Archives for May 2018

Workers Compensation Class Code 9015 – Most Reclassified in 2017

May 30, 2018 By JL Risk Management Consultants

NCCI Names Most Reclassified Workers Compensation Class Code 9015

The Workers Compensation Class Code 9015 has long been a source of confusion for agents, underwriters, and premium auditors. NCCI (National Council on Compensation Insurance) reaffirmed the confusion by naming the Code as their most reclassified code.

graphic Workers Compensation Class Code 9015 wheel of fortune

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In the past, NCCI had published their Top 10 Reclassified Codes each year. I assume we will just have the Top 1 only now and in the future.

How could Workers Compensation Class Code 9015 draw so much likely unwanted attention? Let us look a little closer.

I was catching up on my Worker Comp reading yesterday when I came across this article by NCCI on the most reclassified code Workers Compensation Class Code 9015 Building or Property Management—All Other Employees.

The reclassifications are due to in-person physical inspections by NCCI. The changes are not the result of an agent, insurance carrier, or premium auditor changing the codes.

According to NCCI, the 9015 classification terminology out of the Basic Manual, not the Scopes Manual, is:

Applies to the care, custody, and maintenance of premises or facilities. Not applicable to an owner or lessee of a building who occupies the entire or principal portion of the premises for manufacturing or mercantile purposes. Includes doormen, security desk personnel, elevator operators, gatekeepers, and concierges. Separately rate maintenance or repair work at any location where the owner or lessee does not also perform janitorial services. Includes real estate management companies and real estate investment trusts.
License Public Domain-by. Corrina Duron
Clerical and sales employees are assigned to Code 9012—Building or Property Management—Property Managers and Leasing Agents & Clerical, Salespersons, including those who operate at a separate location from the properties managed.
Employees working exclusively for a country club operation run by a hotel, resort, condominium, or other community association are assigned to Code 9060—Club—Country, Golf, Fishing or Yacht—All Employees & Clerical, Salespersons, Drivers.

The third bullet point creates the most questions out of any classification codes mentioned in the article. We are contacted rather often by employers that are confused when they are reclassified into 9060.

The 9060 Code was not mentioned in the NCCI articles as the Class Codes where 9015 employers find themselves post-inspection. The three codes where the 9060 Code employers are reclassified into consist of:
Code 9012—Building or Property Management—Property Managers and Leasing Agents & Clerical, Salespersons, including those who operate at a separate location from the properties managed. For this one, I highly recommend you read the original NCCI article. You can download the PDF if you follow the link in red above.
Code 8855 – Banks and Trust Companies – all employees including salespersons, clerical and drivers
Code 8723- Insurance Companies – salespersons and clerical

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Workers Compensation Reserve Increases – 10 Reasons For Huge Ones

May 24, 2018 By JL Risk Management Consultants

Workers Compensation Reserve Increases

10 Ways To Cause Huge Reserves

Most Workers Compensation reserve increases can be controlled by employers. Let us see how employers cause huge ones below. Some of these come from the Six Keys To Saving On Workers Comp insurance that I wrote in the 1980’s.

The list also applies to large deductibles, captives, self insureds and so forth.

