In the past week, Workers Compensation based North Carolina House Bill 237 amendment was the subject of a few of my posts. One interesting point that was mentioned is the reporters were very concerned the Legislature was going to disallow access to the records that brought this whole matter to light in the first place.

Why would the Legislature add in what was basically a sealed record clause? In one of the links to an article in my prior posts on HB 237, the reporter even asked some of the legislators why this clause existed:

The North Carolina Industrial Commission shall take such steps, including obtaining software or software licenses, as are necessary to be able to receive and process such information from the Bureau. The records provided to the North Carolina Industrial Commission under this section shall be confidential and shall not be public records as that term is defined in G.S. 132-1.

The reporter was never really given a direct answer. A very small error can easily occur when any state or federal governing body is hammering out laws that are very specific to a situation.

Consulting with a Workers Comp expert on this matter may have avoided what could possibly be a veto of a great amendment in my opinion. Then again, this was more of an issue of privacy than a Workers Compensation issue.

Governor Perdue is still negotiating the NC budget. The amendments to HB 237 are still pending for her veto or approval. The original HB 237 from 2011 was a great start to Workers Compensation reform.

Xmods or X-Mods are WCIRB's equivalent of an E-Mod (EMod). The WCIRB is California's equivalent of the NCCI. The full names of the acronyms are listed at the end of this post. This same question could also apply to E-Mods or Mods in states other than CA.

You will not necessarily see an Xmod on your carrier's premium audit bill. However, the X-Mod is critical in calculating your Workers Compensation bill. The premium audit report is often enclosed with the bill or very likely came under separate cover.

Most standard premium audit reports will have the X-Mod on the last page. If the XMod is different than the XMod on your original policy, you may want to question what caused the change. A caveat is to make sure that if you question the change of the XMod your company may receive an even higher bill.

You may want to call in a workers comp premium expert at that point in time. Any X-Mod changes in the same policy period is one of the Red Flags for possible overcharges on your premium. You may want to follow the link. It is one of the most read articles on this blog.

If you cannot locate your premium audit report, there should be a phone number or address on the bill. I always recommend writing the carrier (no calls or emails) to request a copy of your audit report. The fax is also a great way to request anything from your carrier.

Your company should receive the audit report in 7 - 10 days at most after your request. I recommend looking over your complete policy and audit before paying any premium audit bill. There are usually time limits on paying your insurance bill. Waiting until the date the premium bill is due to make the request is usually not a good idea.

WCIRB -Workers Compensation Insurance Rating Bureau

E-Mod/Emod/Mod/X-Mod/XMod - Experience Modification Factor

NCCI - National Council on Compensation Insurance

The North Carolina Legislature has passed two different amendments to House Bill 237 better known as the Workers Compensation reform act. The two amendments functioned as a way to better track employers without coverage.

The amendments also created a Legislative subcommittee for employer compliance and fraud detection. The text of the Legislative Committee bill is below. The alarms went off when a reporter performed a great investigation that showed there were 30,000 employers without Workers Comp insurance coverage statewide.

Governor Perdue has not signed the ratified bill into law as of today.

SECTION 8.(a) Creation and Membership. – The Joint Legislative Committee on Workers' Compensation Insurance Coverage Compliance and Fraud Prevention and Detection (Committee) is created. The Committee shall consist of eight members to be appointed as follows:

(1) Four members of the Senate appointed by the President Pro Tempore of the Senate.

(2) Four members of the House of Representatives appointed by the Speaker of the House of Representatives.

SECTION 8.(b) Scope of Review. – The Committee shall:

(1) Review the statutes relating to workers' compensation in the State to determine whether there are sufficient safeguards to ensure that employers comply with statutory requirements related to workers' compensation insurance coverage and to prevent and detect fraudulent claims before the Industrial Commission.

(2) Examine the measures taken by the Industrial Commission relating to compliance with statutory requirements related to workers' compensation insurance coverage and to fraudulent claims to determine whether the Commission is using effectively existing powers and resources relating to employer compliance and the prevention of claims fraud.

