Archives for October 2012

First Reports Of Injury – File Them Online Now Or Pay 400% Later

October 31, 2012 By JL Risk Management Consultants

First Reports Of Injury Should Be Filed ASAP – No Excuses

Workers Compensation First Reports of Injury (FROI) are an employer’s first step in Loss Control. Loss Control is not the same as Loss Prevention. Loss Control to me is defined as the prevention of future losses AFTER an occurrence of a claim.

In fact, immediate filing of the first report of injury is one of my Five Keys To Cutting Workers Comp Costs. In a study of two different large collections of claims, I found that not filing a FROI quickly will increase claim costs by 400% on the average. *** Thanks to Frank Pennachio of The WorkComp Advisory Group for pointing out the mistake I made on the original post of this article.

Involving your claims adjuster very early in the process will always cut workers comp costs. In fact, the adjuster can rarely proceed without the filing of the FROI. One can look at the FROI as giving the adjuster permission to proceed on the claim.

One of the most important aspects of an employer that files FROI’s quickly is the impression that the employer is on top of their claims. Remember that this is the same person that will be setting reserves on this file and on files in the future. The FROI is the first impression that the adjuster has on the claim for your company.

Picture of First Reports Work Injury Claim Form Bandage and pen on top

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Laggard companies (insurance company lingo) will always have higher reserves on their files, plain and simple. If your company does not care enough to file an injury report timely, it is seen as a negative connotation on the file.

Electronic/online FROI filing has been around for quite some time. This is an example of an insurance carrier’s online filing page. In fact, some companies charge extra to input a claim off paper. Filing a paper FROI when online filing is available is seen by the clams staff as a negative connotation similar to late reporting of injuries.

Your company is almost guaranteed higher reserves than normal when the first time your claims staff or adjuster hears about the claim from a medical provider. What can the Workers Comp claims staff do when the medical provider is the first one to report the claim? They are going to refer them back to the employer as the FROI has not been filed.

Picture Xraymachine First Reports Injury

Wikipedia – Thomas Bjørkan

Once again, this is the same person that will be setting the reserves on the file that figure directly and are the most important variables in your E-Mod (X-Mod) or Loss Development Factor if you are self-insured. First impressions do count.

Insurance companies and TPA’s all keep very close track of the time it takes to file the FROI. The term is called “lag time.” It is measured from the time the claim occurs until an employer files the claim. If you mail it in, the days it takes for the FROI to be processed by the employer, mailing time, and for the carrier to process the mail all are figured into your lag time.

The easiest way to avoid all this is to file your claims online. If for some reason, your carrier or TPA does not have an online claim filing system, you should fax them. If a carrier or TPA does not allow for online claims filing, their claims processes should be viewed as antiquated at best.

Companies often contact us concerning their high E-Mods and ask us to help reduce them quickly. This is one of the areas we examine upfront in our E-Mod reduction programs.

©J&L Risk Management Inc Copyright Notice

Workers Comp Coverage Info Did North Carolina Make Public (Again)?

October 30, 2012 By JL Risk Management Consultants

North Carolina Workers Comp Coverage Still Private

The North Carolina Legislature decided just a few months to ban all public disclosure of Workers Comp coverage info records. At that time, it really did not make sense to me when I can pull up Workers Comp policy information in so many states.

Graphic map of North Carolina Workers Comp Coverage records

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I could understand the concern if something akin to medical information on a certain injured employee was accessed online. Going from almost full disclosure to an outright ban on WC coverage information really does not make that much sense to me.

As I mentioned in previous posts, if it not were not for the previous partial disclosure, the newspaper reporter would not have uncovered over 30,000 uninsured companies in North Carolina. The NC Industrial Commission used to have a spiffy website where anyone (especially an injured employee) could research what company to contact about a WC claim that needed to be filed or one that was already filed with the Commission.

Picture Man Placing Finger on His Lips Workers Comp Coverage Still Private

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That site was swiftly taken down after the passage of SB 237 in March. With states such as California and West Virginia (and many more states) allowing at least limited access to policy info, I had thought North Carolina would have rebooted the access web page eventually.

Over the weekend, I read an article that pointed out the push by certain officials calling for the access to info being allowed as it was in the past. This may have been a case of the NC Legislature passing bills before thinking through the full impact of the new legislation.

One could agree that this access should not be allowed by anyone with a computer. However, it has functioned very well in other states. California’s rating bureau – the WCIRB – started to allow online access to Workers Comp policy info last year. I have yet to see any backlash from the full access.

In my humble opinion, the access harms no companies or individuals except possibly the 30,000 Workers Comp scofflaw companies that have still not been reigned in for their actions. The Workers Comp Coverage Info for that group remains critical.

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Do The Great Premium Deals Really Save Money?

