The Fundamentals of Work Comp: What Makes Your List?

Editor's note: In today's blog, Tim has a "baker's half dozen" of ideas for you. "Baker" reminds me of homemade rolls and cookies, which in turn reminds me of the rapidly approaching holidays. This is our last blog for 2008. We’ll be taking a break for the next couple of weeks, but we'll be back in the new year with more ideas to inspire work comp cost and productivity improvements. We are grateful for your readership, comments and emails and wish you and yours every blessing of the season. - Kory Wells

I am an avid goal setter. Each year in December I spend a lot of time setting specific goals for the coming year. This year, I decided to invest some time in viewing about 24 hours of material from Jim Rohn called Jim Rohn’s Weekend Leadership Event. I would strongly recommend this DVD set (and, no, Mr. Rohn doesn’t know me from a hole in the wall and I get no incentive for recommending his material).

In what I'd call a corollary to the 80-20 rule, Mr. Rohn suggests that about a half dozen facts and ideas will make 80% of the difference in any area you study. So what are those half dozen things in workers comp?

I love the way Mr. Rohn presents complex concepts in a straightforward manner. Each word he uses is carefully chosen, and the message is always precisely on target. Today, I was listening to him discuss “fundamentals.” In what I'd call a corollary to the 80-20 rule, Mr. Rohn suggests that about a half dozen facts and ideas will make 80% of the difference in any area you study. If someone says, “Let me teach you the 50 fundamentals” you need to be concerned, he believes. This concept challenged me to wonder: what are the half dozen fundamentals of controlling workers comp costs for a typical employer?

I’ve developed the following list and provide these without explanation and in no particular order. I invite you to comment, or even to suggest I’m wrong (nicely, of course):

#1 – Have robust hiring practices that include the use of a conditional offer of employment and a robust medical screening that does not let 100% of the people through.

#2 – Actively measure and intentionally improve the safety culture of the workplace.

#3 – Have a well-trained injury management coordinator with clear authority and responsibility to oversee the rapid recovery and return-to-work of any injured employees.

#4 – Train supervisors to understand the importance of their relationships with employees and to optimally manage the post-injury supervisor / employee relationship.

#5 – Have a robust return-to-work program that ALL employees are aware of (there is some hidden psychology here) that gets employees back to work before indemnity payments start - a big benefit in ERA states!

#6 – Establish and nurture a working partnership with a medical clinic that will ensure effective medical screenings and, in the case of an injury, the right treatment plan that will lead to the most rapid return to work possible.

#7 – (I’m going for a baker’s half dozen here.) Work with a WorkCompEdge Member Agency that is like-minded about these fundamentals and can help you implement needed business changes.

Are these the principles that would make your list? Perhaps more importantly, do you even have such a list? And how do you get motivated to make a list - and then do something with it? This is a dicussion we'll continue in the new year!

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

Fitting the Pieces Together: Extraterritorial Issues in Work Comp

In America, we have a Uniform Plumbing Code to protect the health of the nation (not to mention the sanity of plumbers and builders) and a Uniform Commercial Code enacted in all 50 states for a standard method of dealing with business law questions involving commerce. Unfortunately, no such code exists for our nation’s employers and employees for the purposes of work comp.

Knowing how the pieces fit together is especially challenging in work comp due to the lack of a national standard.

As states passed work comp laws starting in the early 1900s, each state established its unique work comp system. This resulted in a mishmash of laws, benefits, compensability and eligibility from state to state. There are many different, non-uniform work comp laws in the United States (state, territorial and federal). The state and territorial laws, which exist in every state, Puerto Rico and the U. S. Virgin Islands, are especially non-uniform in terms of which kinds of employments are covered, dollar amounts of wage benefits payable for different kinds and degrees of disability.

The complexity of our varied work comp system presents challenges for employers in three key areas:

• Establishing proper coverage in jurisdictions in which the employer has operations or other jurisdictions the employer has employees working, living or traveling in


• Understanding what jurisdiction benefits the employee can collect


• Determining what rates (premiums) will apply. (This subject mirrors in its complexity the coverage and benefit structures of the various state and federal laws. We will briefly discuss pricing and only as it relates to extraterritorial issues).