(3) Recommend any statutory changes necessary to improve or enhance the Industrial Commission's efforts and effectiveness in securing employer compliance with statutory requirements related to workers' compensation insurance coverage and to the prevention and detection of fraudulent workers' compensation claims.

(4) Study any other matter related to the integrity of the workers' compensation system that the Committee deems necessary to accomplish its purpose.

The North Carolina Legislature amended House Bill 237 - known as the 2011 Workers Comp reforms.  The amendments were in response to a very inquisitive reporter discovering 30,000 employers in North Carolina were uninsured for Workers Compensation.

A quick calculation using available data  140,000 properly insured companies + 30,000 uninsured  totals 170,000 total companies that should have Workers Comp coverage.  30,000 uninsured / 170,000 total companies = approximately 18%.  In very round numbers almost 1 out of 5 companies in North Carolina were uninsured for Workers Comp.  


The applicable part of the House Bill that was changed is italicized in the next three paragraphs.  I did not include the statute numbers as it may all change, especially if the bill is vetoed.  I will come back and enter in that info if the bill is signed into law.  The amendments can be found here


Bureau to share information with the North Carolina Industrial Commission.  The Bureau shall provide to the North Carolina Industrial Commission information contained in the Bureau's records indicating the status of workers' compensation insurance coverage on North Carolina employers as reported to the Bureau by the Bureau's member companies. 


The North Carolina Industrial Commission shall take such steps, including obtaining software or software licenses, as are necessary to be able to receive and process such information from the Bureau. The records provided to the North Carolina Industrial Commission under this section shall be confidential and shall not be public records as that term  is defined in G.S. 132-1. 


The North Carolina Industrial Commission shall use the information provided pursuant to this section only to carry out its statutory duties and obligations under The North Carolina Workers' Compensation Act. The Bureau shall be immune from civil liability for releasing information pursuant to this section, even if the information is erroneous, provided the Bureau acted in good faith and without malicious or willful intent to harm in releasing the information."

A great article from the Raleigh News and Observer had criticized part of the House Bill 237 amendments.  The article pointed out that some of the new legislation would limit public access to the same information that a reporter used to uncover the 30,000 uninsured employers.  The part of the bill that applies to this concern is in bold type.  

A caveat to everyone thinking the bill is now law.  Governor Perdue has not signed the bill yet and is reviewing it as of the time of this blog post.  I will cover the other part of the amendments next time.  

The Assigned Risk Plan (ARP) is not a voluntary choice. There are other names for the ARP such as risk pool. The rates in the ARP are much higher than the general voluntary marketplace. In fact, I have seen them as high as 400% more than the normal voluntary insurance marketplace.

The ARP is the fail-safe insurer if a company cannot find any insurance with any carrier due to

• high E-Mods - usually 1.4 or above
• type of business
• unsafe workplace
• dangerous occupations

The insurers are required to write a certain percentage of their business from the ARP. The use of the techniques in this website and blog will enable your company to get out of the ARP unless the voluntary insurance marketplace is not writing WC insurance for your type of business.

I have seen temporary employment agencies, loggers, and trucking companies have to go into the ARP as no insurance carrier would write the risks.

The ARP can be thought of as a safety net so that certain employers can stay in business and not face fines for lack of coverage. There are methods on removing your company from the risk pool.. Please follow the link. They do take time to have any effect.

Workers Compensation can be such a boring subject. It can also be a costly subject that wrecks a company's budget. I had a goal in 2007 when I started this blog to try to come up with 1,000 posts of mostly original material on Workers Compensation issues.

This is actually post 1,001. I have always used Blogger as it was the one that I picked out of the air. In fact, the very first post I made disappeared for some reason.

That means I have posted on the average once every 1.75 calendar days. I calculated the time I invested as 1,500 hours. If I include the newsletter, the time spent would be closet to 1,80o hours. The newsletter has 10,000+ readers per month.

