Is Wellness a Wildcard...Like Sarah Palin?

Editor's note: Today we're returning to our "regularly scheduled programming" after blogging yesterday about our award. Next week we'll return to our once-weekly blog schedule.

Sarah Palin was a wildcard choice...is wellness a similarly unexpected consideration in workers comp issues? Photo from the Wikimedia Commons.

Hold your rants or raves! We're not veering into political territory on this blog; I just can't pass up a good analogy. Republican, Democrat or other, almost everyone agrees that Sarah Palin was a wildcard choice as a vice presidential nominee. Now, as I think about Kory's comment in last week's blog about whether the WorkCompEdge wellness module will be largely ignored by our members, I have to acknowledge that we made our own surprise selection when we included it in the lower left hand corner of the process diagram on the WorkCompEdge home page.

We tagged the module, “A new paradigm – promoting the health of your workers.” Was including wellness in WorkCompEdge a good idea? Does it complement all of the other modules, or was it just some crazy late night selection we made to stir things up? Well, as with McCain/Palin, only time will tell. But, let me explain some of the challenges we have discovered with wellness in the workplace.

I love business. I love systems. And, I really love math. I can relate to the process thinking and math behind the various modules and strategies within WorkCompEdge. The content we developed, the tools that we provide, and the implementation plans we suggest were carefully derived from the experiences of successful employers. Wellness is similar to the other modules in that it can involve numbers on both the corporate and personal levels (How many of your employees smoke? How much weight has John Doe lost?). But wellness won't succeed based on analysis and corporate process improvement. More so than with any other program or module in WorkCompEdge (safety, claims management, supervisor training, medical relationships, etc.) wellness involves individual, self-initiated change.

We developed the wellness module easily, given our in-house health gurus and the wealth of external resources available. But will employers use it? And what can make it most effective? As a broker in St. Louis recently explained to me, wellness is about “boots on the ground.” That is, real change in individuals takes internal motivation that is often ignited and fueled by a wellness "foot soldier" - an everyman/everywoman type of health champion who inspires and leads individual employees to a better and more consistent lifestyle.

So, how does a nationwide program like WorkCompEdge put those boots on the ground? Not easily. But, let’s think outside the gym, so to speak. Can we provide the tools, techniques, and resources to train the champion? What if the WorkCompEdge focus for wellness becomes an effort to identify, train, and motivate that champion at each WorkCompEdge employer? What would this look like? Could it work? What if… we created an army of WorkCompEdge wellness foot soldiers committed to leading their organizations to a higher level of wellness, one individual at a time?

Like McCain's choice of Palin, some may argue that wellness works for the WorkCompEdge Process and is an excellent pick. Others may think we are crazy! Let me know what you think (about wellness, not about the political campaign). And be keeping an eye out for who you might tag in your office to champion this cause. I can't resist saying: this person doesn't have to be a hockey mom, and lipstick will be optional!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

You Like Us...You Really Like Us!

When we learned this week that LexisNexis has named the WorkCompEdge blog among the top 25 workers' comp blogs of 2008, we had the urge to gush like actress Sally Field in her well-known, often-parodied Oscar acceptance speech of 1985: You like us, you really like us!

LexisNexis has named the WorkCompEdge blog among the top 25 workers' comp blogs of 2008. Read the announcement or visit the LexisNexis Workers' Compensation Law Center.

In its news release, LexisNexis stated that the top 25 blogs were selected for "a wealth of information for the workers' compensation community with timely news items, practical information, expert analysis, tips, frequent postings, and helpful links to other sites. These blogsites also show us how workplace issues interact with politics and culture. Moreover, they demonstrate how bloggers can impact the world of workers' compensation and workplace issues."

We're doing all that?

Well, we are trying to, and we're delighted that, in the short life of this blog, folks have already noticed. But that brings us to what dear old Sal really said that night at the Oscars:

"...you like me, right now, you like me!" (Emphasis is ours.)

Right now.

In other words, Sally implied, the tide of cultural favor can go in and out, as do the opportunities to earn that favor. We recognize that fact here at WorkCompEdge, and this is a good time to remind you that:

• we're committed to making not only the blog, but the entire WorkCompEdge site a "living" product that undergoes changes and enhancements in response to member needs, suggestions, and the changing market
  
• we need your ideas and feedback to make both the blog and the site thrive. (Well, actually, if you're a member, we need your money every now and then, too. But right now we're talking about valuable content.)