A full article addressing these areas in detail is available to WorkCompEdge members here on our wiki in pdf format.

The hodgepodge evolution of work comp laws has resulted in uneven or nonexistent uniformity across state jurisdictions, which creates challenges for employers when confronting extraterritorial issues, including questions of coverage, benefits and pricing.

Work comp coverage in various jurisdictions may depend on where workers reside, employer operations sites, licensing, and the willingness or reluctance of carriers to accept “broad” language in the work comp policy.

On the Information Page of a work comp policy, the insurance agent for the employer must have the insurance carrier list the states the employer operates in or expects to operate in at the inception of the policy. In a separate section, states are listed where an employer expects it may have employees working but the work in those states will begin after the effective date or renewal date of the policy (with some exceptions). The policy requires that the policyholder (employer) must notify the insurance company at once if the employer begins any work in any state listed in this section. Broad wording (suggested in the full article on this topic) is recommended to assure coverage in most jurisdictions even in unforeseen circumstances.

When a state is listed on the work comp policy, essentially we have attached hundreds of pages of work comp statutes and laws and thousands of pages of case law for that state. Add multiple states and I would argue that, although the basic policy is only about six pages long, the addition of statutes and case law make the work comp policy the largest and most complex policy an employer buys.

Employees working, living, traveling in or through other jurisdictions frequently present special work comp challenges including state specific time limits, variations in benefits, state law, reciprocity agreements and other issues.

To compound the challenges, work comp pricing is often driven by pressure to minimize work comp costs. This presents risks to employers as carriers may deny claims or charge some or all of a claim back to an employer. Errors in extraterritorial issues can result in devastating financial consequences to employers.

Knowing how the pieces of work comp policy and law fit together is especially challenging due to the lack of a national standard. For agents and employers, it is critical to understand each state’s work comp laws, customs and practices and, in doing so, to secure the broadest coverage possible. They also need to understand that any claim can result in a dispute as to which benefits apply as well as other extraterritorial issues. In these cases, it is best to work through these issues constructively with employees rather than engage in a standoff.

If you're a WorkCompEdge member, I hope you'll refer to the full article on our wiki for much more depth on the subject of extraterritorial issues.

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

Rock on with our videos: Getting Started with WorkCompEdge

(Part 3 of the Series "Getting Started with WorkCompEdge")

Okay - because you're a dedicated reader, you already know to use the Getting Started with WorkCompEdge survey and the WorkCompEdge proposal report in ModMaster to help your company or client decide which work comp issues - and WorkCompEdge modules, if you're a member - your company should focus on first.

We admit - our training videos may not bequite as exciting as a rock concert. But they're another way we can help you rock with WorkCompEdge! Visit our training videos now

So you've utilized the survey and/or the report, identified the topic(s) which most need your attention, and now you're chomping at the bit, as we say in this part of the country, to get started with a specific module in WorkCompEdge. (Or, if you're still not a WorkCompEdge user, you're curious to see what you would do next.) But how do you know what to do within the module? And how do you know that you're not overlooking some wonderful features we envisioned and painstakingly labored to include on the site? If you're asking such questions, then you're ready for

Step 3 - Watch our introductory videos

As you've hopefully noticed by now, there are videos all over WorkCompEdge. Our spokesperson Holly starts talking as soon as you hit the site, and each of the 15 modules has its own vignette which illustrates the concepts of that module. But for this step, I'm talking about a couple of different videos, both narrated by the one, the only, the legendary Tim Coomer, our CEO.

When you have 9 minutes, watch the Introduction to WorkCompEdge video for an overview of the site's navigation, module components, goals and more.

When you have 90 minutes, watch the WorkCompEdge Quick Tour. Yes, we realize that a 90 minute quick tour is a bit of a misnomer. But what can we do? Tim's the boss. At this very moment, for example, he's blasting circa 1987 Guns N' Roses from his corner office and there's not a thing any of us can do about it. So, he calls this video a quick tour, we all call it a quick tour. Seriously, as you might expect, this video goes much more in-depth and includes an overview of each of the 15 modules.

