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Jul 17, 2014

Converting to Self nsurance - Five Important Considerations With Alternative Recommendations

We receive many inquiries every year from employers that wish to cover to self insurance for their Workers Compensation coverage.  The inquiries to our offices reached a fever pitch in 2002 - 2005.   Self insurance can save $$ for the right employer in the right situation.

There are many considerations to analyze before converting to self-insurance.  Five of the top considerations are:
  1. Your company or organization will have a new partner with a very close fiduciary relationship.   If you stop and think, before you were just paying an insurance premium and letting the carrier handle the claims.  You will have an outside company - Third Party Administrator (TPA) spending directly out of one of your bank accounts.  In other words, the method you use to monitor the claims must change overnight.  
  2. With self insurance, you lose the ability to absorb many claims or a few large claims.  Unless your company or organization has a large insurance budget,  this can severely impact your budget.  The buffer of  the insurance policy and the E-Mod system are no longer yours.   Reinsurance may help to a certain degree. 
  3. You have to calculate your own E-Mod better known as the Loss Development Factor (LDF).   The outlook in the E-Mod system is up to four years in the past.  LDF's  survey a 10-year period.  Your LDF may not match your old E-Mod.   If your organization is self insured and you do not know your LDF or have not had one calculated, your insurance budget is no more than a bad guess. 
  4. The state requires certain minimums to be self-insured.   There is a reason for these minimums.  The minimums keep your company afloat if #2 above occurs in your insurance budget.  
  5. There may be less expensive and risk averse alternatives such as:
    • Large deductible plans- are very popular with companies that want to retain some, but not all of their WC risk.  
    • PEOs - becoming very popular with mid-sized employers and companies with high E-Mods.  
    • Small deductibles-I have not seen  a very significant amount of savings in these plans
    • Captives - becoming more popular due to flexibility, they do carry a certain amount of unique risk
The #1 concern with an employer converting to self insurance is #2 from above.   Congrats as your company is or has grown in a tough economy.  Patience and risk diversity  such as PEO's are the keys.   Even though your company may be in line to be self insured in the future, now may not be the best time.


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Jul 16, 2014

Are Small Deductible Policies Worth It -NCCI Study - It Depends On The State

One of the long standing assumptions I had made was that small deductible policies really did not make that much of a difference to the cost of a Workers Comp policy.  Small deductible in my observations were $2,500 or less.  

NCCI (National Council on Compensation Insurance) recently performed a study on small deductibles.  They considered a small deductible to be $25,000 or less.  I had not really considered a $25,000 deductible as small.   NCCI had split their analysis as:

  • Small - $1 to $24,999
  • Medium  - $25,000 to  $99,999 
  • Large - $100,000  and up 
There are three main definitions that should be pointed out:
  • Frequency- number of claims over a given time period
  • Gross of claims- certain states do not allow the removal of the deductible when reporting values  to NCCI or other rating bureaus for E-mod calculation
  • Net of claims - certain states allow the removal of the deductible when reporting values
One would have to conclude the net of claim states would actually have more of a benefit that the states with gross of claims.  The gross of claims states indirectly devalue the effect of having a small deductible. 

The three main conclusions drawn by NCCI were:

  1. As expected employers with high frequencies chose small deductibles - or did the carrier force the higher risk employer to take a deductible before they would cover their business or organization?
  2.  Contractors and employers in the most hazardous group (Group G) selected small deductibles more often than other industries or as in #1, did the carriers require the employer to have some type of deductible before being underwritten? 
  3. A significantly greater number of employers select small deductibles in states that mandate the use of losses net of the deductible than states that mandate the use of losses gross of the deductible. 
Conclusion #3 makes great sense as the employer would want the deductible amounts taken out of the E-Mod calculation.  This would seem to be a very large incentive.  

The net of deducible states are:
  • Alabama  
  • Colorado 
  • Georgia 
  • Hawaii 
  • Idaho
  • Iowa  
  • Kansas 
  • Kentucky 
  • Maine  
  • Missouri 
  • New Mexico 
  • Oklahoma 
  • Oregon  
  • South Carolina 
  • South Dakota 
The gross of deducible states are:
  • Alaska
  • Arizona
  • Arkansas 
  • Connecticut
  • District of Columbia
  • Florida 
  • Illinois
  • Indiana 
  • Louisiana
  • Maryland
  • Mississippi
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • North Carolina
  • Rhode Island
  • Tennessee
  • Texas- with exceptions
  • Utah
  • Vermont
  • Virginia 

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Jul 15, 2014

NCCI Updates Website- More User Friendly - Kudos - A Few Hidden Enhancements

NCCI has update their website often in 2014.  The much appreciated upgrades were long overdue.  Some of the upgrades were:
All of the updates or enhancements come with a webinar which covers the updates and enhancements.  As we all know, upgrades and updates sometimes overdo their intended purpose.  NCCI did not change things so much that navigation of the website was the least bit confusing.  The navigation was similar to the old website.

Unlike most websites, the webinars are actually chock-full of great information and very easy to navigate.  Webinars are becoming the bane of web user, but not in this case.  