We're very grateful for comments here on the blog and for those you've given to our staff by email and phone. Even if you tell us something you think we might not want to hear, be assured we have open minds. We know from our 20 years of developing and supporting ModMaster software that your input leads us to create a better product.

Now, we'd still like to increase our readership of this award-winning blog, so please, consider forwarding this page to your colleages, state associations, professional groups, and clients. Tell them that subscription options are at the bottom of the page. And like Sally said, do it right now.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

Wellness: Showing People You CARE

Wellness is one of the 15 modules we chose to include in WorkCompEdge. To be honest, at this point in the young life of the site, we sometimes wonder if it may ultimately receive the award of “Module Most Likely to Be Ignored by Our Members.” After all, it seems that everyone is talking about wellness in the workplace, so isn’t everyone already doing it?

This is a great way to get a little friendly competition started at the office. Who can raise the most money working out for CARE? Be sure to tell a friend or co-worker!

Well…maybe not. Although a quick Internet search will yield statistics supporting widespread corporate wellness programs faster than you can tie your walking shoes, the feedback we have so far from our recent survey (which is still open, please participate it you haven't) doesn’t agree:

• Brokers and agents indicated that only “very few” or “some” of their clients had an effective wellness program 75% of the time. “Very few” was equated to 0-19% of their clients, and “some” was equated to 20-39% of clients.
  
• Of employers who responded to the survey, 66% reported that their company did not have an effective wellness program.
  

We think that part of the discrepancy between our results and others must be related to a company’s number of employees. It seems that a lot of the statistics we see mention “leading corporations.” It makes sense that smaller employers may find it more challenging to implement a wellness program. (Unfortunately, our survey didn’t capture number of employees. We’ll be smarter about that next time.)

But we also wonder if the key word in our question was “effective.” Are there a lot of wellness programs out there that are being offered, but just aren’t being used?

We recently came across an article that indicated some small businesses are motivated to offer a wellness program not so much because of the possible financial benefits (realized from fewer sick days, quicker recoveries, reduced health insurance premiums, better productivity, etc.) but simply because it’s a positive thing to do for their employees. And that resonates with us. Your own personal wellness is a gift - not only to yourself, but to your family, friends and colleagues. And now it can be a gift to the world’s poor.

Fitness expert, author and professional triathlete Eric Harr has implemented a program at CARE, the humanitarian organization dedicated to reducing global poverty, which will take your workout to a new level. For every hour you exercise and log on the website, Eric’s going to donate $5 to CARE. You simply fill out a brief form on the website, and you’ll receive an encouraging email and a monthly summary of your progress. AND, if you’re not already in a fitness program – or want to infuse your existing one with some new routines - Eric has what you need in free downloads, including a fitness assessment, 18 goal-specific training programs, and stretches.

How’s that for motivation? Head on over to the CARE site now, at www.care.org/workout

This ia a great way to get a little friendly competition started at the office. Who can raise the most money working out for CARE? Be sure to tell a friend or co-worker!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

Work Comp Rocket Science: Analyzing Your Insurance Purchase Decision

True confession time: we’re a bunch of nerds here at WorkCompEdge.com, Specific Software Solutions, and SIGMA Actuarial Consulting Group. And, as CEO, I suppose there's a little pressure on me to be the nerdiest of us all.

"...moving your company toward the minimum mod rivals rocket science..."

That's not a bad assignment! I like numbers, and I’ve had the opportunity to use my mathematical education in various analytical disciplines - on everything from top secret “star wars” modeling of ballistic defense systems to complex financial models in the automotive finance industry. I’ve seen math applied to support decision making in many industries and situations – often resulting in decisions that were excellent but far from intuitive.

So that background brings me to this question: how in the world do employers pick a work comp coverage provider by looking at just one number? Price, of course, is the number I am referring to.

Work comp is a complex system. Injury prevention, injury management, and moving your company toward the minimum mod rivals rocket science – and I can say that since I’ve done rocket science!

