers may want the certificate of insurance faxed or emailed to them for verification.

This may cause the verification of the cert to take longer than five minutes, but it is better than paying for a huge claim or paying the premium for the subcontractor at audit time.

If your company is not monitoring the expiration of the certificates of insurance or not even asking for them, then be ready to have your carrier pay for an accident.

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Workers Comp Audit Subcontractor vs Employee IRS Updated Guidelines

September 17, 2012 By JL Risk Management Consultants

IRS Updated Guidelines – Workers Comp Audit

The subcontractor vs employee IRS updated guidelines for Workers Comp audits.

Premium auditors seem to be listing all contractors as employees lately even if provided with a certificate of insurance.

Picture of woman and man with arms muscle drawing on wall IRS Updated Guidelines of Workers Comp Audit

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Differentiating between employees and subcontractors can be confusing for many employers. There is a great new update on subcontractors. I have often heard the IRS rules do not go far enough for a certain state.

The text below can be found here at the IRS website. I included the IRS updated guidelines for your convenience. I will comment more on it later this week.

Independent Contractor (Self-Employed) or Employee?

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It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.

Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

Select the Scenario that Applies to You:

I am an independent contractor or in business for myself if you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center.
I hire or contract with individuals to provide services to my business
If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are.

Determining Whether the Individuals Providing Services are Employees or Independent Contractors

Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be –

Picture of Law Books and Gavel of IRS Updated Guidelines Of Workers Comp Audit

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

Common Law Rules

Facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

Form SS-8

Auditing Tools Drawing on Wall IRS Updated Guidelines Of Workers Comp Audit Graphics

If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.

Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 (PDF).

Employment Tax Obligations

Once a determination is made (whether by the business or by the IRS), the next step is filing the appropriate forms and paying the associated taxes.

Employment Tax Guidelines

There are specific employment tax guidelines that must be followed for certain industries.

Misclassification of Employees

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Consequences of Treating an Employee as an Independent Contractor

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). See Internal Revenue Code section 3509 for more information.

Relief Provisions

If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. See Publication 1976, Section 530 Employment Tax Relief Requirements (PDF) for more information.

Misclassified Workers Can File Social Security Tax Form

Workers who believe they have been improperly classified as independent contractors by an employer can use Form 8919, Uncollected Social Security and Medicare Tax on Wages to figure and report the employee’s share of uncollected Social Security and Medicare taxes due on their compensation. See the full article Misclassified Workers to File New Social Security Tax Form for more information.

Picture Lady Sitting on Bed IRS Updated Guidelines with Her Laptop

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Voluntary Classification Settlement Program

The Voluntary Classification Settlement Program (VCSP) is a new optional program that provides taxpayers with an opportunity to reclassify their workers as employees for future tax periods for employment tax purposes with partial relief from federal employment taxes for eligible taxpayers that agree to prospectively treat their workers (or a class or group of workers) as employees. To participate in this new voluntary program, the taxpayer must meet certain eligibility requirements, apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS.

References/Related Topics

Proper Worker Classification (Audio)
Virtual Small Business Tax Workshop – Lesson 6
The Virtual Small Business Tax Workshop is composed of nine interactive lessons designed to help new small business owners learn their tax rights and responsibilities. See Lesson 6 for information on how to identify an employee versus an independent contractor.
IRS Internal Training: Employee/Independent Contractor (PDF)
This manual provides you with the tools to make correct determinations of worker classifications. It discusses facts that may indicate the existence of an independent contractor or an employer-employee relationship. This training manual is a guide and is not legally binding.
Form SS-8 (PDF)
Publication 15-A (PDF) has detailed guidance including information for specific industries.
Publication 15-B supplements Circular E (Pub. 15), Employer’s Tax Guide, and Publication 15-A, Employer’s Supplemental Tax Guide. It contains specialized and detailed information on the employment tax treatment of fringe benefits.
Businesses with Employees
Hiring Employees
Know Who You’re Hiring – Independent Contractor (Self-employed) vs. Employee

Picture woman Teaching IRS Updated Guidelines Her Friends

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Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court. These were a reprint of the IRS Updated guidelines

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NC Mid State Safety Conference Announcement – Presenting

September 13, 2012 By JL Risk Management Consultants

NC Mid State Safety Conference Announcement

I am speaking at the NC Mid State Safety conference on the NCCI split points and how they will affect your Workers Comp. This info will also apply to self insureds.

ic.nc.gov

This is an all-day conference with great BBQ. I am the Treasurer of the group.

