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What Is A Guaranteed Cost Program In Workers Compensation?

September 20, 2018 By JL Risk Management Consultants Leave a Comment

Article Reader Asks Good Basic Question on Guaranteed Cost Program

What is a guaranteed cost program? Is that the type of policy I have in place now? A great question on a basic subject was emailed in by one of our new newsletter subscribers.

Pic of old workers compensation guaranteed cost program policy

Wikimedia Public License

A Guaranteed Cost program means that you will pay a flat fee of sorts for a given policy period. The policy is not adjusted for losses as in a loss sensitive program. Most small and medium-sized businesses will usually find a guaranteed cost program as the most desirable insurance policy to cover their workers compensation losses.

The basic guaranteed cost program premium is calculated from a rate multiplied per 100 dollars of the employer’s payroll. The final workers compensation bill for the policy period occurs after the premium audit for that policy year.

Once the policy is issued with the rates per $100 of payroll, those rates usually cannot change during the policy as with a loss sensitive program.

Loss sensitive program variables can be adjusted during a policy year depending on the amount of losses incurred during the policy year.

Guaranteed cost programs transfer the risk of the insured and administrative costs directly to the carrier once the policy is issued. The total transfer of risk guarantees the cost at a certain level.

As businesses grow, the need to retain part of their losses for a lower premium can lead to an employer to use deductible programs such as a large deductible. The large deductible policy level will usually be $250,000 per claim.

The large deductible policies require the employer to “guarantee” more of the cost and not the insurance carrier.

The employer should always not just accept one guaranteed cost program as the cheapest policy. Comparing at least three quotes per year may generate surprising results.

As your company is a small but growing company, a guaranteed cost program will likely be the best method to control your workers compensation costs. Your company cannot likely bear the brunt of financing a large claim other than guaranteed cost.

Switching Workers Comp Carriers Early Can Be Expensive

September 19, 2018 By JL Risk Management Consultants Leave a Comment

Switching Workers Comp Carriers Too Early Very Costly

Switching workers comp carriers can be a trying task at renewal. During the year, that option can be very costly due to the Short Rate Penalty. The various state insurance departments decided to eliminate or at least heavily discourage employer jumping from policy to policy to find a better deal.

Bringing in another carrier may save some premium. However, the employer has to weigh out the cost/benefit of making such a major move. The charts below – one from Rhode Island/California shows the devastating effect of these midterm changes.

Switching Workers Comp carriers in the first month in California or Rhode Island:

California and Rhode Island have very different workers compensation systems. The chart for the short rate penalty is exactly the same for the two states.

Looking at the chart, one can see that the canceling the first day of the policy costs 5% of the total policy. Yes, there are many calculations to the process of the carrier assigning a short rate penalty. The main thing the chart shows is that switching workers comp carriers will incur a large penalty for a small number of days covered by the carrier.

Switching workers comp policies after a premium audit dispute costs employers dearly in some cases. The percentages level out after six months into the policy. By then, the carriers figure they have collected enough premium to spread it over the risk, especially the IBNR (Incurred But Not Reported) claims.

I have seen very little carrier leeway with the percentages charged for the short rate penalty. Sometimes, it may be better to ride out the policy and then non-renew with the carrier.

As mentioned earlier, a cost-benefit analysis would be the best way to see if switching workers comp carriers mid-policy will be worth the money and hassle.

Filed Under: Short Rate Penalty Tagged With: California, cost benefit analysis, Rhode Island

Personal Sensitivity Claims A Complicated Workers Compensation Matter

September 6, 2018 By JL Risk Management Consultants

Personal Sensitivity Claims – Frustrating For Employees and Adjusters

A large number of personal sensitivity claims have created a large chasm between workers compensation adjusters and employees who report this type of claim.

picture of personal sensitivity claims rash

Wikimedia Commons License – Skoch3

General sensitivity claims can be defined as where the employee reports a claim that may have been caused by exposures that the general public faces and are not specific to the job.

The maddest employees with the smallest workers comp claims come into play when adjusters assess a claim – usually medical only claims – as not being specific to the risks of the employee’s job.

