Playing by the Rules for Fun and Profit

The recent posts to the WorkCompEdge blog and forum about Vicki's premium audit experience struck a chord with me. Sometimes it gets terribly lonely feeling you are the only sane person engaged in a dialog. There have been many times in my experience as a work comp agent when I’ve wanted to throw my hands up and say to an auditor or underwriter, “What color is the sky in your universe?”

In other words, “What are the rules you’re playing by?”

Now, before any auditors or underwriters get upset with me, let me be quick to point out that they do have rules, and they are playing by those rules. From my perspective, those rules sometimes require me to suspend common sense and my orientation toward what seems fair as I address issues related to a workers compensation insurance policy. But I’ve already wasted too much of my life force debating fairness and common sense with insurance company underwriters and auditors.

You've got to know those rules! If you have trouble viewing the video, try this link.

What I’ve come to appreciate is that the rules are the rules regardless of what may seem logical or fair in a certain case. So, instead of cursing the dark, let’s turn on a light. Our best strategy – as employers and the agents or other professionals who help employers - is to learn the rules.

This could not be truer than in the premium audit process. Commonly, numerous rules are never explained to the employer; sometimes, those numerous rules are executed incorrectly, resulting in overcharges to the employer. In no way do I suggest the auditor or insurance company has nefarious intentions. It’s simply a difficult business challenge – for both insurance companies and employers - to complete an accurate premium audit.

Premium auditors have a thankless job. They are not usually treated as a welcome guest when they arrive, but as an interruption to an already busy day. Auditors are usually facing deadlines and under pressure to get audits done fast. Pressure to get things done fast does not create an environment conducive to education and accuracy.

As an employer, therefore, you must commit to educating yourself – and following through with the processes that will assure an accurate audit.

If you’re a WorkCompEdge member, there’s a module and workbook to help you do that. But as Vicki’s experience attests, you can also root out this information from manuals from the appropriate rating bureau (such as the NCCI Scopes Manual). I heartily agree with her mention of the Ed Priz guide as a great way to become familiar with the process. Here’s a sampling of issues that, when addressed appropriately, may save you money:

• Are your employees classified appropriately for their job function? If your administrative assistants are accidentally placed in the same class as your construction workers, then you’re being overcharged. If any subcontractors – who in almost all cases should have their own wc insurance – are listed on your audit, then you’re likely being overcharged.
• Are your corporate officers exempt or non-exempt from workers comp insurance?
• Are excluded remunerations – such as tips, incentive payments, employee discounts, payment for active military duty, certain overtime payments and a host of other things – really being excluded from your audit bill?

Kory and I entitled this entry “Playing by the Rules for Fun and Profit.” We have to admit that maybe there’s not a lot of fun in navigating the intricacies of a premium audit – but those same intricacies really can be a source of overcharges you can eliminate. And who doesn’t have fun saving money?

Are your premium audit experiences an aggravating mystery to you, a triumph of good recordkeeping and cost savings, or something in between? Let us hear from you.

http://www.WorkCompEdge.com

Meet Work Comp Hero Vicki Hagan

In this blog entry, we introduce a new feature we're calling "Work Comp Heroes" which will focus on individuals who are making a difference in workers compensation costs or productivity for their employers or clients.

Nominate your
own Work Comp Hero by emailing
blog editor Kory Wells.

Our first Work Comp Hero is Vicki Hagan, a WorkCompEdge employer member from Crossville, TN. When Vicki joined Action Heating & Cooling, Inc., in 2004, she inherited a mod of 1.40 - and a disputed premium audit bill of $12,000. "I knew absolutely zero about work comp insurance," Vicki says. She rushed to educate herself, searching the Internet, downloading ebooks, purchasing books, borrowing a Scopes Manual, and calling on NCCI and the state Commissioner of Insurance for information.

Although it took a lot of persistence, Vicki was able to obtain a second audit from the insurance company. Their final audit bill was less than half the original.

After that, Vicki developed Excel spreadsheets (similar to the WorkCompEdge premium audit workbook) to perform a mini-audit of payroll and renumerations on a weekly basis. "So," she says, "when the auditor sits down in my office, I have a neat, tidy package to hand over, and he or she knows how proactive I am about controlling our costs. It simply works!"

Work Comp Hero: A Profile

Name:Vicki Hagan

Company:Action Heating & Cooling, Inc., Crossville, TN

Type of Business: Heat and air installation, maintenance and repair for both the residential and commercial sectors

Number of employees: 22 full-time employees; 7 part-time or seasonal employees

Job Description: As is common in small business, Vicki wears a lot of hats...Accounts Receivable/Payable, Comptroller, Human Resources Manager,"Insurance Battle Queen", Computer Tech, Advertising Manager, Office Manager, Loss Control Officer.

Mod History: Inherited a 1.40 mod in 2004; current mod is 0.84!