October 24, 2012 By JL Risk Management Consultants

The Great Premium Deals May Not Be Deals After All

Do the great workers comp premium deals really save money? With prices rising (at least for the short-term) in California and other states, the “we can save you a ton of dough on premiums” vendors are now appearing again on the Workers Comp radar screen. Are they such a good deal or not? Let us cover a few of them.

Picture Of Two Businessman Great Premium Deals Shake Hands

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Self Insurance – this is the old “we will take ourselves out of the Workers Comp system” method. There are many hurdles to cross to even qualify. One of the most important things to remember is that your company has to qualify for each state, not in the aggregate. You can have a billion dollars of payroll in one state but may not qualify in the others. The other considerations are:

Liquid assets in a certain state – most states want $500,000 at a minimum (per state)
Bond – harder to find a performance bond in the market. These are used in case your company goes bankrupt to pay the claims
Licensed Third Party Administrator (TPA) to handle claims or you can hire your own licensed adjuster
Approval by Insurance Commissioner – obvious one. The Commissioners are more picky than in the past due to the economy.
Actuary or reserve specialist must assign your company a Loss Development Factor (or LDF) to assess your level of risk.
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Your company must file a pile of forms for each state including audited financial statements
Reinsurance is a must and usually required by each state in case your company experiences a spate of very bad claims, or one large one.
Your company may have to pay for temporary WC coverage until the Insurance Commissioner approves your application. This is the one that seems to get employers into a bind.

Large Deductible – this type of insurance for WC has really started to become more popular, at least in webinars. Your company will pay a lower premium than regular Workers Compensation insurance in most cases.

Your company must be large enough for the carrier to take on part of the risk
Your insurance carrier will provide reinsurance in most cases, or broker it to another company
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E-Mods are still reported to NCCI and other state rating bureaus
Your company will pay the funds for the first $250,000 of each claim or some type of aggregate of claims payouts. Once $250,000 has been paid out on a claim or you “bust” your aggregate the insurance carrier will pay the claim or group of claims when it exceeds these numbers
The ability to call the shots on most claims will still rest with the carrier. That statement will usually be included in the contract.
Your company is still in the WC system
Your company has taken on more risk than using a regular carrier and paying premium, but not as taking on as much risk as being self insured.

Self Insurance and large deductibles are not available to smaller employers. The three that are available to smaller employers are:

Professional Employer Organizations (PEO’s) – these are for companies that have a:

Vector Graphic of Hands Carrying piggy bank Great Premium Deals Really Save Money

High E-Mod – above 1.1 at a minimum
Uninsurable companies – trucking and employment agencies were not able to find coverages over the years. PEO’s became very popular with these market segments.
In Risk Pool or will be renewed in the Risk Pool. The Risk Pools are basically forced coverage by each state. The carrier is required to cover certain employers that cannot find coverage and charges very high rates (up to 500%) more than the regular marketplace

You should heavily consider and consult with a Workers Comp expert if you are not in one of the three types of listed companies as noted above. You could be paying much more than some of the alternative programs or even a regular WC policy. Great premium deals exist if your company fits into that insurance model.

Captive Insurance Arrangements – these used to be designed for larger companies. However, with the advent of protected cell and rent-a-captives even small companies may find these applicable.

Captives require a full analysis by a WC expert before WC coverage in placed in them. They are not self insurance. The question to ask is “Where does the funding come for the Captive?” It comes out of the employer’s budgeted funds, so everything is on the line as in self insurance.

Rent-a-captives require less upfront money. I have written on them in the past in detail.

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These two types of alternative insurance may be more suitable for small business. However, your company must go into the transactions as informed as if you were going to be a self insured. Many companies have been burned in what looked like a great way to have WC coverage, but ended up paying more than expected.

There are other alternative insurance arrangements for Workers Comp. I wanted to cover the current major supposed great premium deals the marketplace.

©J&L Risk Management Inc Copyright Notice

California Loss Cost Multipliers Say No To Reform Measures

October 23, 2012 By JL Risk Management Consultants

California Loss Cost Multipliers Do Not Reflect Any Reform Measures

The California Loss Cost Multipliers has said no to reforms. Loss Cost Multipliers (LCM’s) are one of the concepts in Workers Comp that I have been covering for many years. LCM’s are the carriers’ own assessments of risk in the marketplace. LCM’s allow deviations from the Advisory Rates published by each state’s rating bureau or the NCCI.

Map Graphic with Beach And Forest of California Loss Cost Multiplier

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California’s rating bureau – the WCIRB left their advisory rates unchanged as they were unsure of the short or long term effects on Workers Comp. The carrier’s however, did not agree that the reforms are going to work in the short term and possibly even in the long term or at least the risk of them not working is high.