The best example:

Part of an employee’s job involves washing down a workspace. The cleaner used is nothing more than Dawn soap and warm water.
The employee reports a claim that the Dawn soap irritated their hands and caused a rash on their arms.
The employee seeks medical treatment for the irritation and rash
The medical only adjuster receives the first report of injury.
The medical only or lost time adjuster denies the claim as personal sensitivity
The employee becomes very upset that the claim is not paid under Workers Compensation even though they may have health benefits.
These claims have been litigated in certain states.

Is it a better risk management technique to accept this claim and pay it rather than have a disgruntled claimant on their hands?

If the company that processes the claim is a Third Party Administrator (TPA), then the employer should have a large say as to whether they claim is paid instead of creating a disgruntled employee situation. Remember, an adjuster that works in a TPA environment is spending the money out of a self insured’s account.

I remember having an agreement with certain self insureds that personal sensitivity claims are to be paid and not denied. Some of those very small claims have turned into much worse claims that could not be denied later in the claim.

This type of claim has been ruled on in many jurisdictions. I cannot make a blanket statement as to which states allow or do not allow the claim.

This situation is one that should be run by the defense attorneys that the adjuster usually works with on their claims. Personal sensitivity claims may seem too insignificant to speak with a defense counsel. It will be well worth your time to know the answer even if you have not handled personal sensitivity claims.

I wanted to bring this issue to the attention of claims departments, safety managers, risk managers, and our other 7,000 weekly newsletter readers.

Filed Under: Medical Only Claims Tagged With: Claims Adjuster, injured employee

Civil Engineer Asks Great Worker Compensation Class Code Question

September 6, 2018 By JL Risk Management Consultants

Civil Engineer Was On The Right Track With Workers Compensation Codes

A civil engineer was looking over the house that I am presently selling. He had asked me what I do for a living. I had told him that I am a workers compensation consultant.

Public Wikimedia License – Blkutter

The civil engineer posed this question –

I work as a civil engineer. My company is moving all the civil engineers from a remote location into the main plant. Today we were told that they are setting up an offsite trailer for us with a barrier fence between the plant and us.

Why would they put us so far away from the plant and build a fence between the trailer and the plant? Is it some risk factor?

I said – “Well your plant manager did not do that because he does not like the civil engineers. It could be due to the Workers Compensation rating system. ”

I went on to explain that the civil engineers working inside the actual plant would likely cost the company a large amount of workers compensation premiums as the civil engineers could be grouped into a plant workers classification code.

The plant manufacturers large metal pipes so the difference would be huge in the Workers Compensation rate. I pulled out my trusty smartphone and pulled up the North Carolina Rate Bureau advisory lost costs.

Class Code – 8742 (Civil Engineer that does not handle material manufactured) – .26 per $100 – very low rate
Class Code- 3022 – (Pipe Mfg) – 4.81 per $100 – much higher rate

Comparing those two classification codes = 4.81 / .26 = 18.5 or 1850% more expensive if the civil engineer group was included in the pipe manufacturing Class Code. Ouch!

He said so you are telling me that there is an 1850% difference if we work directly inside the manufacturing plant even though we are not involved in the manufacturing process? I said yes.

One has to remember that these are advisory rates and not the insurance carriers rates due to the Loss Cost Multipliers filed by all workers compensation insurance carriers.

The average civil engineer salary is $83,750. Let us take that a step further.

83, 750 * (.26/100) = $217.75 in yearly premiums for Civil Engineer

83,750 * (4.81/100) = $4,028.38 in yearly premiums for Civil Engineer working in plant

And yes, I have made a ton of assumptions, but the idea is the same. The plant manager and likely the CFO were smart not to bring the civil engineers into the plant. I am sure there were many other considerations. Workers Comp rates would have likely been one of the considerations.