“So Tim,” you might ask, “if price isn’t the number I should be looking at to make a work comp insurance purchase, what is?” That number, I suggest, is your total cost of risk. At WorkCompEdge, we think that when you purchase insurance, you need to do two things:

• know your total cost of risk, and


• have a goal - not to buy the cheapest coverage you can find, but to engage with a business partner who will help you change your company processes to move your company to the minimum mod and the minimum premium.

This is important not only for the long term costs savings but for the many ways in which your business will improve as a result.

Within WorkCompEdge we have derived our own unique expression of the total cost of risk as follows:
The WorkCompEdge TCORW = (LR + PM + PC + PA + R + S + C + F) + (LI * 2.5)

In this formula, the direct costs include:

LR = Retained losses
PM = Minimum insurance premium
PC = Controllable insurance premiums due to the controllable mod
PA = Estimated premium adjustments
R = Risk administration allocated to workers compensation
S = Outside services related to workers compensation
C = Collateral requirements (applicable for deductible programs) related to workers compensation
F = Fees and taxes related to workers compensation

This formula also includes indirect costs of workers compensation, which have been estimated by a variety of institutions, including OSHA, to be anywhere from 1 to 20 times the cost of a loss. Some formulas for the total cost of risk exclude indirect costs because of the inherent difficulty in determining an accurate value. For the WorkCompEdge total cost of risk value, our actuarial group, SIGMA Actuarial Consulting Group, analyzed available data across a broad spectrum of industries to determine an estimate of indirect costs. This estimate is simply:

Indirect Costs = 2.5 * LI

where LI = The total incurred loss amount for the period analyzed

In many cases, this formula will underestimate the indirect costs. However, here at WorkCompEdge, we decided that some measure of the indirect costs of workers compensation losses is a critical portion of the overall equation.

The purpose of knowing your total cost of risk is to see the long term impact on this number in different scenarios. The goal is to minimize this number. Buying the cheapest insurance is not likely to result in reaching your minimum total cost of risk. Working with an agent and insurance company that supports your effort to implement WorkCompEdge-type strategies will launch your company (pun intended!) toward minimizing your total cost of risk over the long term.

If you’re a WorkCompEdge member, be sure to look at our Avoid low bid mentality module for more about this topic, including a handy-dandy workbook to help you calculate and play what-if scenarios with your total cost of risk.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

How We Know What Isn’t So

In the development and ongoing support of WorkCompEdge, we have questioned and will continue to challenge everything that is assumed true in the workers compensation industry. This process of questioning is a key factor in enabling us to present work comp strategies in a straightforward, factual, systematic way.

A book I read during the development of WorkCompEdge strongly influenced my thinking on this subject of “what is true.” How We Know What Isn’t So: The Fallibility of Human Reason in Everyday Life by Thomas Gilovich does a masterful job of highlighting how many things we believe that “just ain’t so.” Here is a great example that Gilovich starts with in his introduction:

"It is widely believed that infertile couples who adopt a child are subsequently more likely to conceive than similar couples who do not. The usual explanation for this remarkable phenomenon involves the alleviation of stress. Couples, who adopt, it is said, become less obsessed with their reproductive failure, and their new-found peace of mind boosts their chances for success.

On closer inspection, however, it becomes clear that the remarkable phenomenon we need to explain is not why adoption increases a couple’s fertility; clinical research has shown that it does not. What needs explanation is why so many people hold this belief when it is not true."

We all use intuition and seek to “prove” that our theories and preconceptions are true. We often do this through a biased sorting of data and evidence. Without knowing it, we look for what supports our ideas and reject information that conflicts with our beliefs. But as dysfunctional as this process may sometimes be, it is also the process that develops our intelligence - a fascinating human dilemma.

Frank's blog and the subsequent comments in Are Bad Employees Really the Main Problem in Workers Comp? are just one example of how this process is manifested in workers comp.

So, here are my questions for you:

• Where in the workers compensation industry are we relying on theories, perceptions, and biases that are NOT backed by hard evidence and objective facts?


• More importantly, where are the most costly places where this occurs?

I would be interested in hearing your thoughts. And, if you really want to challenge yourself, pick up this book (here on Amazon or through your favorite independent bookseller) and better understand How We Know What Isn’t So.

Editor's note: This is the first entry in our new "Books" category inspired by reading we've enjoyed and in some way applied to business, workers comp, learning, personal productivity, wellness, and more. If you have a book to suggest, let me know!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

Does Claim Count Affect the Mod? The Answer May Not Be What You Think

(The following relates to experience rating in states that use the NCCI or similar rating methodology.)