Law of Large Numbers Workers Compensation Reserve Increases Graph

Public Use License – Dean P Foster

Top 10 Ways To Cause Jumbo Workers Compensation Reserve Increases

Filing the 1st Report of Injury late – you have introduced your company to the adjuster as a high-risk company. Large lag times make employers look irresponsible. A high-risk company receives high-risk reserves. This is an easy one to correct. Many carriers have online reporting to cut the mailing times to a minimum.
Not having an industrial-minded medical network in place – this one is even worse than late 1st reports. Your workers comp adjuster has to deal with the medical providers very often during a claim. If the medical providers seem high risk, the adjuster sees your company as high-risk. This one takes some effort to establish. Even in states where the employee has full choice of providers, they will likely go to the physician that your company recommends 80% of the time.
A shoddy or no return to work program – this one can turn a regular claim into a permanent total claim very quickly. Many industrial commissions and all adjuster take notice when an injured employee cannot be returned to modified duty. The days of firing the injured employee (in most cases) are long gone. Once again, your organization sticks out as a high-risk employer. The adjuster may set or add in reserves that equate to a high-risk employer.
Employee treated like they are no longer part of the company – this is one area that will almost always result in attorney representation. If the employee feels like everyone is against them, they will find someone that will be glad to represent their interests for a price. This one is very easy to fix. An employer’s internal controls should facilitate how the employee is treated by the company. Remember, as in #2 above, the adjuster has to deal with your choices on the claim. The wrong choices can result in large reserve increases initially.
Not taking #1 – #4 seriously – an employer may write a large manual on controlling Workers Compensation. I have dusted those off many times when consulting with employers. The manual was great but unused in those situations. #1 – #4 above is multiplicative or additive when an adjuster starts to establish the reserves. In fact, many reserve worksheets have checklists for #1 – #4 right on the reserving sheets.
Twilight Zone (c) Phone Calls – this one goes hand-in-hand with #1 above. If the first introduction to a workers compensation claim is a call from an unknown medical provider on an unknown claim, the employer just put the red flag on the file as a high-high risk employer. Check out the link for a better description of those types of those phone calls.
Not Knowing Your Adjuster’s Names – If you do not know who is working on your claims, then that should be an internal red flag that your company is not working with your claims adjusters. Establishing a working relationship (by email) reduces your company’s perceived risk factor with the adjusters. Quite a few employers have us track their claims for them. The first thing I do is send the adjuster a nice – hey let’s work together email.
Not Knowing Your E-Mod, LDF, or Total Claim Payments – this comes from my 5-minute company safety analysis article. All senior management, business owners, safety officers, risk managers, or company claims administrators should know this number cold without having to look it up. If you do not know the number, how can you tell how your company is doing with #1-#7 above? This is similar to your location finder on your smartphone. The maps function will not work if you do not know where you are presently.
Not Having Your Loss Run At Your Fingertips – this one is the same as #8, but on a larger scale. If you do not know your losses, you just shut off the location finder on your smartphone. Online claims access should be viewed as beyond critical, especially near your Unit Statistical Date. How can you talk with your adjuster when you have outdated data? Emailing (not calling) your claims adjusters with old data does not look good.
Like it or not appearances and first impressions count – For instance, I am sitting here now with a large claim on my desk that I have been asked to assess the proper reserves. What do you think I noticed in the file review – yes, these things work the same for workers compensation reserve increases as for an after-the-fact-analyses.

Many more reasons do exist to have a large workers compensation reserve increase or have the initial reserves set very high. Feel free to add more in the comments section.

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Micro-Captives (Offshore) Still on IRS Dirty Dozen List – At Bottom

May 23, 2018 By JL Risk Management Consultants

Offshore Financial Arrangements Including Micro-captives Still On Watch List

Most micro-captives are a legitimate way to offshore the self-insurance of Workers Compensation benefits. The IRS released its list of the Dirty Dozen for 2018 a few months ago. Offshore financial arrangements filled the #12 of 12 spots.

Public Use License – Library of Congress

Micro-captives, better known as 831(b) Captives were unfortunately heavily abused for many years. In fact, some of the owners issued themselves debit cards to draw the money out tax-free. Such tax abuses immediately caught the watchful eye of the IRS. I learned of such abuses at a previous CICA Conference in Orlando.

The maximum amount limit on 831 (b) Insurance Captives was lifted to $2.3 million for 2018. Could an offshore micro-captive provide enough protected capital to finance the handling of a group of Workers Compensation claims? Yes, the program would be viable. However, $2.3 million can easily be expended with just a few claims.

Aggregate reinsurance would be needed if the claim payouts reached the $2.3 million maximum. Some micro-captives have even re-insured themselves with another micro-captive. One has to be careful when stacking one captive on top of another to re-insure of the captives.