One of the big enhancements is for Google Chrome and Firefox  web browser users.  Many web savvy user now use these two web browsers.  One of the most complex uses of NCCI's website was the browser requirement of Internet Explore only.   This was due - without sounding too geeky- to most of the NCCI website being built on frames.   This was a reliable but very old way to program websites.    

The complexity kicked in when I had to have Internet Explorer, Chrome,  Adobe (PDF), and Microsoft Word or Excel open when working on the NCCI website.  Internet Explorer would crash so many times that on some days, NCCI was unworkable.  One very interesting was that NCCI seemed to work the best with Windows XP.

In case you are interested, you can find Chrome here and Firefox here.   

The NCCI website now seems to work with Chrome and Firefox.  The upgrades may not work with all of the website, but so far so good.  

One nice update is the pricing any data such as E-Mods or Worksheets is very transparent.  If you do not have a username and password from NCCI, a large portion of the website can be reached by the general public.  

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Jul 10, 2014

Mistakes To Avoid on IME's - Part II - With A Bonus

This is a continuation of the Part I article.
  1. The IME physician may not like the fee schedule - some states allow the fees to be negotiated directly without using the fee schedule.   This may be a good idea as nothing can sour a relationship with an IME physician that feels shorted in what they were paid to see the injured employee.  Do not assume the IME physician will just accept a set amount.  This should be negotiated upfront and please do not wait 60 days to pay for the IME appointment.  
  2. The court has seen reports from the same physician too many times.  WC umpires, judges, and commissioners are very adept at noticing a trend where a certain employer, carrier, or TPA (Third Party Administrator) sends all of their inured employees to the same IME physician.  That is not a trend you want to establish overall.  There are so many IME physicians  to choose from in most areas.  
  3. The treating physician is not informed an IME has been requested for a 2nd Opinion.   An act of great courtesy is to inform the treating physician that you are requesting an IME.   Almost all physicians will not take offense, especially if  the IME is a surgical second opinion.  In fact, the treating physician's office may even recommend an IME physician.  The relationship between the carrier/TPA/employer and the treating physician is very important to return the employee to work as soon as practical. 
  4. Does not have all the medical records included with the IME request letter.  This is a big potential mistake as the IME physician is going to base a large proportion of their opinion on a review of the medical records.  One of the most overlooked type of medical records is the radiological studies.   The review of the medical records that accompanies the IME appointment letter is beyond crucial.  Leaving out one report can take a file down the incorrect path very quickly.  
  5. Is rushed so heavily the IME physician is not given time to review records and do a full report.  An appointment should be scheduled far enough in advance to give the IME physician record review lead time.  Copying/scanning  the records and writing the proper IME letter (an art) takes time if done properly.
  6. Bonus - Not involving the rehabilitation nurse- Most rehab nurses will know who the best physician in the area for the type of IME that you have requested for the injured employee.   The rehab nurse is invaluable in these instances.  If she/he has a working relationship with the IME physician's office, that is golden for having successful IME.   The injured employee will also likely heavily trust the rehab nurse's recommendation. 
  7.   Bonus -  Sloppy records- See #4 above - the easier you can make the review of the medical records for the IME physician, the better the results for all involved.   Ordering the notes from oldest to newest is a great idea.  Using tabs will also result in a better IME appointment.  
Please note that each state has its own rules that should be followed.  These two lists were just general recommendations. 

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Jul 9, 2014

Independent Medical Exam (IME) Mistakes To Avoid - Part I

Yesterday, I wrote a list of the Top 10 Ways that IME's can harm a WC file.  The first five from the article are covered more in-depth today.   Tomorrow, I will cover the other five.   These may not fit all files in all states.
  1. Can backfire if the claim is from a state that allows directed medical care.  If you have an employer-directed care state, then the IME is basically a 2nd opinion on your own opinion.   Obtaining a 2nd surgical opinion is a different matter.   Establishing a physician treatment network and using it will avoid IME's on your  own directed care.   The injured employee should be receiving treatment from your approved medical providers when using the treatment network to its fullest. 
  2. Performed on a very old claim with no prior IME's.   Waiting for years to schedule an IME will lessen the validity of the exam.  How can one expect to question a physician's opinion or treatment plan with a single out-of-date IME?   The treating physician has been seeing this patient for years.   How can one appointment question a long-established treatment plan?  The WC courts usually detest seeing these and will usually rule with the treating physician's opinion.   
  3. Not discipline-specific - if the treating physician is for example a neurosurgeon, the best IME will be provided by another neurosurgeon.   An orthopedic opinion may not necessarily hold the same weight.  There are so  many IME physicians available in most parts of the country.  
  4. Takes the claim on a tangent - there are files where the IME physician identifies non-related medical conditions,  and has other incorrect info that is actually written in the IME report.  See #5 for how to avoid having an IME actually causing more problems than it helps prevent overall.   These do happen now and again and are sometimes unavoidable.   
  5. Starts with one of those form letters - not good.   Spending a large amount of time and money can be easily fettered away by using a form letter.   The specific information needed may not be enumerated in a pre-filled form letter.  As there is so much on the line with an IME,  a letter that covers the file and medical history is a great idea.  The physician should not be solely relied upon to come up with a report without some input in the IME appointment letter.   Sending a form letter for an IME will raise the risk of #4 occurring on the file.  Ask the questions you want answered by the IME physician.  
These five and the next five for tomorrow came from observing actual WC file reviews over the years.

