Communication and Injury Management

“A New Approach to Lower Work Comp Costs”

By: Carl Zeutzius, CIC, CWCA, MWCA

Tom Champoux, CPCU, AIC, CWCA, Licensed Consultant

What is a Certified WorkComp Advisor?

• An insurance professional who has been trained by the Institute of WorkComp Professionals and has passed a certification test.

• There are only about 300 Certified WorkComp Advisors in the U.S.

• In October of 2010 UNICO Group was named the National Work Comp Agency of The Year by the Institute.

• 2009 Accident Fund’s National Work Comp Agency of The Year

• We have clients