The insurance carrier’s actuaries and underwriters are basically implying there is too much risk in the general CA marketplace to not increase rates. In my humble opinion, insurance carriers and their actuaries do not like there being so many unknown variables when trying to provide employers in CA with quotes for coverage.

Insurance carriers are going to always err on the side of extreme caution. If you introduce so many concepts that are not concrete then carriers are going to increase rates and wait for the fallout. As a person that cranks through so many insurance statistics, I would have to agree with their stance. I do not agree with insurance carriers often.

If you look at a simple formula that I made up, you will see what I am concluding for the rise in rates.

A = B * C * D

Wikimedia Commons – Industryman

This is a simple formula to calculate. Let us say that B = 9, C = 10, D = 11. A = 990 without question. Adding in another, but unknown variable E to the mix would make the answer 990 * E. If E could easily be estimated, there is some type of security in calculating A.

You may not be able to calculate A directly. A is now just dependent on one variable – E. This equation to me was SB 899, the old California Reform Law. You do not know exactly what A will be but you can come close knowing what E could possibly be in the equation.

This is where insurance carriers were after SB 899 A = 990 * E.

Along comes SB 863 and the formula now changes as there are so many unknown variables. For example

A = B * C * D * E * F * G

Picture Hand Presenting Financial California Loss Cost Concept

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You now know that A = 990 * E * F * G. If E, F, and G are not necessarily known, the risk for any underwriter or actuary is going to jump off the charts. How do insurance companies reduce the risk – by raising rates substantially, thereby lowering the risk of loss due to so many unknown variables.

This is an oversimplified version of events. One can see, though, how the rates could have been sharply increased at least of the short term. As underwriters and actuaries feel more comfortable with E, F, and G, the rate corrections will follow.

For our readers in other states, there have been many pseudo-reforms over the last few years. CA is not alone in this problem.

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Loss Cost Multipliers Affect Premium Audits Indirectly

October 18, 2012 By JL Risk Management Consultants

The Loss Cost Multipliers Have An Indirect Effect

I recently posted on Loss Cost Multipliers that affect your premium audit. I have received so many inquiries to my last post on the subject that I thought I would cover the subject again. This is an emailed question I received last week. The answer is definitely yes. Loss Cost Multipliers (LCM’s) affect your premiums as much as your E-Mod (X-Mod in CA).

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Advisory rates are posted by the NCCI, WCIRB, or the state’s rating bureau. Loss Cost Multipliers are each carrier basically asking the state’s permission to deviate from the Advisory Rate. There are two solid facts about LCM’s:

They are usually a % increase over the advisory rates in most cases
A state will rarely reject the LCM’s requested by the carrier

The best way to cover LCM‘s is by showing an example. Let’s say the advisory rate for a trucking classification code 7219 is 12.50. This means for every $100 in payroll for trucking in that state, the advisory rate published by the state for a certain time period is 12.50.

The insurance carrier says that to afford their overhead and to make a modest profit, they need to increase all classification codes by 1.35. In our example above, the 12.50 per $100 in payroll now becomes (12.50 * 1.35) per $100 of payroll is now $16.88.

This is an area that employers are usually not privy to as you will only see the $16.88 rate. The rates can deviate heavily amongst carriers in a certain state. I know of one large carrier that is deviating their rates by 2.11 or 211% in a certain state.

Graphic of Sack of money Loss Cost Multipliers In Premium Audit

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In my example the trucking company would pay 12.50 * 2.11 = 26.38 per $100 of payroll for their truck drivers. So, in that case, the trucking company would end up paying out over 1/4 of their payroll in Workers Comp insurance for their truck drivers. Ouch!

At the premium audit, the auditor will, of course, not use the advisory rates. He or she will use the rate after the LCM has been applied to the advisory rate. There are many more steps to getting to the premium, but the LCM is just as important to your company as the Mod. It is another multiplier in the formula.

If you are in the state risk pool due to a high E-Mod (X-Mod), the state will usually provide the rate with the LCM already calculated into the rate. I will cover that next time.

The main takeaway is there are as many different rates as there are carriers in a state. They do not just take a rate and use it. Next time you look at your company’s renewal quote, you will know each rate has been deviated from the recommended rate by the state.

©J&L Risk Management Inc Copyright Notice

Workers Comp Loss Runs – Ten Quick Ways To Analyze

October 17, 2012 By JL Risk Management Consultants

Ten Quick Ways – Review Workers Comp Loss Runs

Your workers comp loss runs are a very important step in reducing your company’s premiums or insurance budget, NCCI, WCIRB or any rating bureau uses the info that is provided to your company by your insurance carrier.

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Actuaries will use the same info to produce a Loss Development Factor (LDF) if you are self insured.

