Top Five Most Popular Workers Comp Articles For 2011

As this is the first of the year, I decided to post links to our five most popular articles for 2011 judging from the traffic on the web pages and the newsletter.

Medical Only Claims-The Fuse May Be Lit

Workers Comp To Hit Big Time On The Small Screen

North Carolina Workers Comp Shocker!

The Workers Compensation Best Test For Multi-jurisdictions

Not Reporting Claims To The Carrier -You Can Pay It Now Or Pay 400% Later

Five Types of Workers Compensation Audits

We often receive questions centering on Workers Compensation audits. This term may cover many types of audits or reviews. I thought I would cover the top 5 types performed for employers on a regular basis in order by popularity. They are:

Premium Audits - this is basically an examination of the mechanics of how your Workers Compensation premiums were calculated by examining your policies, endorsements, yearly premium audits, and other pertinent materials.

E-Mod Audits - this type of audit recreates the mechanics of how your Experience Modification Factor was calculated. This can be very important to employers as the E-Mod has a major impact on premiums.

Claim Audits -a predetermined set of best practices for claims handling are established - usually using the carrier's or TPA's claims manual. The Workers Comp claims are reviewed thoroughly to insure the claims adjusting and supervision staff is performing at an acceptable level. Currently, we use 31 - 33 areas to examine the claims. Trends are analyzed and reported using our copyrighted reporting methods. This is a very critical area for self insureds.

Reserve Audits - can be done during claim audits or standalone. An analysis is performed for over/under reserving of the Workers Comp files. This is especially important for non self insureds as the E-Mods are calculated directly from the Total Incurred of each file.

Subrogation Audits - money is often left on the table when subrogation has not been addressed in all of the Workers Compensation files. As I wrote in this article, Workers Comp adjusters may not be that heavily trained in liability adjusting. That is the nature of the business. Automobile accidents are a major concern in this area.

There are two caveats to consider in these Workers Compensation audits. Picking out one or two mistakes by an adjuster and inflating their importance is a waste of time and $$$. Trends should be analyzed in most cases. The other caveat is very few companies can do all of these services in-house without having an anonymous subcontractor assist in the audits. I do not want this to be a shameless plug for J&L's services.

Workers Comp Indemnity Costs and The Recession

I was recently reading an article from WCRI concerning an increase in California on indemnity benefits. Their usually very accurate research seemed to equate the rise in indemnity costs to the recession. I think this is a very accurate statement and should not be limited to just CA.

From my experience, the reasons for longer periods of Temporary Total Disability (TTD) nationwide are:

• The job may no longer be available due to the recession. The employer may have eliminated the job while the injured employee is on TTD.
• The employer may not have a modified duty job for a light duty return to work release by the physician. It is very difficult to create modified jobs during a period of layoffs.
• Employees may be very reluctant to return to work as Workers Comp benefits are viewed as a safety net similar to unemployment benefits
• The employer may not have communicated their light duty positions to the treating physician - there is no excuse for this to happen with today's technology. Making a video of a job or modified job to provide to the treating physician is much less tedious than in the past.
• The employer may just not want the employee back due to other personnel issues. I often see the employees that are having HR-type problems be the very ones that are soon to file a claim.
• The long-term employees may decide to have a condition treated they have worked with over the years. I see this very often in a period of layoffs. One of the main conditions for the delayed treatment is carpal tunnel syndrome even though employers have been able to reduce carpal tunnel by 50%.

This list could have been longer. The indirect cost with indemnity is the increase in medical costs. The longer an employee is out of work, the longer they are required to seek treatment including pharmacy benefits.

Are Workers Compensation Costs Just Overhead?

I have seen this situation many times when reviewing employers’ Workers Compensation situation. The cost of Workers Comp is a budget item that is in the overhead cost (cost of doing business) section of their budget. I would never infer that an employer, whether self -insured or not, should just change their company’s budget to make Workers Comp a controllable variable cost.

Including Workers Comp as a variable cost will usually result in three changes/improvements:

• Workers Comp costs will be examined more by Senior Management. If Workers Comp is viewed as a fixed cost, little attention will be paid to a possible silent budget killer. If a Risk Manager or CFO presents the costs as variable, Senior Management or the owners will be much more accepting of an in-depth analysis.

