A Critical Year Ahead
15 actions to guide your risk management decisions - Part One (1 - 8)
2020 was the year that everything changed, and Workers' Compensation was no exception. At its core, the basic tenets of workers' comp were upended with presumption laws and expanded infectious disease coverage, and historic unemployment and falling payrolls rocked the stability of the industry. Organizations quickly shifted to remote and virtual environments, reconfigured physical spaces to conform to safety protocols, accelerated technological investments, and broke down organizational silos, while navigating a maze of federal, state, and local regulations and guidance. Depositions often took place over video platforms, telephonic medical appointments became common, and flexible work arrangements became paramount as care-giving responsibilities escalated.
What emerged was a renewed spotlight on workplace health and safety, technology, mental health, and collaboration. Although many of the changes were already in motion, what would have taken years to accomplished was achieved with lightning speed.
While the rollout of COVID-19 vaccines makes the post-pandemic world seem near, "normalcy" remains undefined and uncertain. Now is the time to look forward, plan, refresh, and strengthen the approach to risk management to be better prepared for the next normal, which is likely to look quite different. Here are 15 actions to help make informed risk management decisions.
- Risk management deserves a permanent seat at the leadership table
Before the pandemic, some companies viewed risk management as a dreary necessity, adding to costs, but not offering profitability nor competitive advantage. Others struggled with motivating employees to care more about health and safety. The pandemic brought risk management to the forefront, both internally and externally. Safety became an operating requirement and organizations shifted to preventive, proactive strategies for both pandemic-related risks and traditional day-to-day risks. Issues of personal safety dominated all aspects of our lives. Employees became intensely aware of the steps companies were taking or not taking to protect the workforce. Reputation risks related to safety and health became inescapable. Employees, prospective candidates, vendors, and customers judge organizations by the way they treated employees during the pandemic.
COVID-19 was the catalyst that compelled organizations to work as a whole, rather than in siloed functions. Risk management became an integral part of operations, executive, and HR discussions, with employee health and safety at the core. Successful companies listened to loss prevention professionals whose initiatives kept employees and the organization safe.
McKinsey's global managing partner, Kevin Sneader, noted, "The most significant leadership shift in 2020 has been from the focus of leaders on what a business does to how a business does it." Whether the organization employs a risk manager or outsources the function, the value to the organization and the C-suite has never been clearer.
- Workforce risk will remain high in 2021
On many fronts, the path ahead is uncertain. Many of the COVID-19 workers' compensation presumptions are temporary and states may take additional action to extend and/or expand the existing presumptions. In addition, new states may consider workers' compensation presumptions for COVID-19. Relaxed regulations around telemedicine may be tightened. The Biden administration may adopt an emergency infectious disease standard. Many measures put in place to reduce worker exposure to the coronavirus will remain necessary as states experience second and third waves. London-based health and security services consulting firm, International SOS, predicts that the disturbing trends in mental health will overtake COVID-19 concerns this year.
Employers face new and continued challenges - critical decisions about business post-COVID 19, whether to mandate or encourage the vaccine, how to manage a hybrid, vaccinated-unvaccinated workforce, the possibilities of outbreaks and shutdowns, PTO for sick employees, managing employees returning to work, and a volatile economic climate.
- The pandemic has both fundamentally and permanently changed the way people and organizations work
While at the beginning of the pandemic many organizations expected to return to a normal, pre-pandemic operating environment, it's become clear that the pandemic has fundamentally changed the way people, organizations, and industries work. Whether your business is in survival mode or thriving in this environment of adversity, you need to have a clear plan about the path forward. It begins by analyzing data to determine where you want your business to go and why. Have there been efficiencies and new technologies developed as a result of the pandemic and how can you capitalize on them? Should automation plans accelerate? Will some offshore production return? How has remote work affected productivity, employee morale, what are the expectations of staff going forward, and at what level will remote work continue? How will your decisions impact on-site employees? Will shifts in worker responsibilities or tasks as a result of the pandemic become permanent? Will the physical footprint be reduced and how will it be used? Is your cybersecurity adequate? What strategies are needed to keep your workforce mentally healthy? How will recruiting and training be handled? Will contingent workers play a larger role in your operations? Will travel continue to be restricted?
- Careful evaluation of loss prevention and workers' comp programs should guide future risk management and control costs
As the business plan evolves, so too must the loss prevention program. Answers to each of the questions above have a direct impact on loss prevention and workers' comp. Historical data is no longer sufficient, you need to look back 30, 60 days and cull the data. An assessment of the leading and lagging indicators used to evaluate the organizations' performance will strengthen safety and health outcomes. Evaluating mitigation and response efforts to determine what has worked and what hasn't can help guide future risk management.
Critical failures may require organizational changes. Following lawsuits and widespread criticism over COVID-19 outbreaks among workers at some of its meatpacking company's plants, Tyson Foods Inc. hired a chief medical officer to oversee employee health, safety and wellness, added 200 more nurses and administrative staff this year, and plans to open pilot health clinics in seven communities to give team members and their families easier access to high-quality healthcare and, in most cases, at no cost.