I have learned so much about the ins and outs of the Workers Comp system. There are going to be some great changes very soon. The blog will be converted into book form as many of the blog readers' have pointed out the posts changes subjects almost every day. I have to agree. However, you can perform a search on any subject using the search box on the right side of the page.

Thank you for reading the posts and newsletter. There is no advertising inserted in this blog. In fact, I really do not bring up J&L's services that often. I wanted to supply the WC community with a non-fee based and unbiased reference source. My main focus was and is to save employers $$ to preserve jobs.

If you have any suggestions, please email me at jmoore@cutcompcosts.com The best part of this blog for me was hearing from the readers.

If you handle any type of liability claim including Workers Compensation, you may want to call in today at 1PM on Medicare Set Asides. The info is here to join in on the CMS Set Aside Town Hall.

The call-in is at 1PM Eastern today. Please note the call-in is just not for WC. It is for all liability claims.

Even though that I am under the impression that WCMSA's are just another step in the Federalization of Workers Compensation, the rules have been published many years ago. If your company or your insurance carrier or TPA is not submitting in your claims data to the CMS, you should expect a spike in the federal fine activity. Some of the fines could be extreme.

The Federal Government usually will have a few companies they use for sacrificial lambs, so to speak. These companies are going to be heavily fined for not properly reporting their claims activity. There will likely be a flurry of press releases on these fined companies to move everyone into compliance (i.e. Willie Nelson and the IRS)

If, you, as the employer are unsure whether or not your claims are being reported properly to the CMS, I know of three companies that are very good in assisting in these matters. In my opinion, this is not the time to be complacent. If you need help, let me know.

The call in to the Town Hall meeting is toll free. The CMS has performed a series of these calls in 2012. This is the last one on their schedule.

Workers Compensation premium recovery can be very complicated on a prepaid policy. Over the weekend, I received this question -

Our company canceled our policy in February. We had six months left before the policy ended. We have not heard from our prior carrier on refunding any of the prepaid premium. We were not on any type of payment plan. How do we go about recovering our premiums from the carrier?

My answer that I emailed back was -

• Short-Rate Penalty - As you canceled mid-term, did your company experience a short rate penalty? Short rate penalties can be substantial.
• Final Premium Audit - as you mentioned you did not hear from the carrier, you should have a premium audit pending to close out the short policy year.
• Call the customer service phone number listed on your policy.
• You may get more than you asked for overall. If you have a final premium audit pending with a short rate penalty - your company may owe more than the premium recovery you are anticipating. The premium penalty can be 50% or more in certain cases. All of the rating bureaus have the formula on file. Please be extremely careful on the numbers that are input into the formula.
• Calculate the short rate penalty on your own - these calculations can be cumbersome and complicated. Your company may want to calculate this number before you contact the carrier.
• Be patient, your carrier will get around to the audit.
• As always, if you feel that you are in over your head or that you may end up costing your company more $ by pursuing the premium recovery, you may want to call on a non-agent expert for an unbiased opinion.

Statutory employees were really one of those under the radar subjects in Workers Compensation. South Carolina deemed a contractor as a statutory employee a few years ago. The subject seemed to not come up again until two recent cases.

Pennsylvania's statutory employee law was considered one of the most conservative when determining the employment status of a subcontractor. That stance changed this week as PA's Supreme Court stretched the boundaries of the employee/employer relationship further than most states.

According to a very well written article, the PA Supreme Court ruled that for Workers Comp "non-premises-based contractors may be viewed as statutory employers for the purpose of claiming benefits." The basic premise is the claimant (trucker) was an employee of another company. One of the stark parts of the ruling is what I have been warning employers about for years.

The Ladder of Insurance (c) was applied in this case as the claimant's direct employer had no WC insurance. The court went up the ladder to the company that had no idea the injured employee's employer had no WC insurance. I cannot imagine the response of their WC carrier. Would they possibly deny the claim for non-coverage? That would likely initiate another lawsuit.

I have written many articles on this subject as I have seen so many employers pay claims for unknown employees. This is why certificates of insurance are golden for risk transfer between contractor and subcontractors. Ask for them or be ready to get out the checkbook.