• Forecasting your future Workers Comp budget will be more accurate. If your company had 500 employees, and now has 350 due to the economy, why would you pay the same amount on the upfront policy with a 30% drop in employees and payroll? The same can be said for the budgeting of a self-insured. If Workers Comp costs are seen as overhead, then forecasting is usually not even attempted overall.

• Now that Workers Comp is a variable cost, the budget responsibilities can be broken down, for instance, each department, plant, location, etc. One of the quickest ways to lower a Mod is to delegate responsibility for their portion of the Mod down to the smallest groups possible. Lag time on reporting injuries are usually cut very quickly and substantially when lag time is looked at by management or the Risk Manager.

There are many other advantages to looking at Workers Comp as a variable cost.

Four Workers Comp Claim Review Strategies

This is an excerpt from the manual found here that I wrote many years ago. The info is basically timeless. Claims reviews are an integral part of a premium reduction program and even more critical if you are self insured.

There are four possible methods to review your WC claim reserves:

Claims Office Review –

Advantages - reviewing the claims files in your insurer’s claims office is the most accurate way to review the claims reserves; the employers can examine everything that was involved with the file and will call attention to the insurer that your company takes the reserves on the files very seriously; the adjuster or adjusters on the files will usually meet with you face to face.

Disadvantages – the review may not be feasible if the claims office is in a remote location; cost of travel; takes up employer’s time, especially if the claims office is in another state.

Claims Review at the Employer’s Location/Agent’s/Broker's office -

Advantages – saves the employer travel time and the cost of traveling to the claims office; adjusters will sometimes adjust their reserves before the meeting, if the adjuster believes the adjustments are necessary.

Disadvantages – insurers rarely bring files with them, more of a “canned” review as the adjuster has reviewed everything and will present their reasons for the reserve levels; more of a public relations/marketing meeting; the adjuster or claims department usually controls the subject matter of these meetings; this type of meeting takes adjusters away from their files; the employer may pay extra premium to have these meetings.

Online Review - Full access to all adjuster notes, statuses, reserve levels, and reserve history are very important.

Advantages – saves the employer travel time and the cost of traveling to the claims office; immediate and accurate claims review if the employer has full access to the claims files; reviews can be done at any time and can follow the recommended timetable on the preceding page; the employer has control of the review.

Disadvantages – there are little or no disadvantages to online reviews with full access to all reserves, statutes, adjuster notes, etc.; if the employer has limited access to the files, then the employer may not know the justification of the reserve levels.

Employer Self Review –

Advantages – the employer controls the review; saves time and cost of travel, as the employer does not have to incur any travel; all parts of the claims file are available; can be combined with the Online Review or by using loss runs from the insurer.

Disadvantages – employer has to keep copies of all forms, notes, and any other pertinent file material; the employer may spend an inordinate amount of time and expense in retrieving all file material from the insurer, treating physician, and other parties; privacy rules may be an issue.

Davis-Bacon Act Wages And Payroll Audits

My last post covered what is included in wages for Workers Compensation policies and premium audits. One of the areas mentioned was the Davis-Bacon Act wages.

The Davis-Bacon and Related Acts, apply to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works. Davis-Bacon Act and Related Act contractors and subcontractors must pay their laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area.

The Davis-Bacon Act directs the Department of Labor to determine such locally prevailing wage rates. The Davis-Bacon Act applies to contractors and subcontractors performing work on federal or District of Columbia contracts.

The Davis-Bacon Act prevailing wage provisions apply to the “Related Acts,” under which federal agencies assist construction projects through grants, loans, loan guarantees, and insurance.For prime contracts in excess of $100,000, contractors and subcontractors must also, under the provisions of the Contract Work Hours and Safety Standards Act, as amended, pay laborers and mechanics, including guards and watchmen, at least one and one-half times their regular rate of pay for all hours worked over 40 in a workweek. The overtime provisions of the Fair Labor Standards Act may also apply to DBA-covered contracts.

Payroll Audits Cover More Than Just Wages

One of the most trying times for a CFO or business owner in the Workers Compensation process is the payroll audit. I had a question posed to me yesterday as to what funds are considered gross wages under a Workers Comp policy. That was a good question.