If you don't have many minutes at all, you can still view these videos a segment at a time. They both have menu options so you can click to the parts that interest you most - or watch a little while, then come back and click in to where you left off.

Finally, this is a good time for me to mention that there are other videos to help you with specific workbooks associated with several of the modules in WorkCompEdge. Don't miss them on the WorkCompEdge WebHelp page at www.specificsoftware.com/wcehelp/. All these videos are another way we can help you rock with WorkCompEdge.

More in this series "Getting Started with WorkCompEdge: Part 1 Part 2

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

From Birds to Cats: WorkCompEdge, One Step at a Time

(Part 2 of the Series "Getting Started with WorkCompEdge")

In last week’s blog I talked about tackling work comp issues “bird by bird,” so it seems only natural that this week we should move, in some fashion, to a discussion of cats, as in, “there’s more than one way to skin a cat.” This common idiom certainly applies to the many ways you could decide which work comp issues - and WorkCompEdge modules, if you're a member - your company should focus on first.

Print a copy of the Getting Started with WorkCompEdge survey and consult with other staff before you complete it online. Don’t worry if you’re not very sure of how to answer all the questions - it's meant to be an intuitive guide to identifying the work comp issues you should focus on first.

As we discussed in the last blog, the WorkCompEdge proposal report in ModMaster provides an excellent first step - and analytical method - for determining where to start making improvements to your company’s or client’s work comp picture. But we also think there's merit in a more intuitive approach, so that brings me to

Step 2 - Answer some key questions about your company's operations in our Getting Started with WorkCompEdge survey.

This survey, located at www.specificsoftware.com/wce/survey.htm, consists of 19 questions to help a company assess its work comp strengths and weaknesses. Each “question” is really a statement with which you can strongly agree, somewhat agree, somewhat disagree, strongly disagree, or indicate neutrality. All questions have a ranking of importance which we’ve predetermined, but your positive or negative answers will, of course, further impact that ranking. Leaving a question blank is the same as a neutral response.

OK, now for the tricky part. Depending on the size and structure of your company, it may be difficult for one person to immediately answer all 19 of these questions. We have two suggestions:

1. Print a copy of the survey and consult with staff including the controller, insurance or risk manager, safety team leader, human resource personnel, and CEO to get these questions answered before you complete the survey online.
   
   
2. Don’t worry if you’re not very sure of how to answer all the questions. This is meant to be a more intuitive approach than the WorkCompEdge proposal report, so just give your gut response and move on.

When you submit the survey (using the button at the bottom of the survey page), results will be shown as a prioritized list of the WorkCompEdge modules. Whether or not you’re a WorkCompEdge member, you’re welcome to use the survey as a guide to determining the work comp issues that most need attention in your company. Give it a try - you'll be the cat's meow!

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

Bird by Bird – WorkCompEdge, One Step at a Time

(Part 1 of the Series "Getting Started with WorkCompEdge")

Although I originally joined Specific Software as the programmer for ModMaster, nowadays I write words more often than I write code here at work. After I write and edit usage instructions, marketing pieces, educational information, web pages and endless emails - I then do the unthinkable, to some: I go home and write for fun. In all its forms – novel, memoir, poetry, etc. – I’m addicted to the written word.

How does this relate to you and work comp, you might ask? Well, one of my favorite books about writing is Bird by Bird: Some Instructions on Writing and Life by Anne Lamott. Believe it or not, some of the lessons in this book easily transfer to the process of improving your work comp picture. Bird by Bird got its title from an episode that Lamott relates in the book: when her brother was 10, he had to write a report on birds. He’d put it off and put if off, and now it was due the very next day. Lamott writes,

…he was at the kitchen table close to tears, surrounded by binder paper and pencils and unopened books on birds, immobilized by the hugeness of the task ahead. Then my father sat down beside him, put his arm around my brother's shoulder, and said, "Bird by bird, buddy. Just take it bird by bird."

