There are ways to help your client keep their experience mod under control and keep their work comp costs down. In fact, there’s six easy ways. And in this initial installment we’ll look at the first two ways you can help better serve your clients.

Agents who blindly copy other agent’s work. Think of it as taking over as manager of a baseball team and doing nothing more then copying the old manager’s lineup. Maybe the guy playing third base should really be playing first base. This happens when an agent gets a new commercial account and does little more than copy the Workers’ Comp employee classifications the previous agent used, never taking the time to note that perhaps the company secretary at an auto body shop shouldn’t be classified the same as the guy yanking a 600-pound engine out of a Toyota Camry.

So right from the start, the agent is failing a client, through nothing more really than sheer laziness. Take time to walk the site to make sure you are familiar with the operation, what they do, and who does it.

Agents who ignore valuation dates. Six months after a Workers’ Comp policy’s expiration date, the insurance company takes a snapshot of the current status of both paid and reserve losses, the Experience Modification Rate, and other pertinent data on all Workers’ Compensation claims. But those numbers may not be correct. Maybe the reserves are too high because they thought an injured employee was going to need $25,000 for surgery, but only required $5,000 of physical therapy. Maybe another employee was deemed by a doctor eligible to return to work, but this was ignored.

Agents should take advantage of their agency management system to keep track of upcoming valuation dates and to speak with the adjuster at least 60-90 days before the date to better understand all the facts and figures. Otherwise, once the date has past it can take up to a year to correct any mistakes, and your client will have to pay the price.

(Image via Flickr courtesy of Beige Alert)

Here are a few areas that should be given attention as we head into the New Year.

The Aging Workforce: Their coming was foretold in 2008, when the first Baby Boomer hit 62 and filed for Social Security. The Institute on Aging at the University of North Carolina has released data showing that 20% of workers will be 55 or older by 2020.

Although older workers tend to get injured less on the job, when they do get hurt we find larger claims and more days off the job. According to a report by The National Council on Compensation Insurance (NCCI) a determining factor in the high claims cost can be traced back to older workers having higher salaries so their compensation for loss-work time is higher.

According to the Bureau of Labor Statistics (BLS), older workers take an average of 15 days off per injury compared to one day off for younger workers. Plus, they require more extensive medical treatment then, say, a teenage worker. Factor in the statistics showing older workers are less likely to return to work after an injury (in some cases over 80% less likely, compared to 12% for a worker in his 20s), and you see a disturbing trend.

The best we can do when it comes to getting an aging workforce back on the floor is to make a concentrated effort to customize the return-to-work program based on the severity of the injury, age, existing medical conditions, etc.  In other words, ease workers back into the fold and make the workplace conducive to them, even it’s simply making sure there is enough bright light in the work area  (the eyes always seem to be the first thing to go ).

Off-Site Workers: In an age of technology, where more and more workers are doing their jobs from their homes, we are seeing a whole new can of Work Comp worms open up.

According to World at Work’s “2011 Survey on Workplace Flexibility,” in 2010, 26.2 million U.S. workers conducted business outside the office. Companies see the advantages of home-based work (i.e. a decrease in absenteeism, reduced stress), but overlook an untapped area of risk.  Two recent cases illustrate what may be a disturbing trend. A New Jersey court granted workers’ compensation survivor benefits to the family of a woman who dies of a blood clot while sitting at her computer doing work. That same month in Oregon, a court ruled in favor of a claim brought by a woman who broke her wrist when she tripped over her dog while carrying supplies from her home to her car.

So how do employers monitor “at-home” risk? Perhaps it is as simple as having someone visit the home and make sure everything is ergonomically in order and void of any clutter or potential hazards. It’s also been suggested that the employer photograph the workspace. A more extreme maneuver would be to invest funds in the workspace and set it up for the worker. This could be a one-time cost versus a much higher cost down the road should the worker somehow suddenly fall out of their chair and break a hip.

As for making sure any injury happens on “work time,” experts suggest having the worker log in on their computer so time at work and time off can be tracked. No employer wants to pay a claim because one of their workers hurt his back while lifting a turkey out of the oven on Thanksgiving.

Rising Medical Costs and Prescription Drugs: Medical costs continue to soar and it can be attributed to several factors which are, in some ways, related. In many states, employers let the employees choose what doctor they want to see when injured, and employees are most likely to choose their family doctor. The problem here is the family physician sees the worker as their client. So if the employee asks for a week off, the doctor will grant it. Why not? Most family physicians have no experience with occupational medicine or the importance of getting employees back to work.