Please see the list of the IRS’s Dirty Dozen for 2018 below:

Phishing
Phone Scams
Identity Theft
Return Preparer Fraud
Fake Charities
Inflated Refund Claims
Excessive Claims for Business Credits
Falsely Padding Deductions on Returns
Falsifying Income to Claim Credits
Frivolous Tax Arguments
Abusive Tax Shelters
Offshore Tax Avoidance: Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. IR-2018-64)

An excerpt from the above link is below:

Hiding Income Offshore Using Micro-captives

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Over the years, numerous individuals have been identified as evading U.S. taxes by attempting to hide income in offshore banks, brokerage accounts or nominee entities. They then access the funds using debit cards, credit cards or wire transfers. Others have employed foreign trusts, employee leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as bankers and others suspected of helping clients hide their assets overseas.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward to voluntarily disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations.

———-

The above passages should not discourage any legitimate Workers Compensation Micro-captive from being formed and used to cover claims. Recently, Congress even redefined some of the 831 (b) captive arrangement rules to remove any ambiguities.

Most offshore domiciles/jurisdictions want you to input at least $250,000 upfront to begin a micro-captive. One large differentiation among the domiciles is the expenses charged to set up an 831 (b) captive.

Please note that I am not referring to onshore domiciles.

I do not tout myself as a captive expert. However, I have facilitated the runoff claims for two failed captives over the last few years. From the claims end, I have learned what to and not to do with the financing and claims handling of micro-captives.

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Predictive Analytics Is Now Opioid Buzzword Replacement

May 18, 2018 By JL Risk Management Consultants

Predictive Analytics Replaces Opioid Buzzword

Predictive Analytics for workers compensation claims adjusting still has not proven itself as a cost saver. Please note that I am referring to workers compensation only.

picture wizard predictive analytics crystal ball

Public License – Wikimedia-The Wizard

Predictive analytics for other lines of casualty insurance such as auto and property damage has shown some promise over the years. However, workers compensation adjusting and reserve analytics have not reached the point as a viable option.

One of my longtime workers comp compatriots – Mark Walls of Safety National went as far as calling analytics a myth. That is very strong language, but I cannot find one analytics package, app, program, or cloud-based analytics that would allow me to challenge Mr. Walls’s assessment.

Mark and I agree down the line on many facets of workers compensation. With my actuarial background, I often give any type of statistics a wide berth to enhance the accuracy of workers compensation benefit management.

The bottom line is that I am still waiting for a great analytics package outside of an Excel(r) spreadsheet that would make me feel very comfortable with professing that “workers compensation claim and reserving analytics have arrived.” I still cannot even begin to utter that phrase. Why?

Two different random variables enter into the equation. Every injured employee has a different “healing window” of time to physically and mentally recover from an injury and return to the workplace. The other variable is the mental healing capacity of the injured worker. No two people look at a fractured arm in a cast with the same outlook.

So let us look at what I am talking about in a formula for the number geeks such as myself:

Known and predictable statistic (1) * known and predictable statistic (2) * known and predictable statistic (3) = accurate predictive analytic

but

Known and predictable statistic (1) * known and predictable statistic (2) * known and predictable statistic (3) * physical healing random variable * mental healing random variable = shot in the dark at best

Man With Predictive Analytics Neck Injured

Extended License Stockunlimited.com neck injury

As I have said, and Mark Walls says in his article – Show me the analytic. I will do an article at length on any software, etc. if I can be presented with one package that can predict claim outcomes.

That is why Reserving is an Art, not just a formulaic contrivance of a few numbers on a spreadsheet. As Mark mentioned in his article, good experienced adjusters still survive as the best analytic tool for foretelling how a claim will turn out. Hold on, though, please see the word good in the prior sentence.

Unfortunately, not all experienced adjusters are great at reserving. Then again, they can be the best claims handlers on earth using one technique. It is called The Golden Rule.

As with my search for a decent Workers Compensation app, I invite any person or company to see me a claims predictive analytics package that can predict workers compensation claims outcomes.

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Google Panda Penguin Penalties Can Pigeon Hole Blog

May 17, 2018 By JL Risk Management Consultants

Google Panda Penguin Penalties

The Google Panda Penguin penalties can wreak havoc on a long standing blog. J&L Risk Management Consultant’s blog experienced the wrath of the penalties a few years ago. However, the wrath was due to a change in the rules, not anything we were doing wrong at the time. Well, the link-buying thing from 8 years ago was one on us.

