Compare Your Company to Industry Standards Using Data from the Mod

One of the more dreaded phrases in the English language – particularly on high school and college campuses – is probably “compare and contrast.” As in:

• For 20 points, compare and contrast mitosis and meiosis.


• For 30 points, compare and contrast the style and theme of Shakespeare's "Sonnet 18" to "A Red, Red Rose" by Robert Burns.


• For 50 points, compare and contrast the economic, political, and social structures of ancient Athens to modern-day Iraq.

Comparing and contrasting your work comp experience to industry standards isn't difficult with the right information and tools. (Shakespeare would insist on complete sentences, of course.)

If these questions (which I found on the Internet, by the way) give you a not-so-nostalgic pit-in-the-stomach feeling, you’re definitely not alone. If you’re like me, you’re grateful such academic gymnastics are in your past. But here’s a compare and contrast exercise that will be useful to your company today:

Compare and contrast your company’s work comp losses to the average for your industry. Use actual and expected losses on total, primary and excess amounts. Include comparisons on a policy period basis. Use complete sentences.

OK, you don't have to use complete sentences. Even without that directive, this analysis can still sound a bit intimidating. However, if you have a mod worksheet from NCCI or another bureau, all the data you need is on the worksheet – and at least some of it is already summarized and ready to use.

The whole purpose of the mod calculation formula is to compare your company’s loss experience with the average for your industry. The code word for this in mod-speak is “expected.” On your worksheet, you see total expected losses, total expected primary losses, and total expected excess losses. If you don't know the differences between all these expecteds yet, don't worry. It's enough to know that these values reflect the standard, or average, for your industry for a theoretical company that has the same payroll you do.

The mod itself tells a story, comparatively speaking: if your mod is over 1.0, your compare unfavorably to other businesses in your industry. If your mod is under 1.0, you compare favorably; you are, as we’ve said in other blog entries, “beating the average.” But the formula can be broken into components which can be analyzed for additional insight. So let’s take this exercise in pieces:

1. Compare your company’s total losses to the industry average.

Why you want to do this: This comparison provides a general indicator of your loss experience.

How to do this: Divide your total actual losses (box H on the NCCI bureau report) by total expected losses (box D).

2. Compare your company’s total primary losses to the industry average.

Why you want to do this: This comparison provides an indicator of whether too MANY losses are keeping you from reaching your minimum mod.

How to do this: Divide total primary losses (Box I) by expected primary losses (Box E).

3. Compare your company’s total excess losses to the industry average.

Why you want to do this: This comparison provides an indicator of whether the SEVERITY of your losses is keeping you from reaching your minimum mod.

How to do this: Divide total actual excess losses (Box F) by expected excess (Box C).

In all three of the comparisons above, you will get a number that’s more or less around 1.0 or, converted to a percentage, 100%. The lower the number, the better; and any percentages over 100% warrant your attention.

Now, for the trickier stuff: compare your actual versus expected losses for each policy period in the mod. This is harder to do because all of the totals that you need – by policy period - are often not shown on the bureau worksheet. So, you’ve got to haul out the slide rule, calculator, Excel workbook, or (ahem) ModMaster software to make this easier.

This seems like a good time to mention the WorkCompEdge Proposal Report that employers or (more likely) their insurance agents can print from ModMaster. We discussed the first part of this report, about what your mod is costing you, in another blog entry. Now let’s look at the second part – How Your Company Compares to Industry Standards.

Here's a snippet of a sample WorkCompEdge Proposal Report that shows how you can use mod data to compare your company to industry standards - and identify trends that will affect your future mods.

The first 4 bullet points in the report excerpt correspond to the comparisons we discussed in items 1-3 above (note the wonderfully complete sentences), and the graph on the left, Actual vs. Expected Losses, visually shows the same information. In this sample, when so many of the percentages look so good, the 134% ratio of the primary loss comparison stands out. While this company has a pretty healthy mod, that 134% points to a clear opportunity to reduce the number of losses they’re experiencing and thus drive their mod even lower, for even more cost savings.

The graph on the right, Loss Trend, shows the actual losses and expected losses for each policy period. This graph is really helpful for two reasons:

First, it shows us the general trend of losses for our own company versus the industry average. In this particular example, we see that this company has never exceeded industry norms, and that in the most recent year they’ve beat the average by quite a bit.