“Do zero-dollar claims have an impact on the mod?”
“Do the number of claims directly impact the mod?”
“Claim frequency affecting the mod is a myth – isn’t it?”

These variations on the same question are very common here in the support department of Specific Software - from both our WorkCompEdge beta users and our ModMaster users. It’s a confusing issue because while the answer is officially “no,” it can also appear to be “yes.” Let me explain.

Experience rating does
not directly count the claims.

Experience rating does not directly count the claims. Don’t be misled by the fact that the experience rating worksheet often shows a claim count for small losses. This is for documentation purposes only, as far as the experience rating formula is concerned.

When you look at the formula itself, you never see claim count as one of the variables. Instead, experience rating uses a system called “split rating.” Each loss is split and put into two buckets: primary and excess. In most states that use the NCCI or similar formula, the first $5,000 of each claim is placed in the primary bucket while any loss amount over the first $5,000 of a single claim is put into the excess bucket.

A zero dollar loss has absolutely no impact on the mod because there is no loss amount. However, the number of claims, when the loss amount is greater than zero, is indirectly measured by the amount of dollars in the primary bucket. Here’s a brief example:

Employer A: $100,000 in losses. 2 claims - $40,000 and $60,000.
Employer B: $100,000 in losses. 20 claims - $5,000 each.

The two employers had identical total losses, but Employer A will have only $10,000 in primary losses while employer B will have $100,000 in primary losses. Employer B’s mod will be much higher than employer A. This is due to the frequency of claims as measured by the amount of primary losses. So, the claim count does matter, but it is never directly included in the experience rating formula.

To take this illustration just one step further, let’s consider:

Employer B: $100,000 in losses. 20 claims - $5,000 each.
Employer C: $100,000 in losses. 100 claims - $1,000 each.

Because ALL of these claims in both cases are less than the $5,000 split point, the formula doesn’t measure any effect of 20 vs. 100 claims. If all other things (i.e., payroll and loss rates) were the same, Employer B and Employer C would have the very same mod. So in this case, the claim count doesn’t matter – but only because all claims were under the split point.

WorkCompEdge members can learn more about this issue and access an online tool for analyzing the mod in Learn the Lessons Your Experience Mod Can Teach You.

Keep Taking Our Quick Survey!

Thanks to those of you who have participated in our quick survey we posted last week - and to those of you who let us know when there was a slight glitch with it. If you haven't taken it yet, please do! So far, responses are all over the board. We're hoping that more responses will help shake out some identifiable trends. The survey is for both insurance professionals (to answer on behalf of their clients) and employers themselves. Take it now.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

What Do You, Dilbert, and NCCI Have in Common?

Hmmm..what do you, Dilbert, and the National Council on Compensation Insurance (NCCI) have in common?

That question might keep you guessing for a while, and we know your time is valuable. So here's the answer - you're all helping identify what's trendy in work comp:

• Dilbert because he's talking about wellness programs;


• NCCI because they've recently released reports on claim frequency and severity trends for 2007 (as reported in this Insurance Journal article on August 4th);


• And you because you're going to take our quick survey (so nice of you, we do appreciate it!)

If wellness wasn't already a hot enough topic, even Dilbert is talking about it this week. Here's Monday's strip; check his website (on your own time, of course) for the continuing theme. Here at WorkCompEdge, we're kind of hoping Dilbert creator Scott Adams might tackle early return-to-work next.

Admittedly, trendy may not be the best word to apply to good work comp practices, but here at WorkCompEdge we're definitely interested in identifying trends that can lead to improved work comp costs and outcomes. Both of these items in the media this week directly apply to select content in WorkCompEdge - see the modules A new paradigm - promoting the health of your workers for wellness and Expedite return-to-work and The clock is ticking for strategies to address the loss severity problems that NCCI reports. But even if these are topics that people are talking about, we have to wonder if they reflect true action on the part of our readers and their companies. In other words, are you (or your clients) practicing the work comp strategies that we're preaching?

Trendy or not, we want to know what's going on with you. Whether you're an employer or an insurance professional who can share a perspective on your clients, please take our quick survey now. We'll share the results in a future blog entry!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com