Amsterdam Tumbler Pigeon – Public License

Google Panda Penguin penalties have now made it very difficult to repeat subject matter. For instance if I write about Temporary Total Disability, Google scores the post as a no-count and discounts the other articles that cover Temporary Total Disability. When I started the blog ten years ago, there was no concern for duplicate content if it was not spammy. How times have changed.

The best way to discuss the matter is by realizing that there is only so much technical blog writing on Workers Compensation. I wanted to return back to the basics and cover the terms which are the foundation of technical knowledge in Workers Comp >>>no such luck. I have written on them too many times.

I did experience writer’s block a few years ago.

Blog Icon Google Panda Penguin Penalties On Globe

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As I sit here in the Denver airport, (good fast WiFi here), I have contemplated how to fix the situation without having to cause major changes to the blog. The major changes would be having to combine articles (yuck) that cover the same subject. Does everyone really want to read articles that drone on forever? (Of course not).

Workers Comp is a static subject. I can pull up an article from 10 years ago and no one would recognize it as being that old. I do include classics in the weekly newsletter a few times per month that covers the old but good articles. The newsletter production has kind of been affected as I cannot produce a newsletter each week with three or more fresh articles.

I think the opioid subject has long been a worn path that I do not need to walk down. Please, if anyone has any ideas or suggested subjects, email, comment or call me to discuss.

I have found that J&L article readers generate great ideas for me to cover in an article. I have written over 2,000 articles. I have eliminated, combined, and carved out 200+ articles to lessen the penalties (if they exist). Hopefully, we will be able to rewrite some of the articles without experiencing any Google Panda Penguin penalties.

What Is A Workers Compensation Permanency Rating?

May 2, 2018 By JL Risk Management Consultants

Question From One Of Our Devout Readers on Workers Compensation Permanency Rating

A Workers Compensation Permanency rating can also be called a PPD Rating or Permanent Partial Disability Rating.

picture of circular slide workers compensation permanency rating rule

public use license

Each state is very distinct on how they handle permanency ratings. PPD ratings by physicians differ in some states. For example, – are the AMA guidelines used or not.

Some states even set the ratings themselves using the doctor’s rating as a basis.

So, this article will cover just the generic basics of a Workers Compensation permanency rating. If you are an adjuster or anyone that handles Workers Comp benefits that is reading this article, most renowned law firms have a “cheat sheet” on Workers Compensation law including PPD rating benefits.

If your online claims system does not provide you with the associated number of weeks for each injury, you should contact the law firms you use for a “cheat sheet” for each state in which your employer has workers compensation interests.

Signing Workers Compensation Permanency Rating Disability

Public Domain

They are called cheat sheets as no other term fits. The cheat sheets are not illegal or wrong to use. That name is just the name that they are given in the WC community.

For example, we will use our HQ state, North Carolina for a list of the applicable permanency. As mentioned before, most states, but not all have permanency rating.

If you want to dig into workers compensation permanency rating, then try looking here. This coverage is very in-depth. For just the benefits per part of body loss, you would want to use the chart below.

Let us use the thumb for example –

The injured employed severely fractured his/her left them. The rating formula would be:

workers compensation benefits rate x maximum number of weeks x physician rating

(As an important side note the benefits rate usually equals 2/3 of the injured employees total average before tax wages)

If the injured employee had a 30% rating to the right thumb, then the formula would be:

$400 * 30% * 75 = $9,000.00

The formula such as the one above generates so much debate. Is $9,000 worth using 30% of the use of one’s thumb? I will leave that to the debaters.