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Jul 8, 2014

The Art Of The Independent Medical Exam (IME)- 10 Ways To Harm The File

One of the most controversial and fund-leaking Risk Management techniques for Workers Compensation is the Independent Medical Exam (IME). This list is not just for adjusters.  Anyone that comes in contact with the process should keep the following list in mind.

  IME's are a great tool when used properly.  IME's are also one of the riskier techniques to control WC costs.   A few considerations before scheduling an IME are listed below.   The most detrimental to the WC file is an IME that:
  1. Can backfire if :the claim is from a state that allows directed medical care. 
  2. Is performed on a very old claim with no prior IME's
  3. Is not discipline-specific
  4. Takes the claim on a tangent
  5. Starts with one of those form letters - not good
  6. The physician may not like the fee schedule and wants to be paid more than the CPT code allows - touchy subject
  7. The court has seen reports from the same physician too many times
  8. The treating physician is not informed an IME has been requested for a 2nd Opinion
  9. Does not have all the medical records included with the IME request letter
  10. Is rushed so heavily the IME physician is not given time to review records and do a full report
This article was going to be an all-in-one analysis.   The article would have been too long if each was of the 10 was enumerated now.  There will be two follow-up articles as this is a very important WC risk management consideration. 

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Jul 3, 2014

Top 10 Industry Gender Pay Gaps - Double Shocker - Two Are Insurance Related

Another holiday is upon us.  I had already written two articles this week.  I decided to Google what other subjects to write about just before a holiday.  One of the best online newspapers on earth is the Daily Mail out of the UK.   The Daily Mail provides an outsider's objective view to what is happening in the US. 

I came across this shocking article on gender pay gaps.  Even though the article was over six months old, it was still relevant.   The original article from another publication can be found here.  The original article - a great analysis delves much more into the gender pay gap.   

The industry with the highest gender pay gap was Insurance Agents along with the #10 rated industry as Claims Adjusters and Examiners.  

Female insurance agents made less than 2/3 of their male counterparts.  The number of female vs. male workers in this area are basically the same.  

Women claims adjusters/examiners made less than 70% of their male counterparts even though as of 2012,  women held nearly two thirds of the jobs in these professions.   

I, or the articles, did not explore the reason for the gender pay gaps.   The full list is enumerated below.  

1. Insurance
Women’s wage as pct. of men’s: 62.5%

2. Retail
Women’s wages as pct. of men’s: 64.3%

3. Real estate brokers and sales agents
Women’s wages as pct. of men’s: 66.0%

4. Personal financial advisors
Women’s wages as pct. of men’s: 66.3%

5. Education administrators
Women’s wages as pct. of men’s: 67.2%

6. Physicians and surgeons
Women’s wages as pct. of men’s: 67.6%

7. Marketing and sales managers
Women’s wages as pct. of men’s: 67.7%

8. Security, commodities and financial services sales agents
Women’s wages as pct. of men’s: 69.1%

9. Inspectors, testers, sorters, samplers and weighers
Women’s wages as pct. of men’s: 69.2%

10. Claims adjusters, appraisers, examiners and investigators
Women’s wages as pct. of men’s: 69.3%

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Jul 2, 2014

Insurance Industry Employment Numbers - Better Than Last Year - But Not Great

In late 2012, Workers Compensation insurance industry employment was stable.  The numbers for Workers Comp actually were mixed in with property and casualty.  

A few insurance industry employment areas have actually reduced greatly over time.  Some of the reduction was due to the Bureau of Labor Statistics reclassifying certain lines of employment in the insurance industry.

The actual numbers of insurance employment has actually stayed the same for the last 15 years.  The total number of insurance workers have totaled  between 2.3 - 2.4 million during that time.

Third Party Administrator (TPA) employment has been a bright spot as the numbers have grown over the last twenty years steadily.   Self insurance and other market drivers have caused this steady growth.

Two other bright post in the insurance employment numbers was the increase for brokers and  the health carrier segment - up 2.7% and 4.8% respectively.  One has to assume the Affordable Healthcare Act was partially responsible for the growth in the health carrier segment.

The one area of concern may possibly be the life insurance segment. According to the Insurance Information Institute, the segment has declined a large amount over the years and has declined once again.  

    

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Jul 1, 2014

Shocking Insurance Industry Numbers - 25% Gone By 2018 - Brain Drain?

A very short but chilling article pointed out a few numbers of the upcoming insurance company personnel crisis.  By 2018, 25% of all insurance company personnel will retire.   That is a hard number to believe in this article.  I checked and the Bureau of Labor Statistics (BLS) and the article was correct.

The average insurance professional is 45 years old.   That seems to be a very stark number.  This article shows the microcosm of insurance, risk management and safety personnel in North Carolina.  Even though my observation of the age gap was made in a bar, the same theory applies overall.

The insurance industry is not really in a brain drain, but instead, an age and experience drain.   One of the more interesting numbers from the aforementioned article is that only 5% of the millennials have expressed an interest in working in the insurance industry.