That’s important information, but we can also discern more. This graph also lets us see the anomalies that a certain period may be contributing to the mod. In this case, the “blip” of increased actual losses in 2006 is probably the principal contributor to the mod. So, until 2006 comes out of the calculation (after one more year), the mod is going to stay a little higher. When policy year 2006 no longer affects the calculation, provided that the latest trend has continued, THAT’s when the mod will really decrease.

So, for real cost savings – not points on a test - compare your work comp losses with industry averages using mod analysis.

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

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The Power of Intentionality, Part 2: A Vision for Work Comp in Your Organization

Today we continue the series inspired by the marathon goals of our actuarial analyst Tony King. Now that we've outlined all that being intentional encompasses in part 1, let's talk more about the root of it all: a vision.

"If you want to reach a goal, you must 'see the reaching' in your own mind before you actually arrive at your goal."- Zig Ziglar
A vision statement often takes the long view: a bold statement or dream for the future.

Whether it's for an individual or an organization, a vision drives all other components of intentionality as you strive for the knowledge, intelligence, measurements, discipline, and repetition it takes to reach a goal or level of achievement. In Tony's case, the vision could be simply stated: he wanted to qualify for the Boston marathon. But a vision statement can be considerably more complex, especially for an organization.

Do I hear some of you groaning now? I'll admit, the words “vision statement” can conjur the image of a slow and painful staff meeting, something we avoid as much as possible here at Specific Software and SIGMA. But Zig Ziglar hasn't been talking about goals and visualization techniques for all these decades for no reason.

So, what's your vision for your workers' health, safety and productivity, and how should you define it? What things should be considered? Here is a list of questions to get your thinking on the right track.

• What type of workplace do you want to have?
• What is the culture you are trying to create?
• How does the wellness of your employees affect your business, and what is your business’ role in supporting employee wellness?
• How is safety viewed within your organization?
• What is your view of and relationship with OSHA?
• What is the relationship between management and line employees?
• What responsibility do you have in gathering and determining the accuracy of data pertaining to the premium audit?
• Should your organization take time to understand, analyze, and manage the experience mod?
• Are you trying to buy the cheapest insurance possible or do you have a broader goal?
• Do you have a vision for how your agent and insurance company should serve YOU the CUSTOMER?
• Do you or should you have a leader who oversees many aspects of injury management?
• Is there a commitment to having a relationship with a local clinic?
• Do you know what happens right after an injury occurs and how your organization will respond to it?
• How are injured employees treated?
• What do the processes you go through to hire someone look like?
• How is an injured employee returned to work?
• What is the driving force behind your organization?

This list presents a lot of questions to help you form a vision that will guide you through the remaining principals of intentionality. Your complete vision might look something like this:

XYZ Corporation Workers Compensation Vision Statement Our organization is committed to a culture that promotes the mental, emotional and physical wellness of our employees, reduces injuries, and mitigates the severity of any injuries that do occur. We believe that the backbone of this culture is effective communication. We take responsibility for our workers compensation program by having a trained injury management coordinator, maintaining accurate records that allow us to prepare a premium audit and thus avoid overcharges, understanding the technicalities and insights of experience rating analysis, hiring people who are fit for the job, establishing and following excellent safety procedures, and looking beyond the lowest bid for our coverage to a long term effective relationship with an agent and insurance company. We optimize effective communication by: training our supervisors on injury management and employee relations; training our employees on what to expect if they are injured; and having our injury management coordinator oversee communication, establish effective clinic relationships, internally market our return-to-work program, measure both subjective and analytical measures of our culture and safety, and build relationships with medical clinics, OSHA representatives, and other professionals who can contribute to our employees' safety and wellness.

Does this seem like a tall order? It's OK if it does! I even considered saying that XYZ is committed to a culture that eliminates all injuries. After all, a vision statement is often the long view: a bold statement or dream for the future. For more about leadership and vision, see An Interview With Leslie Kossoff on Management Leadership Skills, or chapter 10 of The Leader's Guide to Storytelling by Stephen Denning, which gives a template and considerations for crafting a "future story," which is what a vision is.