I decided to list the usual payroll items that are counted during a payroll audit. Each state has its own list of items to be considered payroll. The following is a default list of the most common gross payroll items. Please note there are many exceptions to the list. This is not an exhaustive list – more of an example.

• Wages
• Vacation Pay
• Sick Pay - not paid by a TPA
• Bonuses
• Holiday Pay
• Employee contributions to a 401(k) or other deferred compensation plan
• Employee contributions to a Section 125 Cafeteria Plan
• Auto Allowances
• Market value of lodging provided, i.e. free or reduced rent apartment
• Value of free meals provided by the employer
• Travel or “Show Up” pay
• State Prevailing Wage fringe Benefits paid directly to an employee
• Davis Bacon Wage fringe Benefits paid directly to an employee
• Commissions
• Payments for hand tools provided by the employee, either directly or through a third party

I know of some very strange items being counted as gross payroll. I have seen chickens and pigs being counted in certain situations. The Davis Bacon Wages come from an act established to pay workers a minimum amount on Federal and State contracts. I will cover Davis Bacon Wages in the next post.

NCCI Proves What We Knew All Along

A new report has been produced by the NCCI indicating that older workers do not account for a larger percentage of Workers Comp accidents than the overall employee population. In a way, the theme of the article seems that NCCI may have been surprised by the final numbers.

We should all give kudos to NCCI as they could have swept the stats under the rug and just not completed the study. I have seen researchers just not publish a study when the forecasted numbers are not as expected overall.

I have attended a few NCCI conferences over the last few years. One of the main sections that had always been covered was the older worker concerns in the general worker population. I kept wondering if they were trying to say that older workers cause more Workers Comp accidents. The causation issue was never directly addressed at any of the meetings.

Many studies on older workers have been performed by various research organizations along with state and federal governments. Unless I am mistaken, the studies usually agreed with the same conclusion drawn by NCCI. A German study on older workers seemed to agree in part with what NCCI had covered in their study.

One of the largest studies undertaken on the workplace on a worldwide basis seems to agree with the German study and the NCCI study.

The specific variables on age and work in the US can be found in the Sloan Center Report. If you skip down to page 21 and go from there, the results are very clear.

I thought I would throw in my two cents worth on why older workers are happier and safe workers. I came up with the following list:

• Job satisfaction results in a higher level of organizational commitment
• Older workers have a high level of job satisfaction
• The level of experience eliminates the learning curve. As we all know, the most dangerous time is when an employee uses a machine or is assigned a new job task for the first time.
• Organizational commitment also includes safety programs
• Older workers have been around long enough to see the results of when safety programs are not followed – namely accidents.

This list is not comprehensive by any means. I am sure there are more that easily can be added to the list.

10 Workers Comp Premium Reduction Resolutions – Part 2

6. For CFO’s – I will not consider Workers Comp premiums as an overhead expense or a cost of doing business. I will look at the premiums as a tax (of sorts) and structure our insurance program similar to our tax structure. I will consider Workers Comp as a variable cost, not a fixed cost.

7. I will read the Workers Comp policy before singing from the front to back including any amendments or riders. I will highlight any clauses that I question. I will review these highlighted areas with my agent before I sign the policy. I do realize the policy is a legal contract and should be treated as such.

8. For self-insured’s, I will look at more than just the cost of processing the Workers Comp claims as some TPA’s are better than others. I will heavily analyze if one TPA charges less, but costs more on claims. I will also factor in other fees such as bill processing fees, rehabilitation nurse fees, and other ancillary services if I am using the TPA’s other services. I will always explore all vendors for the ancillary services.

9. I will keep myself updated on any Workers Comp law changes or important cases in the claims jurisdiction where my company operates. I will subscribe to at least three Workers Comp online publications.

10. I will institute in my company (if large enough or if you have remote workers) an efficient way to report injuries so that my company is able to file a First Report of Injury with our insurance carrier or TPA within 24 hours of the occurrence of an injury.

11. Bonus - I will institute a reporting procedure to the owners of the senior management of my company that distills down our Workers Comp situation in very complete yet concise terms. I will always keep very current on our Workers Comp situation so that my reports are up to date as possible.