I will cover the Missouri statutory employee case next time.

Cancellation notices by a Workers Comp carrier can be a frightening experience for a business owner, Risk Manager, CFO, HR manager, or whoever internally handles the Workers Compensation claims for an employer.

We received this question earlier this week from a small business owner - I received a certified return receipt letter on 06/05/2012 informing my company is being cancelled for Workers Comp insurance. What do I do now? BTW, this employer became one of our clients due to a policy mistake.

In this case, we recommend:

1. Finding out the true cancellation date. An insurance carrier has to give your company notice from the date of receipt before the cancellation date - usually 10 or 30 days. The date will be on your notice or on a prior notice. Your policy is usually cancelled at 12:01 AM of the cancellation date.
2. #1 does not necessarily apply if you are being cancelled for non-payment of undisputed premium
3. Contacting your agent - we do not recommend this if you are coming up on an imminent cancellation date due to non-payment of premium. You need to talk to the insurance carrier's collection department ASAP.
4. Searching for any additional documents from the carrier. They will have sent your company other notices. I have never seen a carrier cancel an employer out of the blue. Is there another person in the company that handled the documents? We have seen employers toss such notices thinking they were advertising.
5. If you are in the cancellation grace period under #1, find out the reason for cancellation. There will usually be a phone number to call.
6. Contact your agent immediately if the reason for cancellation had nothing to do with premium payment. You will need new coverage. Non-payment of premium accounts for approximately 90% of cancellation notices that we see from companies.
7. Finding out the results of your last premium audit. If you had a premium audit and bill that went unpaid, what was the reason for the non-payment? This type of cancellation occurs usually early in the next years' policy.
8. Disputing the bill, except you need a valid and legal reason. If you are disputing a premium bill and are unsure if you really owe it, then you may need to bring in a premium expert.
9. Paying the bill. You will lose your leverage if you have a valid dispute and pay the premium audit bill. However, if you owe it, pay it.
10. As a very last resort, contact your Department of Insurance. They usually have an ombudsman that may be able to help you. The ombudsman may actually work for the Industrial Commission or rating bureau depending on your location.

The bottom-line recommendation for cancellation notices is that you must act NOW. Some states are now assessing heavy fines for each day that your company does not have WC coverage. The worst-case scenario is an employee having an on-the-job injury and your company has to pay out-of-pocket along with hefty fines.

This is a concern that we are hearing from quite a few clients, blog readers, and fellow conference attendees. Recently, premium audit notices are being emailed and faxed to businesses giving the business owners or CFO's less than week to prepare their records for a premium audit.

I am looking at two notices from clients as I write this post. I could understand the short notice if the business was small and/or assembling the records would not be very complicated. However, in both of the ones I am examining involve subcontractors, expense logs, and other documents that cannot be organized in time.

Five days (three business days) is a little much to ask an employer to prepare for an audit. There are premium audit guidelines usually built into every policy. If not; your state's rating bureau is the organization (NCCI, WCIRB, etc.) that sets the premium audit rules.

The one clause that is usually in all of the rules states the audit will be conducted at a convenient time for all parties, or something along those lines.

If you feel that your company needs more time to organize your records, then fax or email a letter to the auditor that is setting his/her schedule that the premium audit date and time is not convenient. I do not recommend calling as this has led to confusion on "who said what" on rescheduling the appointment.

It is recommended to not completely disallow the premium auditor looking over your payroll and company records. The insurance carrier will then perform an estimated audit and bill. An estimated premium bill will usually be 200 - 300% more than what is actually owed due to the very liberal rules for estimated audits.

Please note I am not blaming the Workers Comp premium auditors on their schedules. They are given very heavy schedules in today's insurance environment. He/she is trying to fit in as many audits as can be done in a week due to internal time pressures. That is the nature of the beast on anything with Workers Comp presently.

There is no exact time frame on extending the audit date. I would think that more than four business weeks or 30 calendar days would be the maximum number of days to extend the audit date.