Of course, having a vision statement is only worthwhile if you compare the actual conditions of your workplace against your vision on a regular basis and work to make needed changes...which is where we'll pick up next time with how knowledge applies to the power of intentionality.

Does your organization have a vision statement just for workers compensation, or does your general vision statement include the health and safety of its employees? We'd love to see some real examples from our readers!

More in this series "The Power of Intentionality": Part 1

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

Layoffs: Ten Techniques to Avoid or Minimize Claims

Layoffs have become an unfortunate reality of everyday life in America. While historically layoffs are often due to legitimate competitive practices (and in some cases corporate heartlessness), I don't have to tell you that almost all layoffs in the past 18 months have been due to the severe economic downturn. A full article addressing layoffs and terminations, discrimination, duties of the employer to comply with state and federal laws, and more about the human costs on both the laid off and remaining employees is available to WorkCompEdge members on our wiki. For this blog, let's take a further look at work comp claim issues associated with layoff situations:

Don't just do the paperwork: employers mustover communicate in layoff situations. These are human beings whose lives have just been turned upside down. The surviving employees will give the employer the benefit of the doubt and their commitment to the employer if the employer tells them the truth and treats the employees who are leaving with fairness and compassion.

It is a documented fact that an impending or even threatened layoff increases workers compensation claims…especially in a tight job market. Individuals faced with a reduction in their income, temporary unemployment benefits and the likelihood of unaffordable health insurance may look to workers compensation as a way to ensure their income is sustained in the face of a layoff or termination. Even the rumor of layoffs and company reorganizations is enough to scare some employees into filing a work comp claim. But note: simply because an employee files a claim after his or her employment ends does not necessarily mean that the claim is fraudulent. Some employees, previously worried that filing a claim would affect their job security, go ahead and file once they are terminated. Whether the injuries are real or imagined, the fact is, workers compensation claims increase during and after a layoff.

Employers can't completely stop illegitimate claims from being filed, but there are steps they can take to prepare for defending against such claims - and thereby minimizing costs. The following techniques, a list I've tweaked from an article by the Louisiana Workers Compensation Corporation to include my own experience, can avoid or minimize claims cost following downsizing, terminations or layoffs.

1. Communicate with Your Insurance Carrier

Let your insurance carrier know about any downsizing plans your company has. The carrier should be more than willing to strategize with you on ways to thwart any fraudulent claims. Report any suspicions you have about a claim, along with all the reasons for your suspicions, to your workers compensation carrier. The earlier you voice concerns, the better the opportunity to investigate, gather medical evidence and discuss strategy on defensible positions.

2. Focus on the Things You Can Control

The workers compensation system was designed to protect the employee and the laws favor the employee. However, measures can be taken to minimize cost and limit the life of the claim. Often this is the goal – reducing cost and the life of the claim – which can be frustrating to employers. The reality of workers compensation claims is that they are not won by hitting a home run. Rarely is there one isolated piece of information that “knocks it out of the park” and provides an ironclad denial. Claims are won through a series of singles. Documentation of anecdotal evidence (the employee was fine on the last day of employment; no one saw the individual get hurt; the employee was observed using the body part he or she is alleging is not functional etc.) and objective evidence (the independent medical exam’s x-ray or MRI shows no injury) builds your defensible positions and gets you to home base (which is usually a negotiated settlement). The value of the claim will be substantially less with well documented information. The claims take patience and persistence to resolve as bringing the employee back to work (the most common resolution to workers compensation claims) is not an option in a layoff situation. The lack of this option complicates the claims handling. The efforts and costs expended to defend suspect claims is difficult but worth the aggravation as it far outweighs suffering the enormous cost of a permanent long term workers compensation claim.

3. Revisit Your Accident Reporting Policies

Require all employees to report accidents immediately, no matter how minor.

4. Recommit to Thorough Accident Investigations

Accidents in times of company turmoil can be especially upsetting, but this is not time to get lax on your procedures. Investigate accidents immediately after they're reported. Separate witnesses from each other and the injured employee to get the whole story - and signed statements. Remove or restrict access to any equipment or other physical evidence involved until it can be examined. Address any other hazards which may have contributed to the accident as soon as possible.