Usually, every crisis has a silver lining.  Due to the increasing level of technology, there will be a large number of job openings in the insurance industry including:
  • Customer Service Reps
  • Sales agents
  • Business Analysts
  • Claims Adjusters
  • Underwriters
  • Actuaries
There will be 220,000 more jobs in the insurance industry in the next 10 years.   The personnel to work in those jobs will come from an unknown source.  Usually, if there are not enough qualified recruits, then a brain drain will occur which will make the insurance industry and their customers suffer through having lower quality workers.  

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Jun 26, 2014

WCRI - Two Nice Studies On Ambulatory Surgery Centers - ASC's

The Workers Compensation Research Institute (WCRI) recently published two studies on Ambulatory Surgical Centers  - acronym ASC's.

The Association of ASC's defines ambulatory surgery centers as:

Ambulatory Surgery Centers—known as ASCs—are modern health care facilities focused on providing same-day surgical care, including diagnostic and preventive procedures.
ASCs have transformed the outpatient experience for millions of Americans by providing them with a more convenient alternative to hospital-based outpatient procedures—and done so with a strong track record of quality care and positive patient outcomes.
The two studies by WCRI can be found here and here.   The comprehensive studies covered:  

  • Comparing Payments to Ambulatory Surgery Centers and Hospital Outpatient Departments - As expected, in almost all cases ASC's were a much cheaper route for surgical care than hospital outpatient centers.  There were notable exceptions in a few states. 
  • Payments to Ambulatory Surgery Centers: This study shows that prices paid to ASCs in some states were triple those in other states ---    due to state price regulation or the absence thereof.  
After reading the abstracts  for each study, the one thing that seemed to be very important is that state price regulations (fee schedules) keep costs down in Workers Compensation .

The 23 states included in both studies are Arizona, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin.

  

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How Long Could Workers Compensation Survive Like This???

The process of Workers Compensation is going to always involve claim over-payments.  Any time that I hear "We have X, Y & Z process in place to not overpay vendor and injured employees is just not being honest with themselves.  Any time benefits are paid to any type of claimant or vendor, overpaying the benefits is going to be a large concern.  

Insurance carriers and especially Third Party Administrators (TPA's) have a massive fiduciary responsibility to their insured clients to make sure that overpayments are limited as much as possible.   There is no excuse for issuing overpayments as part of a trend. 

I was reading today in a report by the GAO (PDF file) which found $14.1 billion in overpayments.   This did not seem that large as the Center for Medicaid/Medicare Services (CMS) is a massive payor.   I then read in this article the error rate for overpayments was 5.8%.  

The 5.8% error rate is likely understated.  The audit was examining a small section of the overall payment structure.  The GAO and CMS even admitted that their MCO (PPO) payors had not really been audited.  

We often are consulted to audit payments by carriers and TPA's.   The error rate is usually much lower, especially if the payments are made through a Workers Comp PPO network.   However, direct non PPO payments do have a similar error rate to the CMS or higher.      


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Jun 25, 2014

The 6th Key To Cutting Workers Comp Costs

In 1989,  I originally wrote and presented on what I thought were the Three Keys to Workers Compensation Savings.   I wrote the three  from a claims standpoint.   Those three were:
  1. ASAP First Reports of Injury
  2. Return to Work Program
  3. Physician Network 
Subsequently, I added in Employee Treatment as a Key.  The article from yesterday contains more info on why I subsequently added in this consideration 

Recently, I added in a fifth Key to Cutting WC- Understand your Premium Audit and E-Mod.   If you are a self insured - Understand Your Loss Development Factor (LDF).  

The Affordable Health Care Act has actually done more than move the subject of Workers Comp to the back burner.  It has caused employers to take it off the stove for now.  Workers Compensation is still a budget-buster that maybe receiving less recognition as at least a partially controllable budget item.   

The new addition to the list (Sixth)  is Adoption of the First Five in the list by Management.   With health insurance becoming more of a concern, Safety and Risk Management departments have been reduced or even eliminated in some cases.   

The employer E-Mods and Self -Insured payouts will usually not show the  full effect of the Risk/Safety departments reduction or elimination for 3 -5 years.   

If Senior Management or the Company Owners in smaller companies will not adopt any of the first five Keys in the list,  the likelihood of not paying more WC premium or self-insured payouts is almost a certainty. 

I have performed statistical tests that showed the first three in the list not being instituted will cause a claim to increase by 400% per item or 1,200% if none of the first three are accomplished.   

A recent study by WCRI (see yesterday's article)  somewhat quantified #4 on the list - Employee Treatment.  WCRI quantified Employee Treatment as being a major concern in WC costs.   

Understanding Your E-Mod, LDF, Premium Audits, or Self-Insured Payouts has been discussed very often in this blog.  I will not repeat the information again here. 

However, if management does not adopt any of the listed cost savings procedures, identifying the areas of concerns and implementing changes "on paper" is just that - in a book that sets on someone's shelf  or as a computer file that is in the My Documents folder never to be seen again. 

Now may be the time to get the book off the shelf  and dust it off or dig out the computer file and see what could possibly be implemented without spending any extra cash as the plan may be sitting right in front of you.  