97-31. Schedule of injuries; rate and period of compensation.

woman athlete long jump workers compensation permanency rating disability

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In cases included by the following schedule the compensation in each case shall be paid for disability during the healing period and in addition the disability shall be deemed to continue for the period specified, and shall be in lieu of all other compensation, including disfigurement, to wit:

For the loss of a thumb, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 75 weeks.
For the loss of a first finger, commonly called the index finger, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 45 weeks.
For the loss of a second finger, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 40 weeks.
For the loss of a third finger, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 25 weeks.
For the loss of a fourth finger, commonly called the little finger, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 20 weeks
The loss of the first phalange of the thumb or any finger shall be considered to be equal to the loss of one half of such thumb or finger, and the compensation shall be for one half of the periods of time above specified.
The loss of more than one phalange shall be considered the loss of the entire finger or thumb: Provided, however, that in no case shall the amount received for more than one finger exceed the amount provided in this schedule for the loss of a hand.
For the loss of a great toe, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 35 weeks.
For the loss of one of the toes other than a great toe, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 10 weeks.
The loss of the first phalange of any toe shall be considered to be equal to the loss of one half of such toe, and the compensation shall be for one half of the periods of time above specified.
The loss of more than one phalange shall be considered as the loss of the entire toe.
For the loss of a hand, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 200 weeks.
For the loss of an arm, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 240 weeks.
For the loss of a foot, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 144 weeks.
For the loss of a leg, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 200 weeks.
For the loss of an eye, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 120 weeks.
The loss of both hands, or both arms, or both feet, or both legs, or both eyes, or any two thereof, shall constitute total and permanent disability, to be compensated according to the provisions of G.S. 97-29. The employee shall have a vested right in a minimum amount of compensation for the total number of weeks of benefits provided under this section for each member involved. When an employee dies from any cause other than the injury for which he is entitled to compensation, payment of the minimum amount of compensation shall be payable as provided in G.S. 97-37.
Department Of Foreign Affairs And Trade By 2.0 commons.wikimedia.org
For the complete loss of hearing in one ear, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 70 weeks; for the complete loss of hearing in both ears, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 150 weeks.
Total loss of use of a member or loss of vision of an eye shall be considered as equivalent to the loss of such member or eye. The compensation for partial loss of or for partial loss of use of a member or for partial loss of vision of an eye or for partial loss of hearing shall be such proportion of the periods of payment above provided for total loss as such partial loss bears to total loss, except that in cases where there is eighty-five per centum (85%), or more, loss of vision in any eye, this shall be deemed “industrial blindness” and compensated as for total loss of vision of such eye.
The weekly compensation payments referred to in this section shall all be subject to the same limitations as to maximum and minimum as set out in G.S. 97-29.
In case of serious facial or head disfigurement, the Industrial Commission shall award proper and equitable compensation not to exceed twenty thousand dollars ($20,000). In case of enucleation where an artificial eye cannot be fitted and used, the Industrial Commission may award compensation as for serious facial disfigurement.
In case of serious bodily disfigurement for which no compensation is payable under any other subdivision of this section, but excluding the disfigurement resulting from permanent loss or permanent partial loss of use of any member of the body for which compensation is fixed in the schedule contained in this section, the Industrial Commission may award proper and equitable compensation not to exceed ten thousand dollars ($10,000).
For the total loss of use of the back, sixty-six and two-thirds percent (66 2/3%) of the average weekly wages during 300 weeks. The compensation for partial loss of use of the back shall be such proportion of the periods of payment herein provided for total loss as such partial loss bears to total loss, except that in cases where there is seventy-five per centum (75%) or more loss of use of the back, in which event the injured employee shall be deemed to have suffered “total industrial disability” and compensated as for total loss of use of the back.
In case of the loss of or permanent injury to any important external or internal organ or part of the body for which no compensation is payable under any other subdivision of this section, the Industrial Commission may award proper and equitable compensation not to exceed twenty thousand dollars ($20,000). (1929, c. 120, s. 31; 1931, c. 164; 1943, c. 502, s. 2; 1955, c. 1026, s. 7; 1957, c. 1221; c. 1396, ss. 2, 3; 1963, c. 424, ss. 1, 2; 1967, c. 84, s. 3; 1969, c. 143, s. 3; 1973, c. 515, s. 3; c. 759, s. 3; c. 761, ss. 1, 2; 1975, c. 164, s. 1; 1977, c. 892, s. 1; 1979, c. 250; 1987, c. 729, ss. 7, 8.)

You may wish to look at this reference to find more info on any workers compensation permanency rating.