5. Be Vigilant About Your Recordkeeping

Many of the workers compensation claims filed after employment ends are occupational disease in nature. Claims for hearing loss are common after layoffs. Be vigilant about your industrial hygiene recordkeeping, including baseline levels of noise, airborne particles, in-door air quality, chemicals and dust exposures. Also be sure not to neglect equipment condition or housekeeping inspection logs. Make sure records are not destroyed, since employees' payroll, schedule and accident reports may become evidence in a claim after their employment has ended.

6. Use Wellness Exams and Videocams to Document Employees' Health

Many employers contract with their workers compensation medical provider to conduct physical examinations to determine an employee's overall health and fitness status preceding a layoff. Employers may also videotape work areas to document employees performing their usual duties. These tools can help establish an employee's health and activities at the time employment ends. A cautionary note - information obtained about an employee's health must not be used as a reason to terminate or lay off the individual. This would violate the Americans with Disabilities Act.

7. Ask Employees to Confirm They Haven't Had Unreported Accidents

As part of an employee's exit interview, have the employee sign a form stating whether they have been involved in any unreported accidents on the job. This is an important document that can help defend any claims arising after employment ends.

8. Invest in Employee Assistance Programs

Terminations can easily and understandably thrust employees into an antagonistic frame of mind that can lead to fraudulent claims, but this can be mitigated if the employer communicates caring in the exit interview - and provides some real programs to support those sentiments. Consider job fairs, resume counseling, placement services, on-site therapy, and other services that demonstrate your concern for your terminated employees' welfare.

9. Consider Stepping Up Security Measures

As we all know from unfortunate events reported in the media, workplace violence is a real concern following layoffs or terminations. Any employee hurt on the job through violence of another current or prior employee will result in a workers compensation claim. Examine the level of security you can provide for remaining workers. Use exit interviews to assess an employee's attitude and tendency towards violence, and take all threats seriously. Employees probably should not have unescorted access to work areas following a layoff or termination.

10. Watch for Potential Fraud Indicators

Familiarize yourself with the warning signs of fraud developed by the National Insurance Crime Bureau:

• the employee is disgruntled after being fired or laid off
• the employee has been told his or her employment is about to end
• the employee is having financial difficulties
• the accident is not witnessed
• the injury involves subjective complaints of pain with no ability to obtain objective medical evidence

Your claims adjuster is undoubtedly familiar with these, but, as noted in our first point, your awareness and good communications will facilitate optimal claims handling.

Conclusion

Although none of these tips may actually prevent an employee from making a workers compensation claim after leaving an employer, they can assist in defending against such claims. The more evidence to present to the judge that there was no mention of any accident until after employment ended or was announced to end, the stronger the defense will be.

Employee reductions can pose a significant challenge for employers and often a devastating turn of events for employees. It is important for employers to have a layoff strategy broken down into goals and an action plan for the company. The layoff can be so overwhelming an employer may forget the overall company’s vision and strategy. Each employer should ask the question; “How do we not just survive but thrive after a layoff? How do we inspire our remaining employees to achieve amazing things… to continue their focus and innovation and not be paralyzed by these troubled and uncertain times?” First, every employer must over communicate in these situations. The employer should reiterate the vision and strategy of the company and the action taken (layoffs), although painful for everyone, accomplishes the mission.

Next, keep in mind; these are human beings whose lives have just been turned upside down. The surviving employees will give the employer the benefit of the doubt and their commitment to the employer if the employer tells them the truth and treats the employees who are leaving with fairness and compassion.

Don't miss the full article on this topic, available to WorkCompEdge members, on our wiki.

http://www.WorkCompEdge.com
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How Low Can You Go? Attaining a Perfect Score for Your Mod

Perfect and yet attainable scores apply to many areas of life: credit reports, bowling, the game of Yahtzee, and ACT college prep exams immediately come to mind. These are cases in which the higher the score, the better. Less commonly, an excellent score is represented by a low number: as our director of strategic consulting Lloyd Kelley would be quick to point out, golf is an example, even if it doesn't have a true perfect score.

If your mod was a game of golf, you'd want it to be under par - not just average. You also want to know what your company's perfect score can be - and then implement loss control and prevention measures to attain that perfect score.

Did you know that you can have a perfect score on your workers comp mod?

