2022 Workers Comp Self-Insured Resolutions – Post-Pandemic(?)
The 2022 Workers Comp self-insured resolutions should be looked at as a bridge from the pandemic to the post-pandemic era.
Over the last 13+ years including 2021, I have written articles on workers comp resolutions. Our self-insured clients and article/newsletter readers always remind me to not forget 15% of the market – which is self-insurance. As every year for the last 13 years, I agree and publish an article for the companies and organizations that are paying workers comp out-of-pocket.
Check out the 2021 workers comp self-insured resolutions at this link.
Update – I decided to add in the 2021 resolutions below to save time and the reader having to flip back and forth between 2021 and 2022. Check the bottom of the list for the ones added for this year. I have removed any out-of-date recommendations and italicized any additions to the 2021 resolutions.
- You are paying directly from your budget. With the advent of COVID – reviewing your loss runs online, not on paper at monthly or quarterly intervals is beyond critical now. Following the payment patterns become critical if you have incurred several claims. Monitoring the outflows of claims payments cannot be just an exercise in reviewing a loss run. You must 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. We have heard of many claims where the treatment stopped due to the injured employees not wanting to visit a doctor’s office during the pandemic. Most of the Industrial Accident Boards/Workers Comp Commission decisions that I have seen sided with the injured employee on the office visits and other treatment hesitancy.
- 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. If your company has had to cut back its workforce, self-insurance may not be the correct option. The fixed costs per state may not justify being self-insured in states where you were self-insured in the past. A self-insured’s Risk Manager or consultant needs to heavily analyze this concern. Payrolls and production may have been reduced to a level where self-insurance may cost more than it saves an employer.
- 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. With the move to home-based adjusters, emailing the adjuster is even more recommended instead of calling. The only time a call is recommended is when there is an emergency or when a new adjuster takes over a claim as a “hello” phone call.
- 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. The LDFs may become more inaccurate if they are backloaded with full claims payment data even though your present and future workforce may have shrunk. Review the number you submit to any actuary very closely.
- 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. See #3 above, is your company still large enough or going to be large enough in a certain state to justify self-insurance? Every company wants to be self-insured, but should you stay with self-insurance – a hard one to call.
- Setting your level of reinsurance can be tricky. Most potential self-insureds think that $250,000 is the only level. Many active reinsurers reinsure 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 t0 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. PEOs have become a very viable option since the start of 2020. Yes, PEOs consist of returning to more of a premium structure than resembling self-insurance.
- 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. Return to work will take on a new connotation this year with at-home workers returning to work. The return to work for injured employees may have been delayed due to COVID-19. We have seen many office visits and surgeries postponed or canceled since March of 2020. Having patience with medical treatment delays seems to have worked out for most employers. Office visits and some surgeries have begun again in some states. Each state has its own protocols on medical treatment. #11 below became very important in 2020.
- Medical networks become more critical to self-insured 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. As with the recommendations for non-self-insureds, COVID-19 may have made your workforce become very distributed across a larger area. If someone is injured while working at home, where do you send them for treatment if they have a home worker injury? Yes, they do happen. Workers Comp Boards do not appreciate requiring an injured employee to drive 1.5 hours for workers comp treatment.
- Your program will likely take hits over the years. Not every year can be chalked up to a banner year. Risk is a risk. Expect the best but prepare for the worst (reinsurance, medical networks, return to work program, etc.). Update – check out next week’s articles where a 2022 workers comp self-insured may have gotten shorted vs. an E-Mod-based insured. I will add a link to the new article when I finish it next week.
- Keep your C-Level Executive or company owners updated on how the program progresses over time. Many times, I, as a consultant, informed the Executives 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. With many employees being spread out over a larger area including your injured employees, C-Level Executives need to know very current information on the company’s workers compensation program. A loss run analysis report works well. Keep it concise. With all the remote working going on, this is one of the main concerns that we have heard from company owners and C-Level Executives – they do not what is going on as well as when everyone was in the same office.
- 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!)
- New – Treatment Delays – Check with your TPAs medical network and providers to make sure that there are minimal delays in employees receiving treatment. Surgeries and office visits have been often canceled leaving the injured employees falling out of the treatment system. Telemedicine appointments are some of the more popular ways to keep injured employees in the medical treatment loop.
- New – Handling Double Return To Work – If an injured employee is released to return to work, but no positions are available due to the pandemic or a company downturn, then you may end up having to pay them Workers Comp until a job is available.
I could cover more items. I did not want to have the 2022 Workers Comp Self-Insured resolutions turn into a booklet that is too long to read in five minutes.