Archives for July 2015

Risk Safety Pro Search Is Like Finding Good Plumber

July 30, 2015 By JL Risk Management Consultants

Risk Safety Pro Search – Leaky Pipes?

Finding a good Risk Safety Pro Is a Lot Like Finding a Good Plumber. It took me 36 semester hours i.e. twelve classes to earn my M.S. degree in Human Resources. But you don’t have to go thru all that time and expense.

Picture of Man and Woman Standing In Front of Business People Risk Safety Pro Portrait

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Any company can greatly improve its H.R. Dept. by following what I call the ACES model. There are four parts and ACES is a mnemonic device.

The A is for accountability, the S is for science the C is for conscientiousness and the E is for equitable. Now let’s put it into a short paragraph.

Use science ( i.e. personality testing ) to hire conscientious individuals. Provide them with an equitable work environment, and hold them accountable to follow company standards.

It sounds simple, and it is, but in reality, most companies rely too heavily on job interviews for employee selection. The science is available but why bother making a good decision, when you can take your chances at the interview roulette wheel.

Graphic of Construction Worker Risk Safety Pro with Laptop and Tools

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Most companies loose because they do not get the conscientious work warriors that can help them win the business wars. Almost as common are the companies that lack standards and do not hold employees accountable for their work performance.

Ask yourself, what metrics do you use to measure performance, both by quality and by quantity ? Here is something to think about, any company that does not hold employees accountable for their work place behavior, is essentially a social club where the members are paid for attendance.

So what does this have in common with picking a good Plumber or a good Safety Consultant ? Nothing much except that there are four parts to this puzzle, as well.

Last week my wife and I had our first clogged drain in North Carolina. It took a lot of phone calls and a lot of time, but after the Plumber left it occurred to me that a good tradesman must have four characteristics.

He must be dependable, i.e. show up on time, honest because you are depending on him to give good advice about how to fix your house, a skilled craftsman, he must know how to fix things skillfully and not create further damage, and his prices must be reasonable. After all, no one has money to waste.

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Picking your Risk or Safety Consultant is almost the same; dependable honest and reasonably priced are mirror image to our Plumber. The only trait that is a little bit different is the skilled craftsman part.

In lieu of this we will substitute knowledge and experience. So when you pick a Risk, Safety or H.R. Professional, look for some credentials: ARM, CPCU, CSP, PHR or SPHR.

I sure love loading up the dishwasher after two days of not being able to use it.

Glen DuLac is our new safety consultant. His bio can be found here. We were going to do more on WC Apps. Check back next week for more WC App reviews.

©J&L Risk Management Inc Copyright Notice

Work Comp Apps – My Rabbit Hole Journey For Technology

July 28, 2015 By JL Risk Management Consultants

Work Comp Apps – How Many Exist

My last foray into the Work Comp Apps for Android was very frustrating yet indicative of the minimal innovation/technology in this industry.

Healthcare Work Comp Apps for android tablet

Wikimedia Commons – Intel Free Press

The last attempt to find any useful apps in WC world ended up with a few that were not disguised attorney ads or a banner for a company.

I decided to go down the rabbit hole on my own in April 2014. The three articles that were produced from that trip were:

Please remember that there were no searches of IOS apps, just Android in April 2014 and now.

The number of Android apps has surprisingly not changed that much overall. There were 150 apps that one could say were WC apps. Somehow there are a few anime apps mixed in- and I will not go there.

Wikimedia commons – Google

If you want to come with me down the rabbit hole, just click here for the Work Comp apps . Welcome to the search for apps in the Google Play store. The apps that I thought were even remotely related to WC were:

2020 Update – please note that some of the apps no longer appear in the Google Play list. I left the ones that still exist as of 2020.

American Health Systems
Sedgwick
NCCI WC Coverage Verification
MyMatrixx Mobile
EMC Smart Mod
My Care – Corvel
Vital Point – PMSI
HealtheSystems
Nova Medical Centers

A few other work comp apps may have been applicable. As this blog has readers from all over the world, I thought the companies should be nationwide.

I downloaded these apps to my Google Nexus 4 phone. Wi-Fi was turned on so that I would not use up my monthly data allocation.

Almost all require a username and password which may prevent me from testing them fully. Check back in tomorrow when I take the harrowing journey of trying to use Android work comp apps.