Filed Under: classification code

Georgia Fee Schedule Possibly Needs ASC Makeover – WCRI Study

August 30, 2018 By JL Risk Management Consultants

WCRI Study Shows That Georgia Fee Schedule For ASC’s Not A Cost Reduction

Recent Georgia Fee Schedule changes to Ambulatory Surgical Centers (ASC’s) did not actually reduce the costs or increase the level of care. According to Inova, ASC’s are facilities where surgeries that do not require hospital admission are performed.

picture of outpatient georgia Fee schedule ASC

Public License Wikimedia Leoboudv

Our blog readers know that I am a huge proponent of medical fee schedules as one successful way that state governments can assist the employers in their respective states.

To date, virtually no levels of care fell after a state adopts or changes its workers comp medical fee schedules. Workers Comp still pays medical practitioners well. The only factor which affected the level of care that I have seen was an injured employee in a very remote location may have to travel far for a level-two physician.

Sometimes the fee schedules have unintended consequences or do not result in a reduction of what could be seen as very expensive medical treatment charges compared to the norm. The Georgia Fee Schedule seems to be one of those rare cases where a retooling may be required to have the desired effect.

WCRI (Workers Compensation Research Institute) recently published a follow up study on the Georgia Fee Schedule changes enacted in 2014.

According to WCRI:

Effective May 1, 2014, Georgia changed its ASC and hospital outpatient fee schedule to follow Medicare’s Hospital Outpatient Prospective Payment System (OPPS) ambulatory payment classification approach. The new fee schedule method set ASC and hospital outpatient facility fee schedule rates at 2.25 times the Medicare OPPS rates that applied to hospital outpatient departments. While prior studies show that average facility payments in Georgia increased faster than in other states after 2014, little was known about the main factors behind these trends. Although Georgia made additional fee schedule rate changes in 2018, those are not reflected in this analysis.

Payments to Ambulatory Surgery Centers in Georgia covers the recent WCRI study on what caused the post- 2014 ASC ineffectiveness of the Georgia fee schedule.

Filed Under: fee schedule Tagged With: medical cost, outpatient hospital

California Supreme Court Decision Independent Contractors Definition

August 29, 2018 By JL Risk Management Consultants

California Supreme Court Changes Definition of Independent Contractor

The California Supreme Court recently decided how to distinguish a contractor from an employee for the Golden State’s employers.

The decision is called the Dynamex decision. The California Supreme Court decision PDF can be found here. For the legal diehards, the decision is 85+ pages.

Postcard Graphic California Supreme Court Golden Gate Bridge

Public Domain – Tichnor Bros

However, I do recommend downloading it and reading over it as “what happens in California’s Workers Comp system will be coming to your state or states in the future.” <<<saying that I coined>>>

Many articles have been written in this blog which center around the IRS definition of an independent contractor. The IRS has not updated the subcontractor pages since April, 2018. We watch to see when the contractor pages are updated to pass them along to our readers.

California’s former rules and laws on subcontractors vs. employees seemed to be more liberal on allowing companies to operate as independent contractors. California’s gig economy remains massive and still growing.

According to Workcompcentral.com, (behind paywall) the high court in the Dynamex created a three-part test:

Requires businesses to show that a person who is classified as an independent contractor is free from control and direction
Was hired to provide a service that the company doesn’t usually offer
Is customarily engaged in an independent established trade.

The decision seems more restrictive than what California had in place. The second part of the test (bolded above) creates a new wrinkle in the employment determination.

For comparison, the most update IRS determination is (with links that explain each aspect):

_____________

Common Law Rules

Facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

____________

Even the IRS says there is no “magic way” to determine the employee/subcontractor relationship. The California Legislature will likely review in their next session the likely effects of this recent California Supreme Court decision.

Filed Under: California, independent contractor Tagged With: Dynamex, IRS rules, law rules

Medical Treatment Networks Save Money – Win Win Win On Claim

August 23, 2018 By JL Risk Management Consultants

Medical Treatment Networks – A Little Work Saves Big Claim Dollars For All Types of Employers And Provides Injured Workers With Top Notch Treatment

Workers Compensation Medical treatment networks remain the mother of all workers comp savings plans. If an injury occurs, knowing the local industrial minded physicians and other medical providers can save a ton of premiums (voluntary market) and budgetary dollars (self-insureds, large deductibles, etc.)

graphic of Workers Comp Medical Treatment Networks

Licensed – Wikimedia Creative Commons

We received such a large readership rate and buzz on the article from last week on injured employee trust. This led me to extract a piece of my cornerstone manual.