Recommended work comp resources (other than WorkCompEdge, of course!)
Vicki says:

• Scopes Manual (if you can afford one, or are lucky
  enough to have a friend with one you can borrow!)
• NCCI (Maureen Longenacre was a tremendous help to
  our company during our 2004 audit battle)
• Master Your Workers' Comp Modifier booklet by
  Specific Software Solutions (in conjunction with the ModMaster
  software)
• Ultimate Guide to Workers' Compensation Insurance:
  Secrets of Reducing Workers' Compensation Costs by Edward J. Priz (he's
  awesome!)

Best Advice: Vicki says: "A fool and his money soon part ways. As easy as it is for a person to educate himself/herself these days with the help of the Internet, there is no excuse for someone to dread a WC audit, and even more so, the WC audit bill. With an education and a little bit of daily effort, it is very simple to control your workers' comp
costs. For our 2007 audit period, we actually received a refund from our insurance company! How's that for proof in the pudding??"

She also says, "Never give the auditor more information than he/she asks for...and never just let him/her wander around the office. Have a specific place for them to work while at your office." That's advice you'll also find in the WorkCompEdge module "Eliminate overcharges by taking control of the premium audit."WorkCompEdge members can learn more of Vicki's experiences - and view other member comments in the forum topic Ensuring Correct NCCI Codes at Policy Issue.

Several of us here at WorkCompEdge have talked to Vicki, and we've all come away impressed with her passion for work comp issues. We thank her for sharing her insight and experience with us!

Work Comp Heroes can be found in all sorts of places - working for an employer in HR, accounting, or on the factory floor; working in an insurance agency, insurance company, or other risk management position. They might be heroes because they save money, because they have a stellar record on safety, because they've inspired co-workers to quit smoking or lose weight, because they are empathetic but firm leaders...you get the idea. Nominate your Work Comp Hero by emailing blog editor Kory Wells and telling us a little about the person whose story inspires you.

http://www.WorkCompEdge.com

Legally Correct: How Your Hiring Practices Affect Your Work Comp Premiums

In the popular 2001 film “Legally Blonde,” Elle Woods (played by Reese Witherspoon) is a stylish sorority girl who, in a quest to get back the guy who dumps her, discovers her true potential way beyond the stereotypes of her blonde mane.

If you're just crossing your fingers that you've hiring a candidate who's medically fit for the job, don't be surprised if you find yourself with costs related to a new or pre-existing injury.

When we employers are interviewing job applicants, we likely have a movie running in our heads that I call “Legally Correct.” Delving below the surface to discover a job applicant’s true potential can feel like tricky business. This age of political correctness can make the most eloquent orators among us stumble. More importantly, there are EEOC guidelines to worry about: What questions we can ask. What questions we cannot ask. While we are trying to determine if an applicant has the abilities and personality to fit in our company, there’s another aspect we often overlook: whether they are medically fit for the work we need them to do.

I can hear you now: “Frank, I can’t ask someone their medical history.”

You’re right. In most cases, you can’t – not until you make them a conditional offer of employment. But after you do that, your applicant should undergo a medical screening to make sure he or she is fit for the specific functions of the job you want to hire them to do. This is a legally correct and – I would argue – moral thing to do. This process will weed out an applicant who truly is not fit – or who has intentions of filing a claim on a pre-existing injury after they’ve been with you a few months.

Most large employers have been doing medical screenings for a long time. But I find that a lot of my small business clients learn about this the hard way.

Here’s a real life success story: I recently met with a client to renew his company’s workers compensation insurance policy. In 2003, this client was paying over $480,000 in workers compensation premiums. The company was scrambling to find an insurance company that would offer them a renewal policy: their experience mod factor was 1.63. If they didn’t get an offer from the voluntary insurance market, then they’d be driven into the assigned risk market, where their cost would exceed $800,000.

Fast forward to 2008 and the story is dramatically different. The company’s projected premium cost for the upcoming year is under $200,000. Their experience mod factor is 0.85.

I asked the Chief Financial Officer what he felt were the major factors influencing this turnaround. Without hesitation, he said, “Beefing up our hiring practices and returning injured employees to work.” (In my next blog, we’ll talk more about back-to-work programs. As Jim mentioned in his comments to my last blog entry, it’s all about expectations.)

You notice the CFO didn’t make any reference to safety? Not safety committees, safety programs, or safety inspections. This company’s problems didn’t arise from an unsafe workplace, and they already had a positive corporate culture.

Now obviously, creating a safe workplace is a foundational and necessary step to any business. But, employers often don’t understand that the safest workplace in the world will not overcome hiring an employee who isn’t a good fit for the job.

Let me hear from you. Do you or your clients use “Legally Correct” pre-employment medical screenings? What’s your experience with them? Have you seen their implementation improve your claims history and premium costs? Is there a down side to medical screenings that I haven’t mentioned?

http://www.WorkCompEdge.com

Injured Employees and the Psychology of the Right Treatment

As I suggested in last week’s blog and several of you commented to confirm from your own experiences, the so-called “bad employee” – one who is intentionally milking the system – does NOT contribute to work comp costs and problems as much as we might like to think.
Today I’d like to explore one of the myths of a bad employee, and that’s an employee who gets caught in the wrong treatment plan.