If you know of any others apps that I missed please let me know. As you can see there are many major WC companies that have no Android Apps.

Should I buy an Apple product to check them out? By the way, all companies mentioned reserve their copyrights and patents. I am not going to go through each one.

©J&L Risk Management Inc Copyright Notice

Subcontractors And Statutory Employees IRS Publication 15-A

July 23, 2015 By JL Risk Management Consultants

Subcontractors And Statutory Employees

Classifying Subcontractors And Statutory Employees can be a difficult task for any business. A great publication on employee classification is IRS Publication 15-A (PDF File) along with this IRS webpage.

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This is not to be confused with classification codes.

One of the more informative sections from the IRS webpage on subcontractors and employees is below:

The person performing the services may be –

A confusing area which we receive a large amount of emails concerns statutory employees/nonemployees. The below helpful sections are from Publication 15-A mentioned previously.

If you are having to make the decision how to classify employees, downloading the publication may help you make the proper determination.

From Publication 15-A

Picture of Subcontractors and statutory employees Contractor Guide Crane

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If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes.

1. A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.

2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.

3. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.

4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity. See Salesperson in section 2.

Statutory Nonemployees

There are three categories of statutory nonemployees:

Graphic of Subcontractors And Statutory Employees IRS Publication

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direct sellers, licensed real estate agents, and certain companion sitters.

Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if:

Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked,

and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes.

Direct sellers. Direct sellers include persons falling within any of the following three groups.

1. Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment.

2. Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment.

3. Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting.

Real State Subcontractors And Statutory Employees Agent At Family Home

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Licensed real estate agents.

This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output.

Companion Sitters

Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled.

A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis.

Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes.

—

Subcontractors and statutory employees were covered by an earlier article from the DOL under the FLSA.

*Please note that I am a ChFC and can provide this advice. However, checking with your accountant before making such classifications may be a good idea.

©J&L Risk Management Inc Copyright Notice

Subcontractors FLSA – Department of Labor v IRS

July 21, 2015 By JL Risk Management Consultants

Department of Labor v IRS – Subcontractors FLSA

IRS guide to subcontractors FLSA vs Department of Labor. The FLSA (Fair Labor Standards Act) was enumerated by the Department of Labor’s (DOL)) interpretation of recent Supreme Court decisions.

Wikipedia commons – U.S. Department of Labor

We received two emails on Monday with questions on how to determine the status of (what the employer thought were) subcontractors.

The DOL under the FLSA basically says the Supreme Court did not have a “one-size-fits-all” definition of whether a worker or group of workers are to be considered employees or a contractor.

After reading the DOL’s interpretation, one may want to look to the IRS for a better explanation and definition of a subcontractor.

The bottom line of analyzing the employment situation “is to determine the underlying economic reality of the situation and whether the individual is economically dependent on the supposed employer.” – Subcontractors are in a way economically dependent on their contractor so this is confusing.

The factors that the Supreme Court has considered significant, although no single one is regarded as controlling are:

(1) the extent to which the worker’s services are an integral part of the employer’s business (examples: Does the worker play an integral role in the business by performing the primary type of work that the employer performs for his customers or clients? Does the worker perform a discrete job that is one part of the business’ overall process of production? Does the worker supervise any of the company’s employees?); This one, after reading it many times, kind of makes sense.
Wikimedia commons – Carol M. Highsmith
(2) the permanency of the relationship (example: How long has the worker worked for the same company?); – I have known subcontractors that worked for their contractors for 30+ years.
(3) the amount of the worker’s investment in facilities and equipment (examples: Is the worker reimbursed for any purchases or materials, supplies, etc.? Does the worker use his or her own tools or equipment?); – There are many contractors that charge some of their materials back to the contractor.
(4) the nature and degree of control by the principal (examples: Who decides on what hours to be worked? Who is responsible for quality control? Does the worker work for any other company(s)? Who sets the pay rate?); The IRS also lists this one in their advice on subcontractor/employee determination.
(5) the worker’s opportunities for profit and loss (examples: Did the worker make any investments such as insurance or bonding? Can the worker earn a profit by performing the job more efficiently or exercising managerial skill or suffer a loss of capital investment?); and Certificates of insurance would take care of this one.