Another area of growing concern is the type of drugs being prescribed to injured workers and their long-term effects. According to a recent article in USA TODAY, the biggest drug problem in America isn’t the heroin being mainlined in a back alley or the cocaine being ingested in some run-down crack house. In actuality, it’s the prescription painkillers sitting in a medicine cabinet in Middle America, to the point that they kill 18,000 people per year. And don’t think this hasn’t raised an eyebrow to workers’ compensation payers, who are on the lookout to ensure that addictive drugs that are over-prescribed by doctors aren’t affecting workers’ comp cases. Evidence has shown that some doctors are prescribing pain medication usually targeted for cancer patients for simple back strains.

According to Gregory L. Johnson, a health care management consultant, “There is an increase in medical costs as a percentage of all claims; there is an increase in pharma as a percentage of all medical costs. And there is an increase in opioids as a percentage of pharma. So it’s driving a lot of overall loss results in workers’ comp.”

Another industry expert contends that employers may find themselves not only paying for the medication but also funding detox programs, drug overdose claims and treatment for long-term side effects. It’s imperative that employers, doctors, claimants and insurance carriers all get on the same page to make sure such abuse does not occur.

The Need for Wellness Plans: Healthier employees lead to lower premiums. If companies can help their workers improve their health without cutting benefits or shifting more premium costs to employees, why aren’t smaller companies using this proven method to lower their health care costs?

Randy Boss, a Risk Architect with Ottawa Kent Insurance in Grand Rapids, MI, helps companies implement successful wellness programs. And he says he can understand how employers feel. “They’re frustrated because most likely they have tried things that didn’t work,” says Boss. “Businesses tend to think short-term and not long-term, and expect to see solid and immediate savings on their healthcare costs.”

Yet, the benefits of having healthy workers transcend reduced health care costs, including Workers’ Compensation and lower absenteeism. Healthy workers are less prone to injury and when injured, they recover quicker than less healthy workers. If workers change and modify their lifestyle and reduce their health risks, medical costs decline.

A University of Michigan study of a Midwest utility company’s workplace wellness program found that over nine years, the utility company spent $7.3 million for the program and reaped $12.1 million in savings. Medical and pharmacy costs, time off and Worker’s Compensation factored into the savings. The study, which took into account a number of costs, including indirect costs of implementing wellness programs, such as recruitment and the cost of changing menus, showed that wellness programs work long-term even though employees aged during the course of the study.

Companies need to make a commitment to helping their employees stay in better shape. Says Randy Boss, “If companies don’t have the ability to fire all their old workers and hire young workers, then they need to concentrate on what they can control…the risk factors. That’s where a health & wellness program comes in. But to be successful you need high participation… preferably over 85%. We’ve been fortunate to have a 94% record without having to pay employees to participate.  We do this by motivating and educating employees so they take the action steps to get the results.”

An effective wellness plan only works if implemented from the top down. “We see participation rates up to 70%-80% with management support and incentives, but only 10%-20% without it,” says Susan Butterworth, director of Oregon Health Sciences University Health Management Services.

New NCCI Rulings: NCCI has recently made significant changes to the split point that will ultimately affect the experience mod.

The split point will be increased from $5,000 to $15,000 over a 3-year transition period. After the transition, the split point will be indexed for claim inflation in subsequent updates. Filing for these changes will likely be made in 3rd quarter this year. This change will take effect in 2013, based on each state’s usual rate filing date. For some, it will be 1/1/13, for others later in the year.

NCCI’s data indicates that close to 80% of experience mods will change plus or minus five points. The modification of the split point will most substantially impact the very best and very worst mods. Each company will be affected differently based on the costs of their employee injuries.

A big positive for all businesses is that every company’s lowest possible mod will drop. This means that employers will have greater control over what they pay for workers’ compensation than they have before. For companies that take command of their workers’ comp program, the opportunities have never been better to reduce their costs, even though rates are increasing in many states.

Conclusion

In summary, we may just be skimming the surface of what’s in store for our industry in 2012. But unless the Mayan calendar had it right and everything comes to a screeching halt on December 21, 2012, you can pretty much bet 2013 will be even more exciting.

The teams had very special circumstances due to the seasonality of the sport, since late season injuries often drag out and players do not return to work until the next season. Also the very low wages that the players received relative to the national average worked against them.

However, by using the IWCP education, the CWCA was able to make a tremendous difference and saved the first team $43,548 and the second $39,109.