12. Bonus-I will find out the names of every adjuster that is working on my Workers Comp claims and start a dialogue with them by email. I will not phone the adjusters.

There are many more resolutions that can be found on the blog. I just did not call them resolutions.

10 Workers Comp Premium Reduction Resolutions – Part I

The New Year is up on us. The following is a list of New Year Resolutions for Workers Compensation premium reduction strategies. This list was generated from over 16 years of data that I compiled from clients and the general Workers Compensation marketplace.

1. My company will institute or improve our safety program. The best way to avoid a premium increase is to avoid accidents. Your safety program can also save your company $$$ with Schedule Credits. Your company can also end up paying more $$ with Schedule Debits. I wrote an article on Schedule Debits Credits here.

2. My company will organize all of its paperwork with all pertinent documentation for the yearly premium audits. Excel spreadsheets can be your best ally here. If your documentation is straightforward and organized, your premium audit will be a painless process.

3. I will look over and understand my company’s Workers Compensation Experience Modification sheets. I will monitor the E-Mods/X-Mods. I will realize that the Workers Compensation premium system is a delayed system and will not expect immediate results from any premium reduction efforts.

4. I will treat my company’s loss runs as very important. I will obtain online access if possible at all costs as an aid to controlling my company’s E-Mod. If I am unable to have online access, I will retrieve the loss runs monthly and review them very carefully.

5. I will follow the Five Keys To Saving on Workers Compensation Claims. I do realize that the claims filed are the engine of the Workers Compensation premium system and will file them quickly and accurately.

Workers Comp End Of The Year Mistake

Most Workers Comp insurance policies renew on January 1st. If your company's policy renews on January 1st, you are likely committing one of the cardinal sins of Workers Compensation. This may seem like a small mistake. This small mistake can cost your company dearly. I have posted about this mistake in previous posts.

Agents drive virtually all of the Workers Comp insurance market. With almost 40% of the policies renewing on January 1st, your policy is one in the very large pile that has to be renewed every year. Agents will give your company the best shot it can, but your policy will get much more attention given to it if you can change the renewal date to say February 25th or any other date that will allow your company's Workers Comp (or other insurance policies) to receive a higher level of attention.

Another date that is very crowded in the Workers Comp insurance marketplace is July 1st. This is when a large % of the governmental entities renew their Workers Comp policies. This date is not as busy as renewing on January 1st. However, governmental entities usually have very large polices that can divert attention from your policies by the agents.

I am not saying that agents will ignore or not give your Workers Comp policy the attention that it deserves overall. Your company can do your agent a favor by asking for another renewal date. This may result in a short term policy or adding a few weeks onto your renewal policy.

Premium Audit Nightmare For January Policies

Almost 50% of the Workers Comp policies renew at the first of the year. One thing we see very often is our client or a potential will call and say that they have found a great low-priced policy they have found and will be switching to the new insurance carrier.

We then will usually receive a frantic call or email after the policy expiration. The insurance carrier payroll (premium) audit bill is huge and the company did not have the money budgeted to cover the bill.

One of the easiest ways to avoid this type of disaster is to compare your Workers Compensation policies and audits from the past. If your prior premium audit and polices indicate that your company has for example $2.5 million in payroll, then why would the new policy have a payroll of $300,000? This is from a real-world example.

I am not saying that any company has to pay every penny owed on the policy upfront. However, if you have a previous payroll of $2.5 million, you are going to have to "pony up" a large amount of $ at audit. Your company should have a budget for Workers Comp premiums for the upcoming bill after the premium audit.

This type of budgeting advice will also apply to any policy. I wanted to pass this info along due to the large % of polices that renew on January 1st. I wrote a previous article on payroll audit budgeting here.

Paying The Premium Audit Bill - I May Have Been Misunderstood

Last week, I wrote a post concerning paying the premium audit bills. I heard from a few of our weekly newsletter readers that the title of the newsletter article and the article itself sounded like an employer should just pay the bill. I apologize as nothing could be further from what I had intended to say on workers compensation premium audit bills.