As the pandemic has provided a lens on how companies deal with disruption and manage risk, it has transformed the insurance industry, which is placing greater emphasis on risk assessment. Insurance leaders are worried about the uncertainty related to the duration of the pandemic, the number and size of COVID-19 comp claims, how long it will take workers and the economy to recover, and the adequacy of rates. Although workers' comp has not experienced the escalating rates of other commercial lines, largely because of declining payrolls, the future of rates is murky, and insurers will look for employers with strong risk profiles.
- Significant changes will occur at the Department of Labor under the Biden administration
It's widely predicted that one of the first orders of business under the Biden administration will be to promulgate an emergency temporary standard related to the pandemic, similar to what has been adopted in California, Virginia, Oregon, and Michigan. A temporary standard means that ultimately a permanent infectious disease standard will be established. Be prepared for significantly ramped up enforcement efforts. Employers that have strengthened their compliance focus and adhere to CDC and OSHA guidance will be in the best position to avoid citations.
Other areas where changes are expected include the joint employer rule, independent contractors, the Volk rule regarding recordkeeping requirements, which was overturned by the Trump administration, stronger whistleblower/retaliation actions, PSM reforms, workplace violence in healthcare, revaluating PELS and Action levels, return of "shaming" press releases, and revitalizing the Chemical Safety Board.
- A business continuity plan must include infectious disease risks
Many companies had done little to prepare for a crisis. Business continually plans were often treated as a bothersome exercise. Some successfully addressed natural disasters, technological failures, economic crises, security, but few addressed a pandemic. A gut-level calculation that a pandemic will not happen again in our lifetime could spell disaster.
Companies with static views of risk were caught unprepared by the pandemic and could not agilely adapt to the fundamental changes required. Organizations need to cast wider nets to identify changing, new, and emerging risks as well as a playbook for responding to crises. Those who plan well and test approaches to managing through a crisis will recover quicker and emerge stronger.
- A fresh approach to leadership is needed
When the pandemic first began, employee morale was buoyed by the message that "we can get through this together." But as time wore on with no end in sight, many became overwhelmed, disillusioned, and exhausted. Now more than ever, it's important for leaders to empathically listen to feedback from employees. The human element is key to whether or not organizations will get through the crisis.
While executives set the tone, organizations also must assess the ability of supervisors and managers to lead, coach, and mentor during this unprecedented time. Some may need additional support and training. For companies without established work-from-home policies, managers must learn to lead and manage virtually, as well as recognize mental health and substance abuse issues. On-site managers have the added stress of meeting production needs in a significantly altered environment while monitoring employee health and new regulations around safety and compliance.
A crisis can reveal a gaping chasm between what executives think and the employees' experience. Managers who are not empathic and do not engender employee trust are a substantial liability, crushing morale, and exposing the company to significant fines and reputational damage. Tyson Foods Inc. terminated seven plant managers after an investigation into allegations that the managers were betting on how many workers at the company's Waterloo, Iowa, pork plant would acquire COVID-19. In addition, the company has created new communication channels for workers to voice concerns and formed a working group of community leaders to strengthen collaboration between the corporation and the plant community.
- Claims management and care for injured workers will be complicated for the foreseeable future
Until the virus is controlled, there will be a shortage of physicians to care for injured workers and experts suggest it will take almost a year to wade through a backlog of postponed surgeries and other procedures. Further, there are concerns that opioid use is rising as employees deal with chronic pain for extended periods. According to a report by the National Council on Compensation Insurance (NCCI), the share of prescription drug claims with at least one opioid prescription inched up in 2020 after a decline in the previous two years. The dosages, measured in morphine milligram equivalents, also climbed, along with the share of medical costs that went to prescription drugs in 2020.
The delays in treatment mean increased costs with prolonged claims duration and higher prescription and medical costs. It behooves employers to review delayed claims and work with insurers to prioritize medical treatment needs.
The report also provided initial data on COVID-19 claims. While many claims are indemnity only, 20% of medical claims resulted in an in-patient hospital stay, 19% of which involved intensive care. The average length of stay was 7.5 days, and the average cost was $38,500 per stay. Given the many potential outcomes of a COVID-related infection, including long-COVID, employers will have to be flexible about arrangements for how workers return to the workplace.
All of this is further complicated by the impact on recovery-at-work programs. Layoffs and furloughs as well as social distancing and capacity limitations, eliminated many recovery-at-work opportunities in some industries. In most states, benefits continue even if there's no job to go back to. This encouraged employers to pursue early claims closures with workers near the end of their careers and workers with legacy claims.
For several years now, the industry has fostered a claims advocacy approach with a holistic view of the injured employee. This means not only advocating for them and giving them support and a voice in handling claims, but also recognizing the social and economic factors that affect recovery, and the psychology of pain. In the midst of a pandemic that includes heightened levels of depression, anxiety, and financial instability, it is critical to show you care for your workers.