Our article readers will receive a great freebie today – this advice used to cost money – you had to buy the manual on medical treatment networks from me a few years ago. From my 1996 Workers Compensation manual – Keys To Cutting Your Workers Comp Costs – From The End To The Beginning – the verbatim excerpt follows on medical treatment networks: (One Of the Six Keys) –

Medical Treatment Network

THIS is the most critical part of any WC claim without question. One very important point to remember is the Industrial Boards and Commissions in each state that oversee Workers Compensation claims consider the medical providers, especially the treating physician, as the only impartial parties/witnesses in the WC claim.

Some states require that a medical panel be available to all employees so that all employees have immediate and proper medical care. All employers in all states should have a panel of physicians.

Some states allow the employer to have the choice of medical providers for the employees, while others allow the employee to choose their own physician. However, studies have shown that employees in states that allow the employee to choose the physician will usually attend the paneled physician appointment.

The treating physician makes the determination of what medical costs will be incurred, the length of time the employee is out of work, and if the employee has any permanent disability. A good industrial-minded physician in the local area is very important to your Workers Compensation program.

I recommend a walk in clinic or an urgent care clinic to initially treat all injuries. A large number of WC urgent care centers are cropping up around the US.

The most important physicians for the more serious injury are the level two physicians. These physicians are usually surgeons (Orthopedic, Neurosurgeon, etc). The level-one physicians should know who your preferred level two physicians are before a referral is made.

If an injury is very serious, the employee should be taken to the emergency room at the nearest hospital. It behooves the employer to know the nearest industrial-minded orthopedists, neurologists, orthopedic surgeons, and neurologists in their general area (within 150 miles). The physician network often has to be expanded beyond the local area due to availability of specialty medical providers.

Win Win Win on Medical Treatment Networks

Earlier I mentioned the win-win-win situation when medical treatment networks are used by employers. The win-win-win results are:

First and foremost – the injured employee receives timely and proper care. No treatment delays exist in the medical section of the file. An employee that receives timely and proper treatment usually returns to work more quickly than an employee who is unhappy with their treatment. WCRI (research) performed a very large injured employee study that proves this point.
Medical control – the employer knows the employee is receiving the best care in the medical network or panel provided to the employee at the time of accident.
Insurance carrier or TPA – with a medical treatment network, the workers compensation adjuster does not receive the twilight zone phone call,. If the injured employee treats within a familiar network, the adjuster usually calculates that familiarity into the reserves on the file. <<very important. This importance also applies to self insured reserves.
Return to Work – with the adjuster, employer, and employee all on the same medical treatment network page, the return to work will likely be very smooth. BTW, return to work is another of the Six Keys.
Cost Savings – Using the TPA or insurance carrier networks usually result in a 15% reduction in medical fees. However, the medical providers in the network need to be researched heavily before coming up with a panel.

Setting up a medical treatment network requires a little work. Speaking with your carrier or TPA about their recommended industrial-minded physicians may be a good place to begin building the panel.

A local rehabilitation nurse (a recommended risk management strategy) may also be able to assist in forming industrial-minded medical treatment networks.

Filed Under: medical networks Tagged With: industrial-minded, Workers Comp manual, Workers Comp savings

Workers Comp Blogs May Have Good News Coming Soon

August 22, 2018 By JL Risk Management Consultants

Google’s Recent Core Update May Help Workers Comp Blogs And Other Insurance Bloggers.

Picture of workers comp blogs epidemic sitz bath

Licensed by Library of Congress (Wikimedia Commons) Unknown

Good News Travels Fast

Now may be a great time to start that Workers Comp blog . A medical-insurance-type blog would likely now be the best recommendation.

Workers Comp Blogs may have been given a boost by Google’s recent core update. The recent update given the name Google Medic by SEO bloggers seems to have given more credence to Workers Comp blogs (and other insurance blogs) by recognizing and re-ranking good content.