That is why I wrote in #6 this week - to remind companies that dusting off the old WC procedures manual may be a great cost- saving move.  At least putting WC "back on the stove" will likely cause the claims and/or premium payouts to decrease in a time when every $ counts.  

The addition of #6 now makes the List of Keys:
  1. ASAP First Reports
  2. Doctor Network
  3. Return to Work program
  4. Employee Treatment
  5. Understanding Your E-Mod, Premium Audit, and LDF
  6. Adoption of #1 - #5 by Management or Ownership

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Jun 24, 2014

WCRI Proves One of My Five Keys To Workers Comp Savings

The Workers Compensation Research Institute (WCRI) recently published another great study.  The study  Predictors of Worker Outcomes showed employees' trust of their employers as being one of the "silent variables" that determined any upcoming return to work issues.   A few of the statistics covered by the WCRI in the study were:
  1. Workers who were strongly concerned about being fired after the injury experienced poorer return-to-work outcomes than workers without those concerns.
  2. One in five workers who were concerned about being fired reported that they were not working at the time of the interview. This was double the rate that was observed for workers without such concerns. Among workers who were not concerned about being fired, one in ten workers was not working at the time of the interview.
  3. Concerns about being fired were associated with a four-week increase in the average duration of disability.
The WCRI study covered eight states. The eight states are Indiana, Massachusetts, Michigan, Minnesota, North Carolina, Pennsylvania, Virginia, and Wisconsin. The workers surveyed three years post-injury.   

The study results can likely be applied to all states as they were generic in nature. 

In 1986, I originally wrote and presented the Three Keys To Cutting Workers Compensation Costs.   I have since added two more Keys.  In 1989, I added Employee Treatment as the fourth variable.  The addition of a Sixth Key is in progress.   


I had seen so many files where employees that were not treat fairly by their employer post-WC-accident.   These files always cost more as the injured employees basically negated all return to work efforts.   This caused longer periods of Temporary Total Disability and higher Litigation Expenses. 


I had access to a very large pool of public entity data in the late 1990's.  I decided that I would try to analyze the monetary value of not treating employees fairly post-injury.   The files where the employees had kept a good relationship with the employer and vice-versa resulted in an increase of 400% to the value of a file.  


There may be times when keep a good relationship with the injured employee is just not possible.  Most of the time, the injured employee will respond positively to a fair-mined employer post injury.  WCRI has proved that point in eight states, if not more.  

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Jun 19, 2014

Top 10 Challenges for WC - Expanded Part 2

This is part 2 of 2

6.    24 hour coverage - WC and health melding
7.    No young workers in WC, Risk Management, or Safety Industries
8.    Deflation of the dollar as a currency
9.    WC carrier mergers
10.  WC carrier failures
Bonus - Spiraling medical costs to even become worse


24 Hour Coverage

There has not really been much success with 24-hour healthcare coverage.  The concern is that 24 hour coverage would heavily affect the Workers Comp market.  Claims handlers would have to be versed in health insurance and Workers Comp or a claim would have to be directed to a certain department depending on whether the accident occurred at work.  The pricing for this type of coverage would be complicated at best. 

Where Are The New Recruits?  

This concern became apparent when I recently attended a large safety conference.  Every year a large contingent of the attendees would gather at the hotel's main nightclub. This year, the club shutdown well  before midnight.  I then realized the crowd had been the same for 10 years with very few younger workers.  
Over the years, we have had numerous college interns work over the summer.   Even though I/we tried to steer the interns towards WC or Risk Management, all of them took different paths.  All of our interns have become somewhat successful, however, the success was in other industries, especially banking

A great Risk Management degree has been and is now supplied by Appalachian State University.  

Dollar Deflation

The deflation of the dollar was covered very well in this article.  The main concern here is the deflation of the dollar as a currency will only make the return of investment even more difficult for carriers.  Once again, as in the previous list, the policyholders will make up the difference with higher premiums.   

Even China has had its problems in the banking industry.   A tidal-wave effect would be felt in the overall economy if China had to pull out of  its US investments.  

Workers Compensation Carrier Mergers/Failures

These two were combined to keep the article from being too long.  As carriers merge, much like the airline industry, competition will sag and prices will increase.  The basic supply and demand model shows that when the same demand (coverage)  exists and the suppliers (carriers) shrink in number, prices will naturally rise.  

The ULICO merger sent ripples through many markets.   ULICO provided many lines of insurance that were hard to find elsewhere.  This change will be felt for many years to come as the claims are worked through the WC system. 

Spiraling Medical Costs - Bonus

One of the unique conundrums in WC is that when prices are reduced, suppliers of medical treatment and equipment tend to make up that price reduction with an increase in usage.  I performed studies over the years for medical treatment vendors and found this to be true. NCCI and WCRI both verified this conclusion.  

Bottom Line - One has to attain all the education possible in the insurance, Risk Management, and safety industries.  Flexibility is the key.   You may not be doing the same type of job in the near future, so be prepared.  

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Top 10 Challenge Areas - Expanded Part I

The article on the Top 10 Challenges for Workers Compensation received a large amount of inter-buzz.   Two readers suggested an expansion (better explanation) of my list.   I will split the Top 10 into two articles.