You can. But here’s the tricky part: the perfect score for your mod is unique to your company. It will be different from the perfect score of the company next door, or your competitor across town. It may change somewhat from year to year. The variability is due to the fact that the mod is based on your unique industry and payroll. But it is a real, attainable number, not just a theoretical best case scenario.

Many employers have the idea that a workers comp mod of 1.0 is, if not perfect, at least the goal that they want to reach. This is like saying a “C” on your grade school report card is good - or that you've shot par on the golf course. You may be pretty happy with it, but in truth, a mod of 1.0 is only average. If you want to beat that average, and thus lower your workers’ compensation insurance costs, you’ve got to know the value of your minimum mod - your perfect score - and your controllable mod.

Every mod value can be broken into two pieces: the minimum mod and the controllable mod. The minimum mod is that perfect score: the lowest possible mod if your business had no losses for the experience period (typically three years). The controllable mod is the difference between your actual mod and the minimum. This value is a direct result of the losses your company had during the experience period.

Attaining your perfect score directly impacts your work comp premium costs

The minimum mod and controllable mod are important for two reasons. For larger companies, these values highlight the savings that are possible by controlling losses. For example, as shown in the report example below, a large company with a mod of 0.98 may think they are doing quite well, however, since they have a controllable mod of 0.22, there is significant room for improvement - which in this case translates to a $44,000 cost savings!

For a small company, the minimum and controllable mod values can be used for setting realistic expectations; for example, a small risk that sets a goal of having a 0.80 mod will not be able to achieve it under any circumstance if the minimum mod is 0.85.

Here's a snippet of a sample WorkCompEdge Proposal Report that shows the minimum mod and controllable mod - and how much money this company could be saving!

No matter the size of your company, knowing the controllable mod is critical to understanding the possible savings achievable by reducing that controllable mod to 0 through loss control and loss prevention activities.

Ask your insurance agent to show you your minimum and controllable mod values – and estimate the premium dollars you can save by attaining that perfect score. A WorkCompEdge agent can do this using the WorkCompEdge Proposal Report from our ModMaster software. WorkCompEdge members can also use the WorkCompEdge QuickMod tool in the module Learn the lessons your experience mod can teach you to obtain this valuable insight.

http://www.workcompedge.com/
http://www.specificsoftware.com/

Maureen Steps Up (and Down!)

Our blog earlier this week about staffer Tony King's marathon training and intentionality seems to have started a trend: WorkCompEdge regular contributor Maureen Gallagher is also preparing for a big physical challenge ahead of her, and we're hoping WorkCompEdge readers might help. Maureen, who's also a partner with Neace Lukens, is going to be fighting childhood heart disease - and testing her own physical limits - in the grueling Carew Climb, part of the Skyscraper Vertical Mile challenge, on Sunday, February 22 at Cincinnati’s Carew Tower.

Specifically, that means she'll be climbing and descending the Tower’s forty-five floors ten times, with another eight floors and six steps thrown in just to round off the total distance to one mile up and one down—a total of 3,780 stairs in under three hours. And by auctioning off each one of those stairs, she’s hoping to raise enough money to send twenty kids to camp through Hope With Heart as well as raising money for the American Lung Association, the Climb’s sponsor.

Established as a summer camp experience, Hope With Heart provides year round support and friendships for its campers. The camp, now in its tenth year, is unique because it accepts high-risk children with limited life expectancies. The camp has children with varied heart problems such as valve replacements, pacemakers and transplants. Providing a recreation and social eight-day camp experience for children ages seven to fifteen, Hope With Heart has transformed the lives of more than 400 children with serious heart disease through the generosity of contributors.

Maureen, a fitness advocate who has run several marathons, has a personal interest in the Hope With Heart cause. Her nephew, Ryan, was born with a life-threatening heart defect similar to that of other children who attend the Hope With Heart camp. Ryan attended the camp along with other kids whose hart disease was so severe that other camps would not take them.

"We are all grateful for the experience Ryan had at the Hope With Heart camp,” said Maureen. “And we want to ensure that experience remains available for other children in the coming years."

The camp must maintain an emergency helicopter on standby along with doctors and nurse to monitor activities and dispense medicines to the children there. Everyone involved with Hope With Heart is a volunteer and the camp is free to all campers.