Bird by bird. Doesn't any big project - whether it's writing a whole book, building a high-rise condo or planning to host the Olympics - loom large and unwieldly until you start breaking it into pieces? I hope that making changes to improve your work comp picture doesn't feel quite as overwhelming as those tasks, but let's face it: as the sheer number of modules (15) on the WorkCompEdge site attests, there are a lot of places you could start. How do you decide where?

Whether you're an employer or an insurance professional, here’s what you need to do:

Bird 1 - Start by learning what the mod can tell you

You probably already know that the mod is a number somewhere around 1.0, more or less, and that less is better. You hopefully know that the higher your mod is, the more you are going to pay in workers comp premium. If you’re in an industry like construction, you know that you may not be eligible to win contracts unless your mod is at least 1.0. But an analysis of your mod, which your insurance agent can do in our ModMaster software, will show you information such as:

• Your controllable mod – the amount of mod points you could save if you had no losses – and the corresponding money you could be saving on premium


• How much money you could be saving in premium for every point you trim from the mod


• How the number and severity of your losses compare to standards for your industry


• How your losses are trending, and therefore what you may anticipate for your future mod(s)

The WorkCompEdge Proposal report from ModMaster will show you or your client the top 5 or 6 areas of concern to prioritize when evaluating work comp improvement opportunities.

These factors and more are presented in the new, handy-dandy WorkCompEdge Proposal report in ModMaster, which then goes on to do some analytical behind-the-scenes crunching of that data to present the top 5 or 6 areas of concern that you should consider first. For example, if your analysis shows that loss severity is an issue, then this report is going to recommend you look at the Clock Is Ticking, Expedite Return-to-Work and Before and After an Injury modules first. If you have a frequency issue, it’s going to steer you towards the safety modules. If your mod is already great – either at or very near the minimum possible mod – then it’s going to steer you toward optimizing your costs through modules like Avoid Low Bid Mentality, Wellness, and others.

Here’s a sample of the WorkCompEdge proposal report in ModMaster. If you’re an agent, be sure to run it for your clients. If you’re an employer, be sure to ask for it from your agent. It’s a great way to decide – based on analytical data - which “bird” deserves your attention first.

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

Small Medical-Only Claims - To Pay or Not to Pay?

Editor's note: today we welcome commercial insurance broker and consultant Maureen Gallagher as a regular contributor to the WorkCompEdge blog and wiki. Maureen, a partner with Neace Lukens and founder of Insurance Partners Academy, will be bringing commentary, success stories and in-depth analysis on current workers compensation affairs to us on a monthly basis. Read Maureen's bio and this press release to learn more.

Will paying small medical-only bills rather than reporting them to the carrier save you money - or cost you? The answer's not simple!

The most common question an insurance agent gets from employers is whether or not they should pay (or continue to pay) small medical bills on workers compensation claims rather than submitting them to the insurance carriers for payment. The answer to this question is not simple. It can depend on several factors including:

1. Whether or not the state has approved the Experience Rating Adjustment (ERA) in their experience modification formula.

2. Whether or not the employer has expertise in paying according to the state fee or reasonable and customary schedule and/or has access to discounted medical networks as insurance carriers do.

3. Whether or not a small deductible to handle small medical claims might be more appropriate and assist in complying with state rules.

4. Understanding the state rules and penalties where the employer is located.

5. Whether or not the state of operation has a favorable alternative option for handling small medical claims.

6. How organized and detailed the employer is.

For this blog, we're going to focus on one concern related to the ERA, but a full article addressing more about ERA as well as these other factors is available to WorkCompEdge members here on our wiki in pdf format.

An Analysis of Reporting vs. Not Reporting in ERA States

Many of you do business in states which have approved the Experience Rating Adjustment (ERA) to the experience mod formula. Medical-only claims, also known as injury code 6 claims, are reduced by 70% in states where ERA is approved before they are utilized in the experience rating process. Also, the expected loss rate and discount ratio, used to compute expected losses and expected primary losses, have been changed to reflect that medical-only claims will be reduced by 70%.