The first five of  My Top 10 areas of challenge are:
  1. Harder market - without investment returns, WC cannot sustain lowering price pressures
  2. Captives/Alternative Insurance - every company wants out of the current WC system 
  3. States that have legalized marijuana - now what does that do for the workplace?
  4. Employers need to monitor next year's premium
  5. Affordable Care Act- the elephant in the room for any healthcare discussion

Harder Market vs. Hard Market

I rarely disagree with NCCI.  However,  a few weeks ago, the published an article on the underwriting cycle  that I did not agree with overall.   Investment returns besides a minuscule rate of rate on interest bearing accounts drive the insurance markets.   To NCCI's credit, the current situation with a low rate of return (interest) is not enough to sustain a market.  The stock markets have been doing very well.  Other than bonds, carriers can produce a great rate of return on premium dollars invested in the stock market in the long term.

If  the stock markets take a hard downturn and the interest rates stay low deflation would rule the day. Carriers have nowhere to go for a decent rate of return.  They will have to look to their policyholders which would equate to a hard market.  

Captives/Alternate Insurance

As companies grow, there now seems to be a large push to examine other methods to find WC coverage such as captives, PEO's and small/large deductibles.   Alternative insuring arrangement do carry a large risk especially if a company is going to retain a large amount of the premiums.   The alternative market must examined with caution.

States That Have Legalized Marijuana

Two recent New Mexico court decisions have shined a bright light on the problem of marijuana in the workplace.  California issued a similar decision a few years ago.  If marijuana is a prescribed medication by a physician, will it be considered the same as any employee that happens to be taking a prescription while on-the-job?   Will an employee file a "drug discrimination" grievance in that instance?


There are many articles in this blog concerning the level of payroll decreasing for certain employers.   If your company has a 20% reduction in workforce, why would you pay the same premium base as last year?


As I have written so much on this subject, I will refer to this article (click on heading) on how the changes in healthcare will affect WC.   

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Jun 17, 2014

Top 10 Areas of Challenge For Workers Compensation in 2014 - Two Great Lists

A very great list of the Top 10 Upcoming Challenges For Workers Compensation was published recently by the Insurance Journal,  Check it out here.  The Top 10 list was (with a quick explanation).  BTW, I agree with them wholeheartedly:

  1. Wage and salary stagnation - need payroll growth for premium growth
  2. Technology and innovation - WC industry lags in this area
  3. Opioid abuse - hot button 
  4. Marijuana in the workplace - another hot button and will get even hotter
  5. Manufacturing - new growth = new injuries
  6. Affordable Care Act - goes without saying
  7. Terrorism - long term concern
  8. Workplace Safety- increasing regulation = increasing safety
  9. Mobile Workplace - a curse and a blessing
  10. Worker Demographics - Younger workforce has dwindling supply of workers 
My Top 10 areas of challenge are:
  1. Harder market - without investment returns, WC cannot sustain lowering price pressures
  2. Captives/Alternative Insurance - every company wants out of the current WC system 
  3. States that have legalized marijuana - now what does that do for the workplace?
  4. Employers need to monitor next year's premium, see #1 in first list and this article
  5. Affordable Care Act- the elephant in the room for any healthcare discussion
  6. 24 hour coverage - WC and health melding 
  7. No young people in WC or Safety Industry
  8. Deflation of the dollar as a currency
  9. WC carrier mergers
  10. WC carrier failures
  11. Bonus - Spiraling medical costs to even become worse



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Jun 16, 2014

Top 5 Most Popular Posts Written For This Blog Over The Past Seven Years

This blog is now seven years old.  The top 5 most popular posts by click traffic is listed below with the date the article was written. 

 I have been attempting to gather the most popular and relevant topics for a future book.  The blog has over 1,330 posts.  The blog actually would cover 9 volumes if it was organized into book form according to a publisher.


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Jun 12, 2014

Top 25 Most Dangerous Jobs - Highest Injury Rates 2011 and 2012

The Bureau of Labor Statistics publishes many great employment statistics.  When I was searching for the injury rates of teacher from yesterday's article, I came across the injury rate rankings of the most dangerous occupations.  

These are not the fatality rates that are referred to when mentioning dangerous jobs. This list is the highest risk for injury when compared to the same number of work hours. 

For the sake of readability and to fit all browsers, the rankings could not place them side-by-side for comparison.  

The rankings are by SIC Code.  The SIC codes differentiate between State and Local governments facilities.  

The usual industries with high injury rates were really no surprise except Skiing Facilities.   I had not really considered them to be a high-risk occupation.  One has to remember that these are all analyzed by the business or organization's  SIC code, not the Workers Compensation Classification Codes.  

