2020 Self Insured Workers Comp Resolutions – Not Changing Success
The 2020 Self Insured Workers Comp Resolution centers around sustaining success in your program and fixing a few issues that may be costing you dearly. Some of these resolutions come from the old resolutions.
Search self-insured resolutions for suggestions from the past.
- You are paying directly from your budget. Following payment patterns becomes critical if you have incurred several claims. Monitoring the outflows of claims payments cannot be just an exercise in reviewing a loss run. You have to dig deeper into the granular level of individual payments. Remember, the adjusters are spending directly from your accounts.
- Those festering medical-only claims usually turn out to be your worst nightmares. Watch the claims closely that have no Indemnity paid but have a large amount of medical paid quickly or a building medical reserve with no closure. Claims festering becomes a ticking time bomb if these claims are not monitored.
- Is your company still large enough in a state to justify self-insurance? Companies change locations quickly. Many states require a minimum of liquid assets and bonds per state, not per company. Watch the minimums in each state.
- Having a working relationship with your claims adjusters becomes a must from day one. See #1 above. The adjusters in your TPA become quasi-employees as they are spending directly out of your budget. One of the first tasks we often perform in a self-insured review involves establishing which adjusters are working on what claims. Most claim adjusters welcome emailed questions if they are not vague or argumentative.
- Obtaining and understanding your LDF (Loss Development Factor). Yes, your company may have gotten away from the E-Mod system. LDFs become your claims and risk management GPS. Many software packages will produce LDFs. The inputs into the equations sometimes cause confusion and skewed numbers. If you do not feel comfortable calculating your LDFs, seek out assistance.
- Becoming self-insured is not a fashion statement. I have analyzed and advised many self-insureds to stay where they are in the insurance process. Just because you are now large enough to be self-insured does not mean you should take steps to leave the E-Mod system behind.
- Setting your level of reinsurance can be tricky. Most potential self-insureds think that $250,000 is the only level. Many active reinsurers reinsure worker’s comp self-insureds from $100,000 per claim. Yes, the insurance is more expensive than $250,000 per claim. One has to stop and think if they would have any claims that would split between $100,000 to $250,000.
- Asking the State for assistance. States have become much more helpful to self-insureds. Each state’s Department of Insurance does not want to have a bucketful of failed self-insureds on their lists. Assistance with self-insurance applications seems to have increased over the last 10 to 15 years. Not too long ago, the process was almost a guessing game.
- Looking at other insurance markets. The alternatives to self-insurance have become a cottage industry of sorts. Many consultant companies, agencies, and captive managers aligned their services as alternatives to self-insurance without incurring the full risk. These companies have quietly placed themselves in certain markets and performed well.
- Intensify the use of My Six Keys. The keys have helped self-insureds very often over the last 20 years. See this page for the Six Keys. You probably already know them. The keys have not changed since the 1980s.
- Medical networks become more critical to self-insureds success over the years. Having an industrial-minded physician with a good bedside manner makes claims costs go down. Remember, you are spending directly out of a budgeted account. Return to work becomes tantamount to your program’s success.
- Your program will likely take hits over the years. Not every year can be chalked up to a banner year. Risk is risk. Expect the best but prepare for the worst (reinsurance, medical networks, return to work program, etc.).
- Keep your C-Level Executive or company owners updated on how the program progresses over time. Many times, I, as a consultant, informed the Execs what was going on in their programs. A truncated loss run with a mini-claims status works most of the time. Do not operate on an island.
- Watch the budget for expenses (ALAE) that are not related directly to claims payments. Private investigators, defense attorneys, rehabilitation nurses (well worth it), and other ALAE are now being paid directly out of your budget. In some states, the costs to handle and facilitate claims totaled more than the claim payouts (Ouch!)
- Look at the E-Mod system for a few pointers. Even though your company pays all the workers’ compensation costs, step back from payments, and analyze the risks. The number of accidents you may have in a year may look small in total. However, the E-Mod system looks at the number of claims per year being riskier than just one disastrous claim. Any one or more of the smaller claims can turn into a huge claim. A claim is a bundle of risks. Many claims equal a snowball of risk going down the hill. Rating bureaus have adjusted their formulas to reflect an increased risk with a group of claims vs. one bad claim. Why did they adjust the numbers? They have databases that show repetitive accidents cause a higher risk for a certain employer.
I could post many more resolutions for self-insureds. Many times I write articles pointed toward non-self-insureds. This article was purely for the 2020 Self Insured Workers Comp resolutions. Good luck in 2020.
2021 Update – self insurance has become much more complicated with the COVID-19 claims situation. Even though voluntary insurance policies exclude COVID-19 claims from the Experience Mod, self insurers have to pay the claims out of pocket – ouch!
You may have to rely very heavily on your TPA making full investigations of the COVID-19 job-related claims. Communication with your workers comp adjusters is critical on these claims. The same can be said for the years after your 2020 self insured workers comp program.
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