One of the best comments I have ever heard or possibly read referred to any bill. Your company should pay what you owe, but not a cent more. Premium audit bills are no exception. A piece of advice that I post on often is to pay the undisputed amount and not just refuse to pay any of the bill whatsoever if there is a pending dispute. If you feel that you do not owe a partial amount on a bill, then pay the undisputed amount when the bill is due. Your company does not have to pay the disputed amount - if it is based on a valid dispute.

Recently, and I think it is due to the economy, I have received numerous calls and emails where a dispute process was entered into with the carrier to delay paying the bill. That is one of the quickest ways to ruin a company's reputation with their agent and carrier. A word of caution - expect a cancellation notice from your carrier if this has happened. Insurance carriers are becoming much less patient with invalid disputes.

I do not mean to sound like a Workers Compensation insurance company advocate. I am just reporting what we have seen over the last two years in the insurance environment. There are no new companies being created and most companies have reduced their staff. Workers Comp carriers have seen premiums fall quickly. Their margins have become thinner.

What is an invalid dispute? Any dispute where your non-payment is based on the insurance policy and premium audit bill was just too expensive. Your company needs to have re-calculated the premium audit with real and true numbers. The insurance carrier's audit department will need something in writing within 30 days maximum on the basis for your dispute.

Workers Compensation Claim Reserves - The Skinny

From an article and a manual I wrote many years ago. The main WC insurance variable this manual addresses is Claims Reserves (Reserves). THE MOST IMPORTANT THING TO REMEMBER IS THE CLAIMS RESERVES ARE THE UNREGULATED PART OF THE PREMIUM CALCULATION PROCESS. Insurers can set the level of reserves at whatever level they deem adequate with little input from you. A governing body regulates all the variables that go into the premium calculations except the claim reserves. Reserves are what the premiums are charged from, not the amount of money paid on a claim.

Now we come to the engine of this whole process. Everything we have talked about just now all centers around the loss data you have incurred over the last three years. HERE IS A VERY CRITICAL POINT. The loss reserves are not only what you have paid out, but also what the insurance adjuster thinks you will pay out over the life of the claim. Everything else in the WC insurance process usually has some type of standardization, but the amount of money that is reserved on a loss is a true GUESSTIMATE. It is the most subjective part of what you pay in premiums. The amount paid out on a claim has little to do with the premiums charged.

The reserves on a Workers’ Compensation (WC) file are not based on any statistical formula or guide. A claims adjuster sets the level of reserves using their own job experience as a basis for how much the expected payouts will be over the life of a claim. If the reserves exceed a certain authority level, the adjuster must have their supervisor or manager approve the reserves. Reserving is an art of sorts that is akin to valuing a house. As with valuing a house, there is a commonality on the cost of certain injuries. However, there are at least 100 variables that are unique to each WC claim’s value.

Reserving is not an exact science, and is the adjuster’s estimate of what the claim will cost in total. The following items should be taken into consideration when estimating reserves:

§ Nature and extent of injury

§ Anticipated medical costs

§ Anticipated permanency rating/impairment

§ Amount of weekly wage and compensation rate

§ Attorney involvement

§ Claims history of the claimant

§ Claimant’s age

§ Claimant’s occupation

§ Claimant’s education level

§ Claimant’s work history – personnel issues

§ Availability of light or modified duty

§ State laws

There are usually three types of reserves on a specific WC file. They are Indemnity, Medical, and Expense. A WC file’s reserves are based on medical expenses; period of time an employee takes to heal; their motivation to return to work; and any permanent disability.

The Reserves on a file are the “engine” of the premium calculation process. The Reserves for the last three policy years are used to calculate the Experience Modification Factor (E-Mod). Promulgating an E-Mod is not the focus of this manual. This manual will cover some of the basic concepts of calculating an E-Mod.

The E-Mod individualizes the premium to a certain employer. The current WC systems charge all employers based on a classification code multiplied by the associated classification code’s remuneration (payroll / 100). The E-Mod attempts to make sure the safe employers are rewarded and the unsafe employers are penalized. While the E-Mod system has been heavily questioned, it is the system in place and no other system has been devised that is any more effective or efficient at charging an employer the correct premiums.