The companies and organizations that were highly ranked in 2011 and 2012 may be the most dangerous overall.  The  types of employment that appeared on the 2011 and 2012 lists in the Top 10 are:

1.     Fire protection
2.     Nursing and residential care facilities (State Govt.)
3.     Skiing facilities
4.     Police protection 
5.     Travel trailer and camper manufacturing
6.     Manufactured home (mobile home) manufacturing 
7.     Iron foundries 

 2012
  1. Nursing and residential care facilities (State Govt)     
  2. Manufactured home (mobile home) manufacturing
  3. Police protection      
  4. Travel trailer and camper manufacturing   
  5. Iron foundries                    
  6. Fire protection      
  7. Truck trailer manufacturing      
  8. Truss manufacturing       
  9. Heavy and civil engineering construction       
  10. Skiing facilities          
  11. Iron and steel forging
  12. Veterinary services  
  13. Nursing and residential care facilities (Local Govt)       
  14. Hog and pig farming       
  15. Beet sugar manufacturing                    
  16. Prefabricated wood building manufacturing    
  17. Hospitals       
  18. Ambulance services       
  19. Secondary smelting and alloying of aluminum       
  20. Materials recovery facilities                     
  21. Correctional institutions      
  22. Animal (except poultry) slaughtering     
  23. Aluminum foundries (except die-casting)     
  24. Aluminum die-casting foundries       
  25. Light truck and utility vehicle manufacturing 

2011
  1. Fire protection
  2. Nursing and residential care facilities
  3. Steel foundries (except investment)
  4. Ice manufacturing
  5. Skiing facilities
  6. Police protection 
  7. Travel trailer and camper manufacturing
  8. Manufactured home (mobile home) manufacturing 
  9. Iron foundries 
  10. Copper foundries (except die-casting)
  11. Pet and pet supplies stores
  12. Seafood canning 
  13. Nursing and residential care facilities (Local Government)
  14. Soft drink manufacturing 
  15. Ambulance services 
  16. Aluminum foundries (except die-casting)
  17. Beet sugar manufacturing 
  18. Light truck and utility vehicle manufacturing 
  19. Truck trailer manufacturing 
  20. Metal tank (heavy gauge) manufacturing
  21. Hospitals 
  22. Heavy and civil engineering construction 
  23. Beef cattle ranching and farming, including feedlots
  24. Plate work manufacturing 
  25. Consumer electronics and appliances rental

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Jun 11, 2014

Stunning Student on Teacher Violence Increase May Affect Workers Comp

The National Center for Education Statistics recently published a study - Indicators of School Crime and Safety - 2013.  

One of the more shocking statistics pulled from the study was student-on-teacher violence increased by 34.5% from the previous year.  The study results came from a survey given to teachers every year.   Over 5% of the teachers reported physical violence perpetrated by a student. 

What does Salt Lake City Utah have to do with the study?  There were more than 209,800 attacks by students in the 2011 - 2012 school year.  That number actually exceeds the population of Salt Lake City Utah.  

Violent attacks by students often result in the teacher filing a Workers Comp claim.  States such as North Carolina have a Teacher Violence Act that actually pays the teacher for up to one year of full salary + benefits in these cases.    

The post violence act benefits would then have to be picked up by the Workers Compensation carrier, if needed.  Having worked with many school systems nationwide, the return to work situation can become very complicated in such cases.  

I had attempted to compare the aforementioned statistics with the BLS  Bureau of Labor Statistics injury and illness numbers.  The BLS had these numbers (number of injuries per 100 secondary education workers):
  • 2009    .7
  • 2010    .7
  • 2011    .7
  • 2012    .4 
There was no proper way to assess how many teachers that reported acts of violence by students actually filed Workers Comp claims and did not return to work. 

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Jun 10, 2014

New Mexico Supreme Court - A Bad Decision on Temporary Total Disability

The New Mexico Supreme Court recently ruled that Temporary Total (TTD) can be a permanent disability.  These types of decisions are often not underwritten by the Workers Compensation carrier.

As discussed earlier in this blog, the WC insurance process is a delayed system.  The carriers have no way to immediately recover the reserving shortfalls when covering benefits that are totally unexpected.  Such a decision will likely be followed with the plaintiff bar using the decision to pursue permanent TTD benefits for their clients.

One has to wonder whatever happened to Permanent Total benefits as the proper benefit and not Permanent TTD.   According to the case Fowler v. Vista Care , an injured worker can receive Permanent Total Temporary Disability benefits - (sounds confusing?)

One of the more concerning passages from the New Mexico Supreme Court decision was:

The fact that the Legislature removed the duration limits from Section 52–1–41(A) in the same year it expressly created “temporary total disability” as a new subsection of the definition for total disability strongly suggests that the Legislature intended to classify both temporary total disability benefits and permanent total disability benefits as lifetime benefits. See State v. Davis, 2003–NMSC–022, ¶ 12, 134 N.M. 172, 74 P.3d 1064 (observing that the principle of reading statutes together to discern legislative intent “has the greatest probative force in the case of statutes relating to the same subject matter passed at the same session of the legislature”

A decision that rewrites the way that Workers Compensation is underwritten and handled by claims adjusters basically out of the blue can wreak havoc on future policies.  Rewriting basic WC benefit definitions may result in sharp future premium increases.   


Temporary Total is just that - temporary in nature.  


The New Mexico Courts issued a controversial medical marijuana decision last month.  In 2013, the Florida courts attempted to rewrite the basic definitions of Workers Comp benefits.   