Addie Wong was recently named the new ombudsman for California Workers Compensation Insurance Rating Board (WCIRB). I thought I would add in her introduction letter and the functions of the Ombudsman position.

Introduction Letter

California employers have a new workers' compensation Policyholder Ombudsman. Ms. Addie Wong took over the Ombudsman position in March and has begun developing an outreach program aimed at raising awareness of the Ombudsman office and the services she offers to California employers.

Created as part of the 1993 reforms that led to open rating, the Policyholder Ombudsman is an independent position within the WCIRB and receives guidance from an oversight committee whose membership includes an insurer representative, an employer representative, and a representative from the California Department of Insurance.

The Ombudsman helps policyholders better understand the workers' compensation system and their insurance policies, and the Ombudsman can be of assistance to policyholders in effectively resolving disputes with their insurers. "The Ombudsman's job is to work directly with the policyholder and listen to his/her concerns and give voice to those concerns to the insurer.

The worker's comp system is complex and employers sometimes aren't aware of the resources that are available to them. Or, they may not understand why their insurer took a particular action. That's where I can help," remarked Mrs. Wong.

In the coming weeks, Ms. Wong will be reaching out to employer associations across the state making certain that policyholders are aware of the assistance she can provide. "I am excited about the opportunity to help California employers, especially small employers who may be struggling to understand the workers' comp system. I think I can provide a valuable service."

Functions

The Policyholder Ombudsman is available to employers (policyholders) to provide information and answers about the workers' compensation system.

Although agents, brokers, insurance companies, attorneys, and others may represent an employer, it is not within the scope of the Ombudsman's duties to provide assistance to these parties. They should continue to make inquiries through traditional avenues.

Employers are always entitled to receive information from the WCIRB about their loss experience, claims, classification assignments, policy contracts, rating plans, rating systems, and other information affecting the policy premium.

The Policyholder Ombudsman may facilitate matters for you with the WCIRB or your insurer but cannot make decisions on behalf of the WCIRB or your insurer. Your contact with the Policyholder Ombudsman does not constitute initiation of any dispute resolution process with the WCIRB or with your insurer.

A Caveat

As mentioned in the preceding paragraph, there are certain tasks that must be undertaken with certain time limits. Your Workers Comp insurance policy will have all of the necessary steps to commence a dispute. As Ms. Wong has noted, it is better to work things out with your insurer directly.

I have written many posts on Disputing Your Premium Audit and Bill. You may want to search this blog for the word dispute using the search box on the right side of the screen. The caveat is to know if you have a valid dispute - not my company's:

• X-Mod/E-Mod increased dramatically
• Premium increased sharply
• Insurance carrier accepted an invalid claim
• Insurance carrier paid too much on a claim

As an employer, you need to have supporting documents and numbers that validate your concerns. If not, you could end up paying more premium than before the dispute and possibly ruin the relationship with your insurance carrier.

I have found working with the rating agencies (NCCI, WCIRB, or independent state rating bureau) to be a good experience if the research had been done properly with supporting documentation.

One recent inquiry came from a CA medical instrument manufacturer. They had felt some of their workers were misclassified. The carrier returned to do a re-audit that ended up increasing their prior years' premium by 23% and will increase their future premiums.

The NCCI just released a study today on Narcotics in Workers Comp. The buzz on narcotics/opioids almost rivals fraud. I decided to read the study closely to see if there were any astounding facts.

The one statistic that stood out was that 40% of all narcotics in Workers Comp are consumed by 1% of the injured employees. I thought about this stat for a few minutes and came to the conclusion this was true Workers Comp sticker shock.

Along the same lines, but not as severe, 80% of all narcotics in Workers Comp is consumed by 10% of the injured employees. The report went on to say that the numbers have actually fallen a small amount over the last few years. That is amazing to me.

As expected, Oxycontin(r) and its generic equivalent were the most prevalent narcotic. Oxycontin and its generic was the most used narcotic in 2003. Its popularity waned. However it is now the ranked #1 again for narcotic use in Workers Comp.