Mods (E-Mods X-Mods) Are Available Earlier Than You Think

There seems to be a secretive process on EMod publishing dates. Most companies wait until their agent, NCCI, or State Rating Bureau furnishes a copy. Quite often, the E-Mods (X-Mods in California) are available much earlier before your renewal date or E-Mod publication date.

Most Mods can be manually calculated six months before the Workers Comp policy renewal date and are available from the rating bureaus 3 - 5 months before your company's renewal date. Calculating a Mod six months before it affects your policy can be helpful in the budgeting process. CFO's especially appreciate knowing at least if their Mod is going to increase or decrease significantly.

A word of caution - each state may have not yet approved the rating values if a Mod is calculated this early. I have even seen states add in rating values after the policy renewal date. I always recommend to our clients to wait until their E-Mod is calculated and obtain a copy of it ASAP.

We also can monitor the when the new EMods are available and pull the Mod sheets immediately. There is no exact date when the Mods are originally published. I guarantee you will not see the Mod when it is originally published no matter the rating bureau.

There are software packages on the market that will calculate Mods. However, the old saying of garbage in - garbage out applies to using E-Mod software. You have to know which claims and what values will impact your Mod. This can be a time-consuming and confusing process.

If you take a look at an NCCI or State Rating Bureau Experience Modification Factor worksheets, you will see rows and columns of data that may not necessarily make sense. Companies that operate in many jurisdictions and/or have many classification codes will usually have the most complicated EMod Worksheets.

Premium Audits - Paying The Undisputed Premiums

We have received a number of questions on how to proceed if there is a Workers Comp premium dispute on how much premiums are owed. For example, I received this question last week.

We are disputing a premium that was added in at audit time by the Workers Compensation auditor. As we are unsure of exactly the total amount owed, do we have to make a provisional payment or can our company wait to pay until all disputes are resolved?

All states have on their books that any undisputed premium should be paid on receipt of the premium bill. Your company is not required to pay the disputed amount until you have resolved the issue with the insurance carrier that has billed your company. Using the dispute process to hold off paying a bill can ruin what would have been a good working relationship between your agent, insurance company, and your company.

Finding out what your company owes in a premium dispute should be initiated as soon as possible. Paying an estimated amount is not sufficient. Your company should not underpay or overpay in this situation.

As I have said many times in this blog, over 90% of the employers that have overcharges or their Workers Comp premiums have a gut feeling something is wrong. We have a list here that may turn on that gut feeling.

I have had clients and peers say that sometimes I sound like I am very pro-insurance company. Actually, I am pro-the rules in place. As Charles Givens once said "If you want to win, you have to play by their rules." You can still make sure you are paying the right premium for Workers Compensation and follow the rules in place - better known as your Workers Comp policy.

Workers Comp Medical Cost Confusion - Wisconsin Is Now The Highest

I was finishing up my last post on Workers Comp medical costs. I had research that proved Virginia was the highest in the nation. I then read this article and now I am confused. I think the Augusta Journal article that I referenced was incorrect in my original post. I violated one of my rules in this post - look at the study behind the data.

The Insurance Journal was correct in saying that Wisconsin is the highest state for other than hospitalization medical costs. Virginia was number two on the list. The article I am referring to is the one from WCRI.

According to the WCRI, Prices in Wisconsin for non-hospital services were more than twice that of the 25-state median, and nearly 50 percent higher than the median of the six states with no fee schedules. Even if you ignore the fee schedule states, Wisconsin is still extremely expensive for medical treatment. The E-Mods for employers in Wisconsin is where this will show up in the most dramatic fashion. I am unable to say how much more a 50% medical cost figure would impact the Mod, but it is a heavy factor.

For my last article on this subject, I am wondering how many of the 10 most expensive states are fee schedule and non-fee schedule. I will cover that next week.

The bottom line to all the medical costs comparisons is that the top two states do not have fee schedules. After working in or consulting in basically all 50 states, I can tell you that a fee schedule can help your Mod (E-Mod or X-Mod) drastically.

Unless I am mistaken, most of the non-fee schedule states are U&C (Usual and Customary). U&C may look good on paper as your company can usually receive drastic cuts to the bills. However, the bottom line bill charges are still more than fee schedule states.