The conference info is below along with a registration form. If you are interested in being a vendor at the conference, please email Michelle Morgan at [email protected]

If you have any questions on the conference, please feel free to email me at [email protected] I hope to see you there.

Thanks.

Mid-State Safety Council Annual Workshop

October 9, 2012

Topics:

Ergonomics	Mindy Smith, ErgoSmith Consulting
Emergency Preparedness	Steve Naylor, EnviroSafe Consulting
Workers Compensation Update	James Moore, J & L Risk Management
Business Continuity Planning	Jack Moyer, NC Water Marketing Lead
Wellness In the Work Place	Wanda Smith, Alamance Regional Medical Center

Where: Mebane Arts & Community Center

622 Corregidor Street

Mebane, NC 27609

When: October 9, 2012

Registration begins 8:30 am – 9:00 am

Program – 9:00 am – 2:30 pm

Who Can Attend: Anyone interested in Safety and Health

COST: $50.00 (includes lunch, door prizes and vendors)

Registration Form Below

We accept credit cards, checks and cash! When registering please provide: Your Name, Company Name, Address, E-mail and Payment

Mail Completed Registration Form Below and Payment to:

Mid-State Safety Council

Stephanie Glasgow

OWASA

400 Jones Ferry Road

Carrboro, NC 27510

919-537-4223

Email: [email protected]

Company Name:

______________________________________________

Meeting/Event Name and Date:

__________________________________

Number Attending:

__________

Contact Person:

_______________________________________________

Mailing Address:

______________________________________________

City/State/Zip:

_________________________________________________

Email:

_________________________________________________

Telephone: (_____) ______________________

Checks should be made payable to:

Mid-State Safety Council.

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Premium Audit Dispute – DIY- Goes Horribly Wrong

September 13, 2012 By JL Risk Management Consultants

Premium Audit Dispute – DIY

A Premium Audit Dispute can go awry if a company is not careful. Last week, I received an email with an audit dispute letter and an additional premium bill from a company in West Virginia. We usually receive one or two of these a month.

Picture of Gavel and Dollars Premium Audit Dispute of DIY

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A manufacturer in WV decided to work with their agent and do a premium audit dispute. The result was a nightmare. In my opinion, the classification codes and jurisdictions should have been left as they were in the beginning.

This is a timeline of the results:

The manufacturer thinks there is something wrong with their policies and wants to challenge their present policy and the last three years premium audits.
The company wants their classification codes changed and wanted the workers in Kentucky only counted as WV employees
They find a website with class codes for WV – totally different from premium rates
They write a dispute letter outlining the changes.
They do not check the statistics that go with each class code
The insurance carrier accepts the class codes and jurisdiction
The manufacturer’s E-Mod jumps sharply on all of the policies that were disputed from .89 to 1.23. That is a 38% increase.
Wikimedia Commons – Sharan1610564
The Kentucky employees should have been left as is due to the rate for Workers Comp in WV was actually more expensive.
The manufacturer receives a bill for an extra $113,000 in premiums.
They can no longer bid on certain projects that require a 1.0 or less EMod (ouch).

The caveat is what looks cheaper might be much more expensive. The E-Mod/X-Mod calculation is very complicated when trying to adjust the variables. J&L goes through the laborious task of making sure the Mods are not going to increase enough to offset a refund when assisting an employer.