The medic update does seem to have increased the rankings of medical blogs – hence the name Medic. Medical-based bloggers may find their articles ranking much more highly – good for them.

How do I know this?

For months and years I have struggled to get this website’s articles to have higher Google and Bing rankings. The greatest advice I ever received was actually from the Matt Cutts (Google Spam Man) videos. It was the basic idea of – build it and they will come, or just produce the content, link it properly, and it will pay dividends.

I recently noticed many articles climbing the rankings for workers’ compensation keywords. The keywords took a jump recently – within the past week. My blog consultants – yes I have two- have worked diligently over the last two years in getting the most informative articles to rank so that Google and Bing searchers can find them more easily.

Of course, there was a commercial aspect to ranking highly in Google and Bing searches. However, to date, after 11 years, you will see no ads anywhere on the blog or the website.

Bottom line – If you have some type of medically related subject, you may want to start cranking out the articles. WordPress (what we use) makes the job much easier. Grammarly will help you greatly with proofreading (what we use).

Content looks to be back on top for now. Many spammy commercially based websites and blogs may see their rankings reduced in the next two weeks, if not already.

The final effect for workers comp blogs should be seen in about six months.

Filed Under: Google Tagged With: Bing, Grammarly, Matt Cutts

Workers Comp Documents Top Six Best Read on Paper – With Bonus

August 16, 2018 By JL Risk Management Consultants

Workers Comp Documents – Paper Is Best In These Instances

Many Workers Comp documents can be left as PDFs in a computer file. Some documents read better on paper. This article came about due to the article from two weeks ago on paper files in the age of the small screen.

picture of workers comp documents book folded to look like a heart

Public Use License – Wikimedia – Icely88

Most of these go well with a highlighter on paper. If you cannot stand reading anything on paper, you may be missing some important points. Why? We all read so many documents on a screen all day that we tend to rush over the top of them.

Policies

A policy and a highlighter can be your best tools for generating questions and possible savings. Workers Comp policies remain one of the better workers comp documents to print. Almost all policies were designed back in the time where everything was on paper. I had written on this subject a few times over the years. Follow the links to see those articles. You should always have a paper copy of your business policies of all types at your fingertips.

Rating Bureau Information or LDF For Self Insureds

We receive at least 2 – 3 call per week on these often misunderstood Workers Comp rating documents. Rating Bureaus (NCCI, WCIRB, and others) have designed the documents to be more readable in the past few years. California’s WCIRB has completely redesigned their rating sheets.

Rating bureaus can and often do make changes to your Experience Modification Factor for your current, present, and future E-Mods (X-Mods). Filing them away can cost big $$ if you find a past mistake.

Endorsements – very critical

By The National Archives U.K

Business owners, risk managers, and other company personnel are sometimes inundated with policy changes on any insurance policy. That is the nature of insurance. An endorsement can change any policy including your original policy Workers Comp documents. Those endorsements should not be just filed away. Your agent will be glad to discuss them with you on receipt.

Policy endorsements should be read and kept in a quickly accessible paper file.

Premium Audits Including Auditor Workpapers

Premium audit articles are very numerous on this website. See this premium audit search. As mentioned earlier, these are usually in PDF files. Many business owners and risk managers have remarked to me that going over the very important workers comp documents on paper was beyond critical to their Workers Comp budget.

First Reports of Injury

Most carriers and Third Party Administrators require the First Reports of Injury (FROI) to be filed online. Many now even charge extra fees if an employer files a 1st report on paper.

One concern here is the slowness of inputting your company’s injury report into the system. The first 48 hours set the tone and risk for the rest of the claim. <<<Yes, but you said this article concerns paper files.

Printing out a copy of the 1st report still remains an important task. Most insurance carrier and TPA’s systems allow for printing the document. How FROI’s look on the screen and paper can be very different.

I recommend printing it out and reviewing very carefully before submitting to eliminate mistakes. No one workers comp document can be more detrimental to your workers comp program than an inaccurate FROI.