The worst case result is that WC carriers decide not to write business in a state due to court decisions or legislation which create a very unprofitable environment.  


California is the most obvious example where carriers could not afford to write business.  SCIF ended up writing over 60% of the premiums as the insurer of last resort.  

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Jun 5, 2014

Canceling Your Policy Right After Renewal Or Premium Audit Can Be Very Costly

We receive this question at least once per week.   This is an almost verbatim question from two weeks ago with editing for length.

Question - "We just renewed our Workers Compensation policy. We do not agree with our (premium audit or policy terms).   Our company wants to cancel our renewal policy and move on to another carrier.  Can we do this? Is there any penalty for moving our business to another carrier?"

Answer - Without looking over the information, canceling a just renewed Workers Compensation policy may not be the best choice.  Employers sometimes want to end the relationship with their carrier regardless of cost.  This may lead you to the "penny-wise and pound foolish" adage.

The main economic burden that will be placed on your company is the Godzilla-like short rate penalty.  The short rate penalty is a rating bureau approved penalty that will be assessed on an employer that switches coverage before renewal.  The penalty can be significant early in the policy.  There are a few strategies to avoid having to switch before the next renewal or your company may not switch even at the next renewal.

Obtain the policy from your agent at least a few weeks before renewal.  Read through the policy very carefully.  Read through your expiring policy.  Discuss any concerns with your agent at least two weeks before renewal.  If your company does not like the policy quoted, ask for another quote.

Prepare for your premium audit by providing a knowledgeable person to talk with the premium auditor. This person should have organized records with all data that the premium auditor will ask for in their letter to you.

You have the right to dispute the current audit or a limited number of past premium audits.  Exercise this right cautiously.  Saying that "we are just paying too much premium $$ without backup information will likely alienate your carrier and agent.

There are many previous articles in this blog that cover the premium dispute process.  Feel free to print them out for your use.  Use the search box  on the right side to find information on premium audit disputes. 

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Jun 4, 2014

Certificates of Insurance Can Ruin Your Business

Certificates of insurance, known in the Workers Compensation community as "certs" can wreck your business's  budget and possibly Mod (E-Mod or X-Mod) if not handled properly.   This is a follow-up article to yesterday's Employee Misclassification conundrum.

We receive calls and emails frequently from employers with this scenario had:
The premium auditor had rejected the certificates of insurance as the certificate of insurance had:
  • Wrong dates of coverage
  • Wrong company name - must be exact
  • Expired cert
  • Coverage no longer applies
  • Unreadable - this occurs more often than one may think
  • Insurance company no longer in existence
  • Not a valid certificate of insurance form
  • Wrong state of coverage
  • Workers Comp coverage not indicated
  • And the list goes on and on.....
The Ladder of Insurance(c) will always move a non-covered claims up another rung to the first level of Workers Comp insurance available for the claim.  There is a method for verifying a certificate of insurance when your company first receives it.  The dilemma is how do you know if the certificate continues to be valid after the initial receipt or validity check?

The situations where an invalid certificate of insurance seem to occur most often involves the construction or temporary service industries.  The sub-contractor or temporary service agency may not pay their premiums resulting in a policy cancellation.   Their carrier has not obligation, with a few exceptions, to inform your company of the cancellation.  

There are a few methods to make sure that any type of sub-contractor policy cancellation will also involve the carrier or sub-contractor letting your company know of the non-coverage situation.  

Many companies are now agreeing to cover the sub-contractor under their insurance only to find out the premium bill for that decision is now very huge.   

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Jun 3, 2014

Employee Misclassification - Back In The News

Classification Codes such as 8810 (Clerical/Administrative) are the number one question we receive calls and emails about every month.   Employers want to make sure they are not being overcharged for improper classification.

 In this instance, the employee misclassification that becomes a buzzword in the WC press is not referring to questioning or disputing how your workers are classified under each classification code.


Most of the news articles do not concern classification codes when referring to employee misclassification.  Employee misclassification occurs when an employer wrongly classifies what would be a true employee as a contractor or sub-contractor.   The IRS publishes many guides on how an employee should be classified (employee vs. contractor vs. statutory employee, etc.).  The IRS guides may not fit every situation as there may be state-specific guidelines.  The IRS guides are more of  a "rule of thumb."

There are ways to make sure that an insurance carrier premium auditor realizes that you do have contractors that are not covered under an employer's insurance policy for Workers Compensation.  That info will be covered tomorrow.

Employee misclassification (contractors vs. employees) can carry with it very severe penalties.  Not only are employers that have non-covered employees not paying their fair share of their Workers Comp,, they are also not paying the proper taxes.  Many states have locked down on this situation.   Additional enforcement will occur as state and federal agencies share more databases.

North Carolina, our HQ state, had a very severe problem of employers not covering their employees with WC.  The state had over 30,000 employers that did not have the proper WC coverage.

West Virginia increased their enforcement of non-covered employers by posting signs at the businesses informing the public of the business not having coverage.   I actually had seen one of the signs on a business trip to WV a few years ago.

The bottom line is to make sure your company does not have uncovered contractors or employees and to not let the buzzwords "Employee Misclassification"  keep your company from questioning or disputing the classification codes of your employees.   

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