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Workers Comp Statistics – Are They Believable and Trustworthy?

September 12, 2012 By JL Risk Management Consultants

Workers Comp Statistics Come With Many Caveats

The Workers Comp statistics production is one area that I have noted a sharp increase in over the last few months. There are so many statistics out there that make no sense; have (very important) an underlying unreported statistic, or relate the obvious together.

Diagram of Workers Comp Statistics of Fetal Occupational Injuries

For example, I can make the proper statistical prediction that assaults in a certain area can be directly related to the sale of ice cream and I can prove it. The unmentioned underlying statistic is the time of year. In the summer as more people are out and about, there are more assaults.

The same can be said for summer ice cream sales. Both statistics are increasing during the summer and are not related in any manner. The key is that if one wants to associate two variables, with enough work and number massaging, the results can almost always be proven.

Some days, I want to bang my head on the desk when I read some of the Workers Comp variables that are being related to one another. I am not saying any of the studies are incorrect, they just have many underlying variables that actually cause the relationship or tell us what we know to be a fact.

There are also studies that prove what we knew all along. One example from NCCI is here. Actually, for the most part NCCI, WCIRB, and the rating agencies for Worker Comp are usually accurate, timely, and informative.

They also seem to be very adept at not relating unrelated variables. WCRI deserves a mention as a non-rating bureau source of information.

Picture of Human Hand Touch Screen Workers Comp Statistics Concept

For instance, I saw one today that said injured employees take less illicit drugs when drawing Workers Comp benefits than other types of insurance programs. Do you think it might be that the person is being supplied with legal drugs, so why smoke a joint or snort a line and possibly end up in jail? Could it be the injured employee knows they are under a bit more scrutiny and want to be clean if drug tested upon a return to work?

A non-WC example was released by the Census Bureau today. They indicated the percentage of the population that is insured for health has actually slightly increased overall. Of course, that is true due to two possibly hidden variables:

The huge aging baby boomer population means more people are on Medicare.
Due to the very bad economy, more people are on Medicaid.

I did not read the entire study, but the conclusions are obvious before the study was released. In my humble opinion, the best studies are ones that actually have a well-founded surprise relationship between two variables. The rating agencies crank out interesting studies all the time.

North Carolina Industrial Commission Rule Changes

September 11, 2012 By JL Risk Management Consultants

North Carolina Industrial Commission Rule Changes

The North Carolina Industrial Commission is performing a major “tweaking” to the current rules. The Commission had a public hearing on the new rules. This is a transcript of the public hearing. The August 6th public hearing transcript may take a few minutes to download. It is well worth the read.

Picture of Jar full of Coins with Plant Industrial Commission Rule Changes

If you have any comments on the new rules, you can email them to [email protected]. All of the written comments that have been received by the NCIC can be found here through September 6th. The deadline for written comments is September 14th.

I noticed in the comments that both the defense and plaintiff attorneys seem to like the 2000 rules changes better than the ones published. Defense attorney George Lennon’s comments are some of the better ones.

The one that stands out to me is trying to shorten the time limits to paying medical bills. Trying to shorten the time limit to 30 days is not going to help anyone. The verbal and written comments point this very fact out very clearly. The statute says 60 days, so which is correct?

The rules seem to center around the handling of medical bills, rehabilitation nurses, and vocational rehabilitation specialists. If you work in these areas, or if your job or company is affected by the rule changes, emailing your written comments may be a good idea.

Picture Man Working in Bottling Industrial Commission Rule Changes

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Some of the comments seem to be another form of advertising while others do point out some additional changes that may need to be made to work in a Workers Comp environment. We all have seen the Financial Impact statements. This one says the new rules will save a large amount of money.

I am wondering if a rule conflicts with a statute, which one wins out?