(6) the level of skill required in performing the job and the amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent enterprise (examples: Does the worker perform routine tasks requiring little training? Does the worker advertise independently via yellow pages, business cards, etc.? Does the worker have a separate business site?). This one makes sense.

The FSLA decision and the DOL‘s interpretation does make sense of what can be a very confusing matter. Four of the six in the list do make sense.

Two Employee Subcontractors FLSA Shaking Hands

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One area that seems to be the most confusing is the long-term business relationship between a contractor and subcontractor. The above list seems to hint at the longer the relationship, the more likely the contractor is actually an employee.

The amount of control of the contractor over the subcontractor would seem to be the most important factor.

©J&L Risk Management Inc Copyright Notice

WCIRB Long Tail Medical Expenses – Great Study

July 16, 2015 By JL Risk Management Consultants

WCIRB Long Tail Medical Expenses – 30 Year Study

The WCIRB Long Tail Medical Expenses Study was one of the better studies I have seen from them over the years. The WCIRB of course, is Workers Compensation Insurance Rating Bureau- California’s Workers Comp Rating Bureau.

Picture of WCIRB Long Tail Medical Expenses Patient Giving Doctor Money

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The study covered 30 years of claims tail data. Yes, that is right, thirty years. I often have discussion with actuaries concerning overvaluing the current data by using such studies as loss triangles, etc. I am a fan of very long data tails as history repeats itself, even in the WC world.

The study can be found here. Please note it is a .PDF file. Kudos are appropriate for the Medical Analytics Director (Dr. Gregory Johnson) and his staff.

The study provided a data in 14 pages. This is one of the studies that I recommend reading completely if you are interested in Workers Comp data.

The main discovery is that in the area of Workers Comp medical expenses, California does not operate in a vacuum. In fact, one of the major findings in the study and report is the similarities between NCCI (National Council on Compensation Insurance) and the WCIRB.

NCCI analyzes data on approximately 40 states- sometimes even if the state has its own independent bureau. I found it interesting, yet ingenious that the WCIRB would compare their data one-on-one with NCCI.

One hot topic now, of course, is the use or abuse of opioids. The chart on page 12 of the study compares opioid use between California and the NCCI states as measured in RX payments.

Woman Consult WCIRB Long Tail Medical Expenses With Pharmacist

Wikipedia commons – Rhoda Baer

The similarities were almost unanimous except for:

California had a much higher use of Lidoderm 3.8% to 2.5% of NCCI prescription payments
The NCCI states had a much higher use of Hydrocodone 4.2% to 2.0%
California had a much higher use of Percocet and generic Percocet (Oxycodone) 4.3% to 1.9%

The Hydrocodone/Percocet(Oxycodone) percentages almost offset each other exactly.

Two interesting conclusions drawn by the study were:

California medical treatment persists much longer than in NCCI states. One astounding part of this conclusion is that claims are reported long after the date of accident or illness. Risk Managers should be all over this statistic.
The three to six year period of the claims being open is critical in developing the long tail medical treatment claims. After six years, the claims shift from acute treatment to long-term care for aging processes.

There was no much more info in the study that I did not cover due to length.

What If Workers Comp Was Eliminated Tomorrow?

July 15, 2015 By JL Risk Management Consultants

Workers Comp Was Eliminated – Then What?

What if Workers Comp was eliminated in the Sunshine State or any other state for that matter?

Graphic Map of Florida Workers Comp Was Eliminated USA State Sunshine

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The Florida State Supreme Court will very likely rule on the constitutionality of Workers Comp in the near future.

Let us look at the insurance landscape if all Workers Comp was eliminated in total.

The first thing that would be affected is the current WC claims. What would happen to those injured employees? Would the elimination of WC be retroactive? That would be a fine mess.

The second thing that would probably happen is the carriers would be so heavily affected that some would actually go into receivership very quickly. The state guaranty funds would then have to pick up the tab. That would be a heavy liability for the states.

The third thing that would happen is Work Comp would become a litigious liability situation. Employers would bring lawsuits against their employee or negligence or contributory negligence.

The fourth set of occurrences would involve employees suing their employers when injured as liability cases. This development and third one would clog court systems for years to come.

The employers would not have liability coverage except possibly under the Employers Liability clauses in the Workers Comp policies.

Any type of network discount for medical treatment would be thrown out as fee schedules would be heavily affected overall. Workers Comp providers would have to renegotiate all contracts.