All Workers Comp Industrial Commission or Court Mail Including Forms

I added this one in as we had two clients within the last six months that were never notified that a very important hearing or mediation was occurring in the upcoming month.

One client completely missed the hearing. The Industrial Commission had sent them a file with 90+ pages of hearings on the document. The hearing notice was somewhere in those 90+ pages.

A mediation does not call for the employer to attend but instead an employer’s representative (claims adjuster and the defense attorney). However, the mediation may be a good time for the employer to attend the proceeding. If settlement authority is needed from the employer, they are already onsite instead of bouncing phone calls, texts and emails back and forth.

Bonus – Claim Notes and Reserving

This method remains an old trick used by file reviewers for many years. Many processes happen in the workers comp file all at the same time. Even if the claim notes in the workers comp document is separated into different computer file sections, following a train of thought or even a simple form can be tedious at best.

An example –

A workers comp agreement to pay benefits may take two to three months to have it signed by the employer, adjuster, employee (and attorney if they have one) and then filed with the Workers Comp Commission.

Now some adjuster-types will now comment – Hey we have a section on the forms in our system. Yes, but what if there were complications getting the form signed or having the proper amounts on the agreement, etc. I have not seen the associated notes in a Forms section, only the scanned forms at each step of the process.

If an agreement to compensation notes appears on page 11, 23, 45, 67, 110, 130, etc., how does one track that? Printed workers comp documents/notes can be reshuffled, not online ones to see the agreement to compensation flow through the file.

PDF Files For Storage

Mobility means everything nowadays. If you have to read documents while on the road, then PDF’s remain the best file storage. However, I just flew to California and back with a brown folder with 900 pages in it for review as an expert witness. Airlines have never counted the brown folder as a carry-on.

The bottom line is that reviewing documents on paper equals “another set” of eyes even though they are still your own. Let me know (I am curious) how you handle your important workers comp documents.

Filed Under: Workers Comp Documents Tagged With: employer authority, endorsements, highlighter, WCIRB article

Injured Workers Trust Four Professionals The Most During Their Claim

August 14, 2018 By JL Risk Management Consultants

Who Do Injured Workers Trust During Medical Treatment?

Most injured workers resemble their counterparts in the general public. I came across this article on the most trusted professions. At least five articles on these professionals have appeared earlier.

sketch of medical practitioner after treating injured worker

I decided to covert the general public view as the view of injured workers. I had already written articles on the most trusted professional as a great risk management technique. The other profession held in very high regard were pharmacists.

According to the article by Espresso – Nurses were held in the highest regard by the public. That makes sense and further shows why rehabilitation nurses properly hired and place on workers compensation claims can be a win-win-win-win-win (injured worker-employer-doctor-claims adjuster-overall claim) situation.

The article refers to in-hospital nurses. Rehabilitation nurses should still apply as being a trusted professional. In fact, in 30 years of being involved with insurance claims, I have only had one complaint from an injured worker about their rehabilitation nurse.

I could have possibly been lucky. Even employees represented by an attorney have had very few problems other than the attorney wanting to be kept up to date.

The new addition to the list is physicians. However, Workers Compensation has the aspect of employer medical control to it that may make the medical treatment seem forced – the company doctor, etc.

Most injured workers do not have a problem with the care being controlled by a doctor appointed or paneled by their employer. Even if the injured worker has the right of medical control, they will usually see whomever their employer recommends as the initial treating physician.

One professional that “flies under the radar” is the professional that an injured worker sees the most except for minor claims. The Physical Therapist will usually see the employee for a few times a week for a few weeks.

No other professional will see the employee that often. Other than the rehabilitation nurse, the employee will have very limited time exposures to doctors and pharmacists.

Employers can control the doctor and rehabilitation nurse that sees the employee. Few medical networks address the treating pharmacist and physical therapist. The physical therapist should be considered part of the network of choice.

Many physical therapy networks (MedRisk, etc.) do exist even today. The best that can be done is to use a good network.

Filed Under: medical networks Tagged With: physical therapist, rehabilitation nurses