New Jersey May Not Be Correct On TPA Fees – NJ Comptroller

September 10, 2012 By JL Risk Management Consultants

TPA Fees May Not Be Correct in New Jersey

The TPA Fees are not correct in New Jersey. New Jersey’s Comptroller issued a statement last week that Third Party Administrators (TPA’s) for Workers Comp claims may be receiving side payments between the TPA’s and the managed care or bill review companies.

New Jersey Map and green background TPA Fees Graphic

At no time did the Comptroller say this practice was illegal. Instead, there were questions on the effectiveness of the cost-savings if the TPA referred business to a company that had a side-agreement with them instead of another company that can do a better job.

Obviously, the Comptroller’s office consulted no one in the WC clams community. These agreements actually reduce the amount the clients are paying the TPA’s. The TPA’s are able to pass along savings they have negotiated with the companies which they use for rehab and bill review.

Picture Senior Man Taking Out Money from His Wallet TPA Fees New Jersey

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In other words, the bill review and rehab companies are willing to charge the TPA less if there is a certain volume of business. The bill review and rehab companies could possibly pay incentives to the TPA for a certain volume of business.

In turn, the TPA’s clients may likely end up paying much less for bill review and rehab services. I do not see the TPA’s clients being shorted in these instances.

I heavily agree with the NJ Comptroller saying the governmental entities should do a review of their TPA program, and unbundle the ancillary services. The entity may be shocked to find they are paying much more for unbundled services than if they were placed with a TPA.

We do see some of this happening in our TPA file reviews. However, when we compare the TPA’s bundled and unbundled charges, often the client is actually saving more $ than if they unbundle the services.

Split Point Reserve Changes by NCCI – Five Ways To Prepare

September 6, 2012 By JL Risk Management Consultants

Five Ways To Prepare – Upcoming Split Point Reserve Changes by NCCI

NCCI has already enacted the Split Point Reserve changes. In my opinion, the first year will have the most impact as the Primary Portion of the loss will double from 5,000 to 10,000. This will have a big impact on employers that have numerous claims.

Vector Graphic of Hands split point reserve changes

NCCI has warned employers for many years that having multiple medium-sized accidents is going to be the most damaging to your E-Mod resulting in sharp increases in premium. I calculated how this would affect a random employer in the near future using live figures.

The following are five ways to avoid such a whack to your Workers Compensation program:

Understand when the rule is effective for your state or states – not every company will automatically take the hit. I covered the new NCCI rule dates in a previous post.
Loss Run Review – it may be too late this year due to your Unit Stat date. If you still have time before your Total Incurred is recorded, then this will save your company $$$. If you have online access to your claims and reserve change data, you already are one step ahead.
Enact or improve your safety program – repetitive accidents within a policy year are going to cause your company to pay massive premium increases. You can pay the $$ to enhance your safety program, or you can pay your insurance carrier 400% over what you would have invested in safety and risk management.
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Explore alternatives to regular Workers Comp policies – PEO’s, captives, small and large deductibles, and risk retention groups are a few of the alternatives.
Companies that bid on contracts – your E-Mod may possibly jump to over 1.0. That may bar your company from bidding on or keeping certain contracts that require a 1.0 Mod or less. You can have your E-Mod calculated much earlier than the rating bureaus – we offer that service.

The main recommendation is to remember to not just let the changeover happen without understanding exactly how the NCCI change will affect your E-Mod for the next three years. Ask questions often.

Workers Comp Coverage North Carolina Agencies Tracking ERs?

September 5, 2012 By JL Risk Management Consultants

Tracking Employers Without Workers Comp Coverage In North Carolina

Without Workers Comp coverage whose job is it to track employers?

Graphic Map of North Carolina Workers Comp Coverage Track Employers

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For clarification:

NCRB – North Carolina Rate Bureau
NCDOL – North Carolina Department of Labor
NCIC – North Carolina Industrial Commission
NCCI – National Council on Compensation Insurance – not NC state government
NCDOI – North Carolina Department of Insurance
NCDOR – North Carolina Department of Revenue
NCESC – North Carolina Employment Security Commission

Two weeks ago, the Raleigh News & Observer article asked which organization is going to track the state’s 30,000 uninsured employers for Workers Compensation and the new scofflaws? The answers were interesting yet disappointing.