What would each of the states’ Workers Comp departments do as most of their jurisdiction and need for employees would be eliminated very quickly.

Picture of Workers Comp Was Eliminated Group of Businesspeople

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Would employers have to cover all employees under ERISA coverages similar to the current Opt-out employers in Oklahoma and Texas?

How would Workers Comp claim staffs respond as most of them are not trained in adjusting straight liability claims?

As a former multi-line adjuster, there is a night-and-day difference between a Workers Comp claim and a liability claim. Most liability claims are much more slowly paid or settled – the nature of the beast.

How about the injured employee and their family? They, unless they had a side disability policy (AFLAC, etc.), would not receive weekly benefit payments.

In my humble opinion, Florida may get what they ask for – but not in a good way. If Workers Comp was eliminated, the state insurance system would likely end up in shambles unless the State Legislature comes to the rescue.

Ohio BWC Premium Refunds Issued For $255 Million

July 14, 2015 By JL Risk Management Consultants

Ohio BWC Premium Refunds Possible

The Ohio BWC premium refunds were issued this week to 24,140 overcharged employers across the state. The Ohio BWC originally had an almost $1 billion ruling to pay for premium overcharges.

Building Ohio BWC Premium statehouse oin ohio

Wikimedia commons – Bob Hall

There are many articles on the situation in this blog.

The Ohio BWC is one of the few remaining monopolistic funds in the US. The BWC has not been administered without having a few problems along the way including investing in gold coins.

The original case was appealed and the amount owed was lessened significantly by the courts. The case was finally settled this week for $425 million which is less than one half of the original ruling.

Two interesting side notes were that

If you read the article title and then read the preceding paragraph, the state retained $160 million for the Ohio State Insurance Fund.
A comment was made in the original AP report that many companies did not know they were covered by the class action and did not pursue the matter as a party to the lawsuit.
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Our company had actually offered our services to Ohio employers to assess whether they were not involved in the matter. The state of Ohio even budgeted out and spent $$ on an advertising campaign to let employers know there were possibly refunds available.

We were offering our services for a minimal charge to Ohio employers. However, we found it to be a wasted effort as the response was very small to say the least.

It is beyond my comprehension why more companies did not pursue receiving a premium refund. The worst that could have happened was to be told No after filing the proper paperwork.

There is no sure number on how many of the smaller employers would have received a premium refund. The closest reference found was “a large number.”

California WCIRB Rating Formula Major Changes

July 2, 2015 By JL Risk Management Consultants

California WCIRB Rating Formula

The California WCIRB rating formula changes for January 2017 stood out in one of their recent press releases. The WCIRB (Workers Compensation Insurance Rating Bureau) is the rating organization for WC similar to NCCI.

Before I start to analyze the press release, the WCIRB personnel (for the most part) have been nothing but kind and helpful to me. Their educational conferences are always very informative.

The eye-catching phrase in the recent WCIRB press release alluded to the primary loss figure being changed to match the size of the employer. The primary loss figure for California is now set at $7,000.

Small companies took it on the chin in California two years ago with the elimination of the small employer adjustment. Will small employers take it on the chin again in 2017?

The WCIRB is not alone in making major changes to the rating formula. A series of articles earlier in this blog covered the major changes made by NCCI to their rating formulas in 2013.

Hand Holding Calculator California WCIRB Rating Formula Icon

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According to the WCIRB press release there are two areas that will be the most affected by the changes:

Allow the WCIRB to issue debit modifications, in specified circumstances, excluding the unaudited payroll for policyholders who are uncooperative at the time of a final audit. One has to ask as to what is uncooperative and who determines when a company is so called “being uncooperative. Also, what would be the level of unaudited payroll if there are no payroll figures on which to base this figure?”
The second replaces the fixed $7,000 primary and excess loss split point with a variable split point that varies based on the size of the employer. A variable split point enhances the accuracy of the experience rating formula, especially for smaller employers; reduces volatility and provides flexibility for simplifying the experience rating formula in future years. One cannot help but notice the mention of small employers in this second point.

As we all know the per-unit cost of risk under the rating formulas is much higher for smaller companies than larger ones. I hope the new variable split point changes will not be in the same vein.

I will update this post or add additional posts as the new rules for the California WCIRB rating formula changes are published.