Maureen says that training for the Carew Climb is one of the more physically demanding challenges she has ever taken on. Those interested in making a contribution can do so directly to Hope With Heart at www.hopewithheart.com or to Maureen directly at
Maureen.gallagher@neacelukens.com. Any amounts are appreciated!

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

The Power of Intentionality, Part 1

As you may know, we have two affiliated businesses under one roof here at Specific Software and SIGMA Actuarial. Our actuaries hang out on the “south side” of the office, while most of our software staff is located on the north end of the floor. This provides us with the opportunity to kid each other about where the brain power resides. One of my favorite targets for this friendly ribbing is actuarial analyst Tony King.

SIGMA actuarial analyst Tony King has been very intentional about his marathon goals. At WorkCompEdge, we believe the components of his intentionality can apply to any goal, including a new vision for your company. Photo courtesy of Mike Stanfield.

Tony is mild mannered, humble, intelligent, highly disciplined, and focused. But, as he recently taught me by example, he’s also very intentional in working toward his goals. Tony has been a runner most of his life, although he took a break from it while his children were young. Now he puts in about 60+ miles per week. Last year he decided to step up his training in order to decrease his time and qualify for the Boston Marathon. Popping into his secluded south side office ever so often, I kept up with his progress and learned a lot that can apply to any goal:

Being intentional requires specific knowledge

Tony bought Lore of Running - and actually read it. (I have a copy collecting dust on my bedside table.) Gathering the knowledge one needs to effect change is a crucial first step that takes initiative.

Being intentional requires whole system intelligence

Tony then put the knowledge from his reading into practice. Knowledge is, in my definition, information and facts. Intelligence is a more abstract concept that involves applying knowledge to the whole system or “big picture” – in this case, Tony’s body and environment – to the challenge at hand. Intelligence includes a healthy dose of creativity, reason, and abstract connections between seemingly unrelated items to bring about change and improvement. It is one thing to read the Lore of Running, but is an entirely different level of functioning to know what the heck it means to you!

Being intentional requires quantitative measurements

Tony strapped on numerous electronic devices and gathered heart rate, distance, time, and speed data he needed to measure his progress. He then downloaded this data to a computer and gained insight that led to new questions and new measurements – and thus the feedback loop got tighter and tighter. Some of his insights – like how his heart rate correlated with his endurance – were new for him. They also led to new strategies, such as starting slow and ending fast. Some of his discoveries were not intuitive, thus proving the value of lots of measurements and an unbiased analytical approach.

Being intentional requires discipline

Tony used his knowledge, intelligence, and quantitative measurements to develop and execute specific action plans. Most of us can figure out what to do to a reach a goal – it is the doing itself that we struggle with. Discipline overcomes that emotional resistance.

Being intentional requires repetition

After going through the process above, Tony wasn’t sure he was where he needed to be, so he started the entire process over again. He reached out to new experts, identified road blocks, doubled his efforts, measured data again, tried new things. He persevered.

Being intentional produces results

Tony was shooting for a time of 3:15:59 to qualify for the Boston Marathon. He ran the Marshall University Marathon in West Virginia and finished with a time of 3:15:28, trimming about 30 minutes off his previous personal best!

So, when did Tony succeed? Would this have been a worthwhile effort if he finished with a time of 3:16:00? Certainly! The moment Tony decided – to the exclusion of all other options - that he would pour his heart and soul into creating a new level of performance, he created a new reality for himself. Which brings me to my final point:

Being intentional requires a vision

I don’t use the word decision lightly. A true decision leaves no alternative because it’s based on a vision of where we want to be. Arguably, the vision – of qualifying for the Boston marathon – is the first thing Tony had in this process. But he also kept that vision foremost in his mind. A solid vision guides our decisions and provides opportunities for the future.

So what’s your vision as an employer? What’s your “Boston marathon” goal?

This year, employers are facing unbelievable challenges. If, combined with economic challenges, you have workers compensation issues, you may feel very overwhelmed. I believe that the power of intentionality can make a dramatic difference for any employer that wants to change their business, address their workers compensation challenges and significantly reduce costs. In the weeks ahead, I will explore how an employer can use Tony’s model of intentionality with the knowledge and tools in WorkCompEdge to make dramatic reductions in workers compensation costs. But your first job is to make that decision and develop a vision of being a more successful company.

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