All of the above mentioned state departments (except NCCI, NCDOI and NCESC) all said they have very limited resources and wish to stick to their specific departmental authority. The Editorial & Opinion page had the following comments:

All of the departments involved are isolationists
The lack of information sharing between departments is appalling

The bottom line is the departments do not feel they should share data with other departments which may eliminate or at least lessen the numbers of uninsured companies.

Picture Businesswoman Getting Frustrated Workers Comp Coverage Track Employers

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One of the NC legislators said it best – “We just suck at synchronizing things that are supposed to be helping people,” said Rep. Dale Folwell, R-Forsyth, who has worked on workers’ compensation legislation. “None of this surprises me, but it disappoints me.”

In a few articles on this situation, the weak solution seemed to lean on a new computer system that was coming in 2015. I am not sure how the new computer systems would help if the data is still not shared.

I had posted about this situation previously with a recommendation to follow the West Virginia model on Workers Comp scofflaws. The result was that all businesses in the state of WV that were not carrying WC insurance had a sign posted on their front door saying the certain businesses were operating without current WC coverage.

Picture An Overworked Businessman Workers Comp Coverage Track Employers

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This caused quite a stir in WV, but set an example for the uninsured employers. This all was headed up by the West Virginia Department of Insurance. Previously, NC Governor Perdue had recommended the NCDOI should take over the investigations of non-coverage statewide. That is a great idea, if implemented.

I do understand why the NCDOL would not want to be tasked with enforcement of Workers Comp coverage. Maryland decided to have their inspectors check for WC coverage which was not a popular choice for businesses.

All the taxing and corporation databases in WV are fed into the WVDOI. It had taken a simple crosscheck program (which can be done in Excel) to point out the companies without coverage. You can quickly find out the uninsured companies using this page.

If West Virginia, while completely overhauling their system from monopolistic to a regular market system, can come up with a simple system to point out uninsured companies, why cannot NC come up with something similar?

North Carolina and Misclassification Confusion With New Task Force

September 4, 2012 By JL Risk Management Consultants

NC Misclassification Confusion

The misclassification confusion still exists in North Carolina. Recently, North Carolina’s Governor Perdue had drawn together a task force to lessen the number of Workers Comp scofflaws that exist in North Carolina. Earlier this year, 30,000 North Carolina employers did not have proper coverage for their workers.

Graphic of Misclassification Confusion Man Thinking Question Mark

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I had covered this same classification/misclassification issue in the past as this issue seems to rear its ugly head every time a state decides to heavily pursue companies that are seeking to avoid paying workers compensation insurance and taxes. This seems to occur once every six months.

I wanted to immediately straighten out an overused term as we received two emails and one phone call when the article appeared in the Raleigh News & Observer. Your workers compensation classification codes are totally different from the term misclassification as used in this case.

Questioning how your covered workers are classified in your business in not illegal whatsoever if done properly and within time limits. Governor Perdue and the North Carolina Insurance Commissioner Wayne Goodwin are pursuing companies that have no coverage for workers that are possibly employees.

Picture Businessman Covered Sticky Notes Misclassification Confusion North Carolina

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The word misclassified in this instance means the employer has allegedly classified the employees as independent contractors to avoid paying workers compensation and taxes on the employees. This has very little to do with questioning the classification codes or any other type of information on your policies or audits.

If you are in the State of North Carolina (or any other state) and you feel that your policies or premium audits are not correct, you have a right to question whether or not your current employees were misclassified for your current polices and in the three years prior (in most states).

We have never encouraged and strictly discouraged our clients or potential clients from classifying employees as contractors. Trying to avoid paying workers comp insurance and employment taxes will eventually turn out to be a very bad business practice.

I do not wish to discourage any company from hiring sub-contractors.