Many feel the incentive to not report medical-only claims has been eliminated in states where ERA is approved. In the interest of showing that, I performed several “what if” scenarios on employers either reporting to the carrier or paying medical-only claims on their own in ERA states and its impact on the Experience Modification and the employer’s overall costs. The studies are conclusive that the employer did not save money by paying medical-only claims itself in an ERA state, particularly if the employer does not know how to apply the state fee schedule and/or has no access to discounted networks like those developed by insurance carriers. Here is an example.

No State Fee Schedule or Discounted Insurance Carrier Network Applied
	Premium	Experience Modification	Adjusted Premium
Cost (premium) where all claims were reported	$40,790.00	1.275	52,007.25
Cost (premium) where employer did not report medical-only claims	$40,790.00	1.18	48,132.20
Premium Savings due to reduction in experience modification for not reporting medical-only claims.			3,875.00
Premium savings over three years due to the reduction in the experience modification for not reporting medical-only claims			11,625.15
Medical Claims cost paid by the employer			13,981.00
Additional cost to employer due to not reporting medical-only claims			2,355.85

Conclusion

If you're a WorkCompEdge member, I hope you'll refer to the full article on our wiki for much more depth.

The variances among states dictate that there is no one, simple answer to the employer’s quandary of whether to pay small medical-only claims or turn them in to the insurance carriers for payment. An employer must weigh the advantages and disadvantages of paying small medical claims after obtaining a complete understanding of their state’s rules and laws, evaluating their staff’s ability to effectively manage their own medical bills and reviewing the insurance alternatives available that take paying small medical claims into consideration.

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

Thoughts about Claims Management - and the Electoral College

Barack Obama was yesterday’s winner by notable margins in both the electoral and popular votes, but those two sets of numbers (currently 349 to 163 in electoral votes and 52% to 46% in the popular vote, with a couple of states still not reported) still tell different stories. Every presidential election we are reminded that it’s the electoral vote that really counts. It is, as history and pundits remind us, possible to win the popular vote and lose the electoral vote. Now, hold on to your comments, as I'm not trying to make any political statement here, and I know we've all had our fill of polls and graphs lately. I mention these numbers as an example of the cliché: it’s all in how you slice and dice the data.

I recently met with top level claims representatives from a major insurance company to discuss some issues related to their management of several injured employee cases. These are good people striving to do a good job. They do difficult work in a challenging system.

When it comes to claims management, insurance companies and employers are looking at the data in different ways.

However, during the meeting, it suddenly occurred to me why employers – and the agents who serve them - are often at odds with insurance companies over the way injury claims are handled. We’re looking at the data in different ways. Simply put, insurance companies frequently have different goals, objectives, and measurements than employers. I was at the meeting to discuss 9 individual injured employees. They came to the meeting to explain the workings of a system that handles 20,000 injuries a year.

Insurance companies’ key measurement for workers’ compensation injuries is something called the pure loss ratio. This is the percentage of the premium dollar that goes to pay for injury costs. For example, their goal might be to spend no more than 60% of premium dollars on injury costs. Add expenses to that percentage and what remains is their profit, not counting investment income.

From the insurance company’s perspective, if they meet their goal, then their processes are working. They see the work comp world from an aggregate view, while we’re looking at specific injured employees.

Some might suggest that if insurance companies are not effectively dealing with the specific, they will not meet their overall objectives. However, there are times, as is now the case, when they are saved by legislative reforms which drive down injury costs regardless of their processes. When doctors and lawyers get reigned in by the legislature, everybody looks smart. But as the saying goes, just because you are standing on third base, that does not mean you hit a triple.

The employer’s primary objective is for the injured employee to get the best medical treatment and to get back to health and productivity as soon as possible. The insurance company’s primary objective is to meet a number. If they attain their aggregate goal, then they are not as open to improving their processes.

Thus, it is up to the employer to make sure the employee gets what is needed and is not just a set of dates and numbers “sliced and diced” in the insurance company’s claims system. The incentives are not aligned such that the employer can abdicate this critical responsibility to insurance companies.

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