The CWCA realized that the low wages were also an advantage. Whereas many employers would not continue to pay wages for an employee on the disabled list, these teams benefited by providing light duty or transitional duty for the employees and took advantage of the 70% credit opportunity that the ERA rule in South Dakota offers.

Situation
High rate and large number of employee injuries – $800,000 premium

Assessment
No return-to-work program. Analyzed claims and showed employer the true cost of the insurance company paying indemnity to injured employees.

Solution
After reviewing the return-to-work options, the trucking company decided to no longer outsource its security guard function, but make it a “transitional duty” job. Injured workers sit in the booth and collect paper work from incoming trucks. Another light duty job involves scanning the bar codes of boxes as they pass on a conveyor belt. By putting a chair on wheels, the employee simply sits and presses a button as the box goes by.

Result
Self insuring the transitional duty on one case alone, the $4,000 in indemnity reduced the premium by $20,000 over a three-year period.

Situation
In a three-year span from 2002-2005, incurred injury claims losses of $123,107. As a result, the employer saw her company’s Experience Modification Factor (Mod) rise 50%, from 0.91 to 1.37.

Assessment
A Certified WorkComp Advisor (CWCA) reviewed the client’s WorkComp program. He found that the employer was “shopping for rates” to save money on Workers’ Compensation coverage rather controlling work-related injury costs. As a result, the employer had no written policy for dealing with employee injuries. As a result, employees were not notifying the employer at the time of injury and were seeing their own chiropractor, who happened to be related to an employee of the company and who excused employees from work for indeterminate periods of time. Furthermore, the employer was not taking advantage of a state law that allows companies to self-pay indemnity costs and go to its WorkComp carrier for only the medical portion of an injury claim. In two sample cases, this failure cost the employer an additional $10,000 over three years for a claim of $1,800.

Solution
The CWCA began by showing the employer how little rates affect overall WorkComp costs using the Institute’s “Iceberg” illustration, where the rates are just the “tip of the iceberg” while the actual costs are what lie below the surface. Then the CWCA addressed these cost issues in several ways. First, he implemented an “indemnity review” process that helps the employer to determine when to self-pay indemnity costs. Next, using the Institute’s “HR That Works” program, he provided the employer with an employee handbook that, among other things, spells out in writing an injury-reporting program that requires immediate notification upon occurrence of an injury and a return-to-work program that defines the “light duty” jobs – such as inventory work – that employees will perform if physically unable to perform their regular jobs. Finally, the CWCA assisted the employer in establishing a clinic relationship program with The Buffalo Clinic, a long-time local medical provider, which directs employees where to go for covered medical treatments.

Result
Since September 2005, the employer has not filed a claim for employee injury losses. Self-paying indemnity alone will save the company up to 70% of its total claims costs. In addition, the written reporting and return-to-work policies have significantly cut the number of work days lost while the clinic relationship program keeps everyone – the employee, employer and medical provider – informed about the employee’s recovery and working towards the employee’s return to full duty.

Note: Self-funding of indemnity costs requires careful consideration of a number of factors, including state law, particular characteristics of exposure, financial condition of the company and an understanding of the risks and resources it requires. You should seek the advice and guidance of a CWCA to better understand if it is appropriate for you.

Situation
In 2003, the company’s Workers’ Compensation claims amounted to $535,000. Much of the difficulty in managing the claims process resulted from the fact that the company operated crews in some 50 work sites at any given time.

Assessment
WorkComp Advisors analyzed the situation and introduced improved claims management processes in 2004. In addition, the Advisors’ Claim Cost Coordinator found mistakes on the company’s Experience Modification worksheet and had them corrected plus reduced filed claims over the last two years by over $127,000 to lower their new Experience Modification Factor.

Solution
In 2004 the Advisor introduced Post Hire/Pre-Placement processes; Medical Clinic Selection protocols and a Supervisor Claims Responsibility Management Program with the support of a trained management process. Supervisors and a new Workers’ Comp Claim Manager were trained in how to control claims including two critical issues:

1. The supervisors were shown the 2003 claims reports so they could see what the premium costs were doing to the company’s bottom line. They understood the message and responded by saying that Workers’ Compensation claims were costing “30 pick-up trucks a year.”

2. A process was set in place in which the supervisors became responsible for discipline, reporting all claims within 24 hours, and checking out job applicants before they were hired to determine the history of job-related injuries.

The company’s new Work Comp Claim Manager effectively managed claims and monitored their Early Return-to-Work program.