If your company, TPA, or insurance carrier has a PPO network agreement, you can save even more money off the fee schedule rates or the U&C rates. If you are unsure if you are receiving your PPO discount, pulling a few medical bills that are processed and examining them will indicate whether or not you are in a PPO network. The usual PPO discount is 15%.

I always recommend accessing a few of your Workers Comp medical bills and going line by line. By the way, how much are you being charged for medical bill processing? You could be in for sticker shock.

Is Virginia The Most Expensive State For WC Medical Costs?

This article is a follow-up from this post on medical costs. The previous article examined Workers Comp medical costs in Virginia as being the highest in the nation. I decided to see if NCCI agreed with the Workers Comp Research Institute (WCRI). The NCCI and WCRI are both great data sources for Workers Compensation.

I compared each of the states in Virginia's general area to see if the medical costs were actually that high. I was shocked to find that Virginia had such high medical cost severity.

• VA - $44,000
• DC - $18,000
• KY - $34,000
• MD - $28,000
• NC - $32,000

Operating without a fee schedule usually means the employers for that state will pay more in medical costs - plain and simple. It would be very wise for Virginia to enact some type of Workers Comp fee schedule. There are neighboring states with great fee schedules they could adopt very quickly.

Will this situation improve in the future? I actually doubt it. As long as medical fees are allowed to be charged with no checks and balances in place, employers in states such as VA will be near the top in Workers Comp medical costs.

Workers Compensation Innovation At The Las Vegas Conference

As I promised in this post, I wanted to comment on innovation in Workers Compensation. As I was in the general area seeing clients, I decided to spend an afternoon going through the vendor area at the recent Workers Compensation conference in Las Vegas.

I went from booth to booth asking about innovation or new products. Interestingly enough, there were very few fully innovative companies. There were however, innovative products inside the companies. To avoid legal squabbles, I will not post anything negative as other Workers Comp bloggers seem to do as a profit motive.

I did want to mention one of the great LinkedIn groups that is conducted by one of the vendors at the conference. I met Mark Walls of Safety National at the conference. I would suggest signing up for LinkedIn here and joining the Work Comp Analysis Group. If you are already a member of LinkedIn, adding in the group will be of great benefit to anyone in Workers Comp, no matter your job title.

I also met with Dave DePaolo of WorkCompCentral. While you are joining Mark's group, you may want to sign up for Dave's LinkedIn group which is under WorkCompCentral. I cannot directly link into the groups as LinkedIn always requires a username/password combo.

I also met with Craig Denau of MedCor. They are a phone and in-plant triage group that had recently won awards for innovation. I covered this type of service in this post. As I have posted, presented, and written many times, a Workers Comp claim has everything set in place 72 hours after an accident. Any service that will allow immediate control of a claim is a good thing.

A list of the vendors that had booths at the conference can be found here along with a list of the sponsors. There is also a list of the 2010 vendors.

Virginia Has Most Expensive Workers Comp Medical Costs

I have posted often on fee schedules and their effect on Workers Compensation claims. In my original post (see link) on fee schedules, I did not include Virginia. Virginia was and is still without a Workers Compensation claims fee schedule.

Fee schedules are very important in controlling Workers Compensation costs. The state with the highest medical cost has always been a non-fee schedule state. Virginia was 30% more expensive than the median state for medical charges (non-hospital). That is a stark number when looking at the effect on a company's Workers Comp E-Mod.

A recent article on Virginia having the highest medical costs is not surprising overall. Tennessee was in the same position a few years ago. Initiating a fee schedule reduced their Workers Comp medical costs dramatically. The original study was performed by WCRI.

Virginia's lack of a fee schedule will continue to make it one of the most medically expensive states for Workers Compensation without a doubt. Unless I am mistaken, Virginia uses the old Usual and Customary model or the average of what other medical providers charge for the same service in the same geographical area - better known as U&C. U&C is usually the most expensive way to pay Workers Compensation medical charges.

The 25 states included in the study, which represent more than three quarters of the workers’ compensation benefits paid in the United States, are: Arizona, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin.

In my next post, I will see if NCCI confirms this fact.