Even if your loss history or incident rate is not that great, you may be able to at least reduce some of the claims that figure into your E-Mod or X-Mod. This will also work if you are self insured on your LDF. The five quick ways to analyze the list of claims on your loss run are:

See if you have an option to access your loss runs and reserving history online. This will usually be provided if your company has access to your claims information. If you can get this downloaded into Excel, you have saved yourself possibly hours of inputting data into a spreadsheet.
Analyze only the claims that are open. Claims that are already closed will not benefit your company that much unless you think overpayments were made on the claim.
Input all open claims info or your loss run into a spreadsheet . That is why #1 is so important. You cannot do an analysis by hand.
Wikimedia Commons – Vicente
Make sure your claims spreadsheet has a place for a claims status. That can usually easily be found if you have online access. Some carriers/TPA’s will have this included on the paper loss runs.
Check for open claims that should be closed. This is the low hanging fruit theory at work. Use your spreadsheet to send the adjuster(s) an email asking why the claim is still open. Do not call the adjuster. Calls waste their time and leave you with scan documentation.
Email the adjuster to ask for a status (or updated status) if you do not have online access. The status on new claims will usually change every 30 days. The older claims statuses will change every 90 days.
Negotiate your reserves down. Remember that Paid + Reserves = Total Incurred. You are trying to reduce your reserves to decrease your Total Incurred. The Total Incurred is what is reported to the rating bureau.
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#7 can blow up your E-Mod or X-Mod if one is not careful. Knowing which claims to point out to which adjuster is an art in itself. If an adjuster needs to increase a file’s reserves and you try to negotiate the file reserves down, you may be reminding them to increase the file.
Pay attention to subrogation. If your carrier/TPA recovered funds from a 3rd party, are the amounts subtracted from your Total Incurred?
If any of these concern you (especially #7), it may be best to call in an expert to assist with your E-Mod reduction.

The worst thing to do is to file away your Workers Comp loss runs and do nothing. Any employer that is paying attention to their claims will almost always see a reduction in the near future.

©J&L Risk Management Inc Copyright Notice

Workers Comp Claims Explosion If Economy Rebounds Quickly

October 16, 2012 By JL Risk Management Consultants

The Workers Comp Claims Explosion Due To Learning Curve

Will a workers comp claims explosion occur in the next few years? The economy is going to eventually recover from its recent lows. If there is a very quick rebound, insurance carriers, TPA’s, employers, and any type of insurance personnel must be prepared for an explosive increase in the number of claims.I often do phone consulting for investment groups examining Workers Comp vendors from TPA’s to translation services. One of the questions I am often asked is there anything out there that would turn the claims industry upside down.

Picture of Worker Man Sitting on Big Bomb Workers Comp Claims Explosion Concept

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The Learning Curve will be the bane of many Workers Comp insurance personnel and any employer that is large enough to have an Experience Rating (E-Mod or X-Mod). We have all heard of the studies that almost 90% of accidents occur the first time a person is using a new tool or machine. This number can be proven very easily using the learning curve.

I coined a term a number of years ago when I was working a claims desk. The number of accidents right after a hurricane spiked heavily in the construction industries. The investigation of almost all the claims showed a discernible trend. Due to such a heavy increase in demand for construction workers, there were many new unskilled workers on the job. I saw many power tool incidents. I called it the “Hurricane Syndrome.”The true formula for the learning curve is here. If you look at the graph on the page, you can see that it takes someone much longer to do a task than when the workers gains experience. OSHA does a great job of forecasting injury rates over 200,000 work hours. However, I do not see a study from OSHA on time the worker spent on the job before the accident.

Picture of Hand Doing Puzzle Workers Comp Claims Explosion Learning Curve

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The learning curve does not always apply to workers trying out a tool or machine for the first time. Workers that experience long standing layoffs will be much more likely to have accidents as they may not have used certain machines or tools for months or possibly years.

My advice for insurers/TPA’s is to heavily staff their claim departments when signs of the recovery become obvious. The learning curve has been tested since the 1800’s and was studied heavily by NASA starting in the 1930’s. The spike in injuries is not a theory. It is a proven fact.

Employers will need to be ever vigilant in reporting their claims and following up with their WC adjusting staff. Providing your insurance carrier of TPA with the First Reports of Injury in a timely manner will be very critical.

If anyone can locate the study on the exact % of injuries when someone uses a machine or tool for the first time, please email me the link and I will insert in this post. Thanks.

©J&L Risk Management Inc Copyright Notice

Auditing Workers Comp EMods or XMods – Worth Your Time?

October 15, 2012 By JL Risk Management Consultants

Auditing Workers Comp EMods or XMods – Tricky Stuff

By Auditing Workers Comp EMods or XMods, you may find premium savings or you could blow up your program.

Workers Comp E-Mods (X-Mods in CA) can save your company a large amount of premiums if kept in check.