Result
In 2005, a year after the program was put into place, Workers’ Comp claims had dropped to $13,000.

The management processes plus the Supervisor Claims Management Responsibility program was then further enhanced to make certain the dramatic gains would continue:

• Each supervisor without a claim during a 12-month period receives a bonus.

• Each year, individual supervisors are given a claims budget and they must stay within that budget to qualify for the annual bonus.

Even difficult Workers’ Compensation situations such as this one can be turned around with the proper expertise and installing a process that changes the culture and delivers continuous results.

Situation
From 2000 to 2006, the employer’s average annual Workers’ Comp costs were in excess of $80,000 per year. During that same period the manufacturer averaged 35 claims per year, causing the Experience Mod to rise to 1.12.

Assessment
Certified WorkComp Advisors (CWCA) reviewed the client’s WorkComp program in February 2006. They found that the employer had no established return-to-work program nor did he have a policy regarding the reporting of on-the-job injuries. They also found that the supervisors in the manufacturing plant were unaware of how Workers’ Compensation works and how they can have an impact on the employer’s costs.

Solution
The CWCAs began by implementing the basic programs developed by the Institute of WorkComp Professionals including return-to-work, light duty assignments, employee-hiring practices and injury reporting procedures. They then held an education session for supervisors that proved to be the most enlightening part of the program. The CWCAs explained how the Experience Mod worked and how it was affecting the employer’s bottom line. They also discussed the importance of the return-to-work program and how supervisors, since they have the most direct contact with the employees, play a significant role in keeping the overall claim dollars down.

Result
Just six months into the current policy term, there have been only six claims, three of which were for reporting purposes only with no dollars paid. The cost of the remaining three claims has totaled only $3,200. While it’s too early to make comparisons with previous years, it appears that the supervisor training is paying off. The employer and the supervisors were so pleased with the information and the savings that in August, they invited the CWCAs back to speak. At that meeting, several supervisors said they had brought what they had learned in the first meeting back to the employees and were able to see a marked difference in attitudes. The supervisors and employees now see that they are truly a part of the process and how they can help make the company for which they work more profitable.

Situation
An employee had undergone gall bladder surgery in late January. He was released back to work full duty (without restrictions) three weeks later. On his second day back to work, this employee was moving some cross ties and herniated his healing surgical incision, necessitating further medical and surgical interventions.

Assessment
Certified WorkComp Advisors (CWCA) began investigating this claim and determined further assessment was necessary. An independent Registered Nurse with experience in occupational injuries was engaged and began an investigation. After reviewing the circumstances of this injury and speaking with the employer to get specifics about the employee’s recent abdominal surgery, the nurse concluded that the herniation was a result of complications from the surgery.

Solution
The independent nurse alerted the carrier to this determination and the claim was denied under Workers’ Comp. The carrier agreed that this herniation was a complication of and was directly related to the recent abdominal surgery. The claim was instead submitted to the employee’s health insurance plan for coverage.

Result
This claim was closed in less than three weeks, saving the employer the cost of medical care and potential future wages. Disability guidelines report that a typical uncomplicated incisional hernia costs an average of $21,102 ($10,001 in indemnity and $11,101 in medical expenses). Had this claim been accepted under Workers’ Compensation, it would have increased the employer’s Experience Mod eight points, or a total of approximately $15,000 over three years (based upon the rate & payrolls remaining constant over the three year period).

Situation
An employee suffered a laceration to his finger while using a saw. The carrier set the highest possible reserves for disfigurement, permanent loss of use, and temporary disability warranted for this type of injury.

Assessment
Knowing that insurance carriers routinely set high reserves on claims and keep those reserves active until the claim is closed, a Certified WorkComp Advisor (CWCA) resolved to keep close tabs on every aspect of the claim. Along with skilled in-house claims specialists, the CWCA worked with the employer, medical providers and claims adjusters to continually assess the case and adjust reserves accordingly.

Solution
As soon as the employee was released to full duty, the CWCA asked the insurance carrier to remove any remaining reserve for disability. A short time later, the carrier made a payment to the employee for scarring, and the CWCA requested they remove any remaining reserves for disfigurement. Later, the CWCA argued successfully to lower reserves for permanent loss of use.

Result
By the insured’s next valuation date, reserves on this claim had been lowered by more than $57,000. As a result, the client’s experience mod rating was 19 points lower than it otherwise would have been. This translated into a premium savings of more than $4,000.