Trivia for your next game show appearance: The process of drilling a hole in the skull is called trepanation and has been around since Neolithic times. (18th
century image from Wikimedia
Commons)

If you had a headache several hundred years ago, your friendly neighborhood medical practitioner might’ve drilled a one inch hole in your skull to let out whatever was causing the pain. If you survived this treatment, surely you never complained of a headache again, even if it was worse! If you didn’t survive, the practitioner believed you died from whatever was causing the headache, not the cure, so he went on to treat the next patient this same way.

It’s easy to laugh at this example from the history of medicine, and delight in the many scientific and medical advances since then. However, the more things change, the more they remain the same. As new technology, pharmaceuticals, and medical methods are introduced at a rapid rate, the potential for their overuse and abuse seems to grow, too. Here are two examples:

According to this USA Today article, medical treatment of back pain costs about $25 billion annually, and workers compensation costs add another $25 billion. Yet best treatment for back pain remains elusive and highly debated. Some patients undergo surgical procedures that studies have shown demonstrate little effectiveness and have considerable risks. Other patients are on long term opiates that were intended for cancer patients in their last days. These treatments prevail while new studies show that behavioral and psychological treatments can be more effective. (See the article The Psychology of Back Pain for some interesting reading.)

Depression in an injured employee is both common and quite understandable: the employee has the psychological load of the physical challenges of the injury as well as the myriad of social issues of being out of work, being dependent on family members, etc. But how often does the injured employee end up on pain meds AND antidepressants? In recent years, there’s been debate in the media about studies showing that antidepressants prescribed for mild depression are no more effective than placebos. Other studies have shown that a walking program is far more effective for mild depression than any pharmaceutical.

Like most of us, injured employees with physical OR psychological pain will do almost anything to make the pain go away. When the treatment is authorized by someone in a white coat, when it involves a pill that’s advertised on TV or in their favorite magazine, and when the insurance company will pay for it, then it must be a good thing, right?

Don’t get me wrong – I’m not blasting doctors or insurance companies or anybody else, but I am questioning the system, and I am questioning what we in the work comp system – whether we’re employers, insurers, or medical professionals - can do to better anticipate and cope with the challenges our injured workers face.

Let me know what you think. Does your experience support my suggestion that treatments through the work comp system are sometimes no better than a hole in the head of our injured employees? Do you have a return-to-work program that acknowledges the psychological aspects of pain and injury? Does mental health need a stronger footing in the work comp system? Do you have a wellness program that addresses depression?

http://www.WorkCompEdge.com

Are Bad Employees Really the Main Problem in Workers Comp?

Are there really that many “bad employees” out there crippling the workers comp system?

The prevailing message I received at a recent two day workshop on workers compensation is that there are. But I don’t agree.

The workshop was conducted by a renowned risk management organization and primarily attended by risk managers, claims people, and safety managers from large, self insured organizations. The Bad Employee, mentioned again and again, was synonymous with one who malingered in recovery, experienced a delayed recovery, or committed fraud.

"How easy it is to make people believe a lie, and how hard it is to undo that work again!" - Mark Twain(Photo from Wikimedia
Commons)

I keep asking myself why so much emphasis was put on the Bad Employee as a major, if not primary, cause of costs and problems in the work comp system. Addressing that question prompts several additional questions in my mind:

Why is it that in the information age it is so difficult getting good information to people who can make a difference?
Is it because the person doing the telling has something they want to sell you and can benefit from such erroneous myths?
Is it because dusting off and rolling out the same old tired stuff is easier and takes less effort?

I realize that these questions point to a range of ills, from operational legacies to intellectual laziness to the much more serious intentional deceit. My dad, who got smarter as I got older, used to say that a person’s position depends on his position. In other words, a person’s point of view depends on his or her station in life or business. Is it too cynical to think that service providers think they can make more and easier money off the Bad Employee story as opposed to a an alternative, more credible story?

Truthfully, I’m not that cynical most days. I think it’s more the case that the Bad Employee just makes a good story, an easy scapegoat. But I know for sure that these workshop leaders vigorously defended the current methods of management in the workers compensation system. Are we all thinking the same ways on these issues, or are we simply overdue for new thinking to reach all levels of the work comp business?

There are ample amounts of academic and actuarial research written over many years that tell a story different from the Bad Employee one. But, as Mark Twain said, “How easy it is to make people believe a lie, and how hard it is to undo that work again!"

In addition, John Kenneth Galbraith said, “Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof.”

In future blog entries, I’ll be talking about the many challenges in the work comp system and some ideas that I have for facing those challenges. WorkCompEdge staff and other industry professionals will also be contributing their views. But this blog will only thrive if we have input from our readers as well. So please consider today’s question: Do you think Bad Employees are the root of all problems in the work comp system? Is a malingering employee a Bad Employee? Post a comment to the blog and let’s get a discussion started!

http://www.WorkCompEdge.com