Is trying to make sure that your E-Mod / X-Mod worth your time? I had listed a few pointers before you undertake this arduous task:

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Is your E-Mod (X-Mod) high enough to warrant any type of review? If your Mod is below .8, you may find spending your time elsewhere in your Workers Comp program as being a more efficient use of your time. I am not saying that a .8 E-Mod is the best possible. You may find the next point to be the best place for your efforts.
Does your company have a viable safety program in place? If not, you may not being using your time wisely. A full-fledged safety program should be priority #1. If your company’s safety record is not that great, creating or updating your safety manual may be the best place to start.
Realize the Mod system is a delayed system. Your current efforts will only show up in subsequent years. Patience is a required virtue with the Experience Mod system. Your saving efforts will show up proportionately, not all in the first year.
Do you have updated loss runs? Are they older than two weeks? Do you have the precious and very valuable real-time online access to your reserves? If not, your E-Mod review may be out date as soon as you finish it.
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Do you have access to your last four years rating bureau reports? If not, you may not be able to know whether or not the right loss run figures went on the right rating bureau report.
Have you read over at least the basic rules for X-Mod calculations? I have been doing them for many years for clients. They make my head spin sometimes.
Do you have a software package that can help you calculate the Mods? Be very careful at this point as not all software packages are that easy to use. The old GIGO model may show up here (Garbage In = Garbage Out)
Each state may have its own peculiarities on some of the inputs to the Mod system.
Do you have a copy of all your policies and audits from the last four years?

If you are in the midst of analyzing your E-Mod (X-mod) and you have any questions, please feel free to contact us.

If you have already started an analysis or have decided to do one after reading this post, you are already saving your company Workers Comp $. You are paying attention to your WC, which is a great first step.

©J&L Risk Management Inc Copyright Notice

Safety Programs – EMods or XMods Take Time To Decrease

October 11, 2012 By JL Risk Management Consultants

EMods or XMods – Safety Programs Have A Cumulative Effect

The EMods or XMods safety programs take time to decrease your premiums. E-Mods also known as X-Mods in California are basically the same as a credit score for an individual. The main difference is you can fix your personal credit score in a few weeks. Mods take a few years to correct or reduce even slightly. If one looks at any EMod (XMod) reduction program, the first recommendation will always be to create or enhance your safety program.

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I presented this concept at the NC Mid State Safety Council Conference day before yesterday. A safety program takes approximately 18 – 24 months to start appearing in your company’s EMod and will not appear fully for up to four years.

I am very concerned that safety professionals or complete safety departments in various industries were actually terminated as the EMod actually did not move or increased at the time of the first policy renewal.

One of our old clients went through this situation. He was working for a trucking company in South Carolina. He had worked night and day to get his company’s E-Mod down. The EMod ticked up slightly due to factors when he was not even working for them. The next safety person in the job was lauded for their efforts even though he had only been on the job for six months as the Mod started ticking down.

The EMod or XMod will actually decrease after the safety professional or department had been reduced or eliminated. After a brief period of time, the Mod will then increase sharply. As I have said very often the Work Comp rating environment operates on a delayed basis. You can go back 57 months into the past to calculate a Mod in certain situations.

Graphic of decrease Arrow Safety Programs On Bar Graph

In this economy, it is hard for a company to have patience as a virtue. My company had been called into more than one instance where the safety department needed an outside source to prove to management that their efforts were working overall. One such company was an oil and gas company in Oklahoma. Upper management was astounded that the safety program was working but would not show in the E-Mod right away.

There are many factors that figure into the E-Mod such as changes in:

Payroll
Classification Codes
Insurance carrier
Claims staff
Upcoming split point changes by NCCI
Audits

The bottom line is your safety program may be working for your company. You may just not see it in the numbers yet.

©J&L Risk Management Inc Copyright Notice

Who Is The WCIRB And What Do They Regulate?

October 10, 2012 By JL Risk Management Consultants

Who Is The WCIRB ?

What do they regulate and who is the WCIRB ? I received this question on the WCIRB last night from a California employer that had grown large enough to receive an X-Mod. Congratulations on your company’s growth in a tough economy. Sometimes, it is best to get back to the basics when analyzing Workers Compensation.

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The WCIRB is the acronym for the Workers Compensation Insurance Rating Bureau of California. The organization is very similar to NCCI. They are the data gatherer for info that feeds into each California employer’s Experience Modification Factor (XMod).

Some companies are too small to be rated in California. The minimum pure premium for an X-Mod is presently $25,225. The pure premium figure is not the premiums your company has paid.

The bureau holds conferences/workshops usually four or more times a year. I have found them to be very educational. The staff has always treated me very professionally and would help me as much as possible in any given situation.

One very important fact is the WCIRB only sets advisory rates. They are not directly responsible for how much you are charged in Workers Comp premiums. Your insurance carrier will usually deviate from their recommended rates by filing a Loss Cost Multiplier.