I wrote about the abuse of Fentanyl in California's WC system a few months ago. There is now even a stronger replacement for Fentanyl called Fentora. I recommend clicking the above link on Fentanyl. It is an eye-opener.

The concern is that Fentora is much stronger than Fentanyl as the dose has to be reduced when compared to Fentanyl before taking it. Fentanyl is actually 75 to 100 times stronger than morphine.

Alaska's generic only rule in 2008 was seen as a bold move and a way to cut Workers Comp prescription costs. Oxycontin and Fentanyl/Fentora have generic equivalents. This type of rule would not eliminate narcotics being used by injured employees. Would a Pharmacy Benefit Management (PBM) program be the way to handle this conundrum?

I had seen a posting or an article somewhere today that indicated the injured employees that are taking such powerful narcotics for pain management do not ever return to work. I will find that article this evening and post on it tomorrow.

This is from a Raleigh area safety group that holds quarterly meetings on safety issues. I am on the Board and am Treasurer. Please join us for our summer Lunch 'n Learn on June 12, 2012. Our speaker will be Debra Lord with Job Ready Services and she will be speaking on Reducing Workers Compensation Costs from Hire to Retire. We look forward to seeing you there! Sincerely, Stephanie S. Glasgow, MESH, PHR Mid-State Safety Council c/o OWASA 400 Jones Ferry Road Carrboro, NC 27510 (919) 537-4223 sglasgow@owasa.org

Mid-State Safety Council announces the Summer Lunch and Learn Session Topic: Reducing Workers Compensation Costs from Hire to Retire Speaker: Debra Lord, LPT, Job Ready Services Where: Tribeca Tavern 6400 Falls of Neuse Road Raleigh, NC 27609 When: June 12, 2012 at 11:30 A.M. Who Can Attend: Anyone interested in Safety and Health COST: $28.00 (includes lunch) Registration Form Below We accept credit cards, checks and cash! When registering please provide: Your Name, Company Name, Address, E-mail and Payment Registration for MSSC Event Mail Completed Registration Form Below and Payment to: Mid-State Safety Council Stepanie Glasgow OWASA 400 Jones Ferry Road Carrboro, NC 27510 919-537-4223 Email: Company Name: ______________________________________________ Meeting/Event Name and Date: __________________________________ Number Attending: __________ Contact Person: _______________________________________________ Mailing Address: ______________________________________________ City/State/Zip: _________________________________________________ Email: _________________________________________________ Telephone: (_____) ______________________ Checks should be made payable to: Mid-State Safety Council.

Missouri, New Jersey, Wisconsin, Indiana, Iowa and Virginia all have two things in common that only these six states share. I had written about the two things in common a few times in the past. The title does give it away.

They are the states that still do not have medical fee schedules for Workers Compensation treatment of injured employees. In 2009, I wrote this article on states without medical fee schedules. Missouri and Iowa were lower for medical costs then, but that has all changed very quickly.

I find that astounding after it has long been proven that any state without a medical fee schedule is harming businesses indirectly. The states without a medical fee schedule were 27 - 51% higher in the cost of medical treatment.

The main similarity is they are the most expensive states for Workers Comp medical treatment according to a recently released study on medical fee schedules. The Workers Comp Research Institute (WCRI) recently released a study titled Medical Price Index for Workers’ Compensation (MPI-WC). The WCRI studied 25 states.

Tennessee was the best case example for using a fee schedule. Workers Comp medical treatment in Tennessee was very expensive before they enacted a fee schedule along with other reforms. Tennessee's medical care cost for Workers Comp is now in line with most fee schedule states. It used to be one of the highest in the nation.

Wisconsin has become the bellwether for states that do not have a fee schedule. Their medical index cost was almost 200% more than the median. Wisconsin employers are feeling the effect in their Workers Comp E-mods and premiums.

The bottom line answer to the question is that Workers Comp fee schedules are beyond critical for controlling Workers Comp costs for employers. The employers in the aforementioned state should be pushing their lawmakers to pass some type of medical fee schedule very soon.