This is from the WCIRB’s About Us web page.

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The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) is a California unincorporated, private, nonprofit association comprised of all companies licensed to transact workers’ compensation insurance in California, and has over 400 member companies. No state money is used to fund its operations. The operations of the WCIRB are funded primarily by membership fees and assessments.

To accurately measure the cost of providing workers’ compensation benefits, the rating agency performs a number of functions, including collection of premium and loss data on every workers’ compensation insurance policy, examination of policy documents, inspections of insured businesses, and test audits of insurer payroll audits and claims classification.

The WCIRB employs approximately 200 people and maintains two offices. The home office is located in San Francisco, and a small Southern California field office is located in Cerritos.

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Safety and EMods – Highlights From My Presentation From Today

October 10, 2012 By JL Risk Management Consultants

Presentation Highlights – Safety and EMods Are Very Related

How Safety and EMods intermingle was the basis for most of the highlights from my presentation. The NC Mid State Safety Council was kind enough to ask me to do a presentation on how safety programs impact an employer’s bottom line from a Workers Comp standpoint. I am the Treasurer for the organization.

The highlights from my presentation were (you may want to print this one):

Safety Departments can be easily scored by their E-Mods. It is the same as a personal credit score but much harder to improve quickly.
Self Insureds do have an EMod, better known as an LDF (Loss Development Factor). If your company is self insured and does not have an LDF, you are operating a blind WC budget
Due to the economy, there are now temporary employment agencies that may not have their WC policy in force. In this case, the employer will often get stuck with the bill if a temporary employee is injured on the job.
Subcontractors that are operating without a valid insurance policy or with an expired policy actually become employees as the Workers Comp courts are going to go up the Ladder of Insurance (c) to make sure the injured employee will receive WC benefits
Calling the carrier (not the agent) that is listed on the WC certificate of insurance is a good idea just to make sure there is coverage in place for temporary agencies and subcontractors
Do not use your company’s Workers Comp funds to pursue a fraud prosecution.
Workers Comp supplements paid to an injured employee will only make them much more resistant to return to
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The Four Ways To Cut Work Comp Costs from a claims standpoint are:
- Filing First Report of Injury to carrier immediately
- Medical treatment network in place
- Return to Work program in place
- Treat the injured employee as if they are still on the job as they are still your employee
North Carolina Scheduled Rating Plan – discounts are available if a great safety program is in place and your carrier understands your company’s safety measures
An example of how not having a medical network in place = $1.1 million dollar claim
The new NCCI split points can be a benefit or a curse to a safety program
- High EMod companies are going to take a hit
- Lower Emod companies will experience a benefit
- Safety programs and professionals will be worth their weight in gold for the next few years
Bottom Line – Safety is going to be heavily judged by their WC E-Mod even though the safety department may not be involved in some of the WC decisions

©J&L Risk Management Inc Copyright Notice

Split Points – Largest Workers Comp Concern Presently

October 8, 2012 By JL Risk Management Consultants

Largest Workers Comp Concern Today Seen As Split Points

The Split Points became the Largest Workers Comp concern presently. I am presenting at the North Carolina Mid State Safety Council conference tomorrow. A few weeks ago I was contemplating what would be the largest concern for safety, human resource, and risk management personnel.

Picture Of Hand Touching Largest Workers Comp Concern Question Icon

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After speaking with a few of my peers and our clients, the subject of the upcoming NCCI and State Rating Bureaus (other than CA, OH, and NJ) split points came up as the most popular topic of concern. My question to my peers was “Why are split points the topic that is causing the greatest concern presently?”

I received many different answers. The top one was the way our Workers Comp is calculated will now change very quickly at our next renewal.

The other concerns were:

A new variable that may cause an increase to our E-Mod that is beyond our control
We cannot budget for the unknown increase, if there is going to be one
There is a 100% increase in the Primary Loss the first year
There are subsequent increases in the Primary Loss for the next two years
If we go over 1.0 on our E-mod, we cannot bid on government contracts
We are confused as to whether or not our next policy renewal will be affected

Business Strategy Concept Largest Workers Comp Concern Vector

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When I looked over all of the concerns I had received and went back to the responses to my previous posts on this subject, I think the main area of concern can be summed up by saying there is now an unknown variable thrown into the mix that a company cannot prepare for in the future.

My response to that concern would be:

NCCI said only 18% of the companies would be affected. I analyzed one of the reports that came up with this %. I had thought it would be at least 25%
If your E-Mod is .9 or lower, you may actually see a decrease in your E-Mod if your Workers Comp claims status is not worse than in the past
If you have many smaller claims (less than 10,000), your E-mod will likely increase heavily no matter your current E-Mod. The new rating system is going to very heavily penalize employers with multiple injuries.
Your safety and risk management departments are now going to become more of a critical component to your business. If your company has considered WC just a cost of doing business, you may want to get out the checkbook and make sure you have plenty of checks.
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If your company has an E-Mod of 1.2 or higher, you need to take drastic steps to reduce your injury rate.
The reserves on all of your Workers Comp claims will now be even more important. If you do not have online access, it may be good to check with your carrier to see if online access is available. When choosing among carriers at renewal, online access to your WC claims is now even more important
Alternative insurance arrangements such as large deductibles, PEO’s, self insurance, loss groups, risk retention groups, and captives may now be more attractive and cost effective
If your company is in the Assigned Risk Pool because you cannot find coverage in the voluntary marketplace, you need to immediately institute or increase the efforts of your safety program. You may also want to begin considering viable alternative insurance arrangements.

If you are not in a state that is going to be affected by the split point changes, then now is a good time to start preparing for the change. Most states eventually follow NCCI’s lead.

Is Your Carrier or TPA Charging You For Their Mistakes?

October 4, 2012 By JL Risk Management Consultants

Carrier or TPA Overcharging You?

Your Carrier or TPA could be charging you for their mistakes. Some state jurisdictions issue fines and penalties if state forms are not filed timely, if lost time benefits are not issued timely, or for frivolous litigation, etc. This is a more common occurrence than in the past years as many states have added more rules on top of an already ominous amount of rules. The number and amount of fines are increasing over time.

Workers Comp claims adjusting has become even more complicated than in the past. States seem to be very motivated to fine carriers for new rules that have just been enacted. The fining on the files also seems to be inconsistent from file to file.

Many carriers charge these fines directly to the file as an expense. These fines and penalties should be paid directly by the carrier or third party administrator if they were charged due to their lack of adherence to the state’s rules and regulations.

The carrier or third party administrator should cover these costs under their errors and omissions coverage and not charge the costs to the file.

Businessman Carrier or TPA With Heads in Hands

StockUnlimited

Charging fines to the file under the expense category will only increase an employer’s E-Mod or increase the WC budgets for self insureds. The fines are usually denoted in the Expenses as being paid to the respective states Workers Compensation Commission or Department of Insurance.

One cannot assume these payments are always for fines and penalties. The WC Commissions very often assess fees for certain processing in the file.

Some of the fines and penalties can be very large or occur multiple times in a file. Your loss runs may be the first clue if the Expense category seems to be very large or has a large number of payments. For reference, the three categories of payments are Indemnity, Medical, and Expense.

California SB 863 Webinar – Thumbs Up To Presenters

October 3, 2012 By JL Risk Management Consultants

Thumbs Up – California SB 863 Webinar

According to sponsors, the SB 863 Webinar turnout was massive. That is to be expected with such a confusing subject. The reforms were extensive. They presenters had to cover a large amount of info in 75 minutes.

Emoticons Color Yellow Smiley SB 863 Webinar Thumbs Up

The three sponsoring organization were:

· WCAN (Workers Comp Action Network)

· CA Chamber of Commerce

· California WC Coalition

The groups align well with our outlook as they are basing their info from the viewpoint of an employer for the most part.

The general overview was:

· Need for Reform

· Understanding SB 863 details

· What employers should know

· Where we go from here

Five year trend for medical costs +40%

Five year trend for cash benefits +35%

Volume of claims increased +9.1%

Insurers paying 36% more than they collected in premiums – ouch!!!

Insurers were paying over 35% of the claims dollars to administer the claims. That is a surprisingly high figure.

Close up of hand jigsaw SB 863 Webinar Puzzle

Wikimedia Commons – Charles Hamm

SB 863 goals were the same as any reform, reduce costs and increase efficiency especially medical care for injured workers. Reducing litigation costs was also an expected goal.

SB 863 wanted to strengthen Medical Provider Networks (MPN’s) also known as Workers Comp PPO’s. Limiting out-of-network treatment was a goal. I think that was a great idea. I have written a large numbers of posts on medical control.

There must now be an assistance staff that helps the employee find proper in-network care. That was a good idea.

Independent Medical Review (IMR) will be established and will have all jurisdiction over an employee dispute about medical treatment Division of Workers Compensation (DWC) will contract this duty to an approved third party reviewer.

Utilization Review (UR) will fit in the IMR process. Employee initiates IMR process by filing a form with the DWC within 30 days of treatment. My response is great, another form. I am not sure if adding another process on top of the other processes is that efficient. As the presenters pointed out, it is a work in process. The treating physician can also initiate the IMR process. I wonder if that could be abused in some way.

The handling of medical bill payments was also a big issue. The doctors have to provide better info such as the applicable treatment notes. Only the original treating doctor can approve any other services. This is basically what already happens in states that allow medical control.

The carrier/TPA must pay medical bills within 45 days. The Explanation of Review must have all the info for medical provider to understand the payment received from the payer.

If there is Independent Bill Review (IBR) over charges, the medical provider must pay the DWC a fee if there are no additional charges. If the carrier or TPA owes an additional amount, they will pay the DWC a fee. This functions as an incentive to pay the bill properly in the first place.

IBR will cut down the length of time on medical bills disputes and not allow them to linger for years. If the provider did not use the IBR process, there is no lien applicable. This is a good development for the CA WC system.

Medical legal reforms required that chiropractors pass the same qualified medical examiner (QME) tests as other medical providers. QME’s are limited to a maximum of 10 locations.

The reforms limited spine surgeons receiving a rebate for a medical implantable device from the manufacturer and then receiving full payment by the carrier/TPA.

Fee schedules will be now based on Medicaid/Medicare fee schedules. This is the same as most states have been doing for many years.

Permanent disability (PD) payments are going to increase. The law that allowed this was legislated in 2009, but it was never enacted or enforced.

As with the SB 899 reforms, expect a large amount of litigation on SB 863 along with legislative attacks to dilute the reforms.

The presenters said the advisory rates recommended by the WCIRB (CA Rating Bureau) will be unchanged with no increases. However, the word on the street is that some of the major carriers are asking for 21+% increases. As I pointed out a few weeks ago, the advisory rates are nefarious figures if they carriers deviate heavily from the advisory rates.

Overall, heavy kudos should be given to the presenters and their organizations. They did a good job in presenting a concise overview of a very large reform.Even if you are not a CA employer, some of these reforms and concerns will be coming to states in which you operate your business.

Indiana Rate Increase = Sharp Increase In Medical Costs

October 2, 2012 By JL Risk Management Consultants

Medical Cost – Indiana Rate Increase of 5%

The Indiana rate increase in medical cost should come as no surprise. Yesterday, I posted on the increase in Indiana’s advisory rates of 5%. I had actually written the article under the impression that the lack of a fee schedule was to blame for the increase.

Graphic of Percentage and Red Arrow Indiana Rate Increase Medical Cost

I was right as NCCI has said the increase was due to a striking increase in medical costs in Indiana. The adoption of a fee schedule would eventually turn the tide on the medical costs in the state. As I have posted often, any Workers Comp changes will affect a state gradually over the next four years. There are no quick overnight fixes in Workers Comp.

The changeover would not take that long nor be that complicated as they could use a good fee schedule such as Tennessee’s and just add in a factor due to different economies of scale in each state.

One of their neighboring states, Illinois, had installed a fee schedule a few years ago. The last recommendation from NCCI that was accepted by Illinois was a 3.8% cut in rates. Tennessee saw a 5% cut.

The reason for a smaller decrease in Illinois was the fee schedule has not had time to fully work itself into their WC system. Additionally, IL used what I would call an artificial fee schedule at the very beginning of the switch.

There may be an excellent reason that Indiana does to want a fee schedule for Workers Comp such as a large medical lobby, or wanting to be totally independent. Saving their employers WC $ is obviously not one of the goals.

5% Rate Increase Approved by Indiana – Still No Fee Schedule Yet

October 1, 2012 By JL Risk Management Consultants

5% Rate Increase Approved – Indiana – Needs Medical Fee Schedule

Indiana just approved a 5% rate increase for Workers Comp advisory rates. I thought enough time had passed that most of the remaining states without fee schedules would have followed suit to help their employers receive the benefit of an easy Workers Comp savings method.

Picture of Hand pointing on screen 5% Rate Increase With Blurry Light Background

States such as Tennessee have reduced their Workers Comp payouts by enacting a fee schedule. I am aghast as to why Indiana does not enact even a limited fee schedule. Many studies have shown the need for a fee schedule.

One of the main rebuttals against fee schedules used to be that physicians and other medical practitioners, along with clinics and hospitals would not see injured employees.I have yet to see any physician turning away Workers Comp patients.

With an authorization from the claims department, WC payments are a sure thing – usually. Even if Workers Comp may not cover an accident, health insurance will usually step in and cover the medical treatment.

Thumbs Up Gesture 5% Rate Increase With Mobile Marketing Concept

StockUnlimited

We had reviewed and consulted on a few Indiana claims in the past few years. The Usual and Customary fees seemed to be one long negotiation using bill repricers basing the charges on a percentile and then having the hospital dispute those percentiles.

The injured employee, of course is receiving notices that they are going to be referred to a collection agency while all the negotiations are occurring over time. Medical providers want their bills to be paid regardless of the payer.

Indiana had the highest medical costs in its region in 2009 – 2010. In my opinion, you will see Indiana have inflating medical costs over the next few years unless a fee schedule is enacted soon.

I have not read the articles explaining why the increase was recommended by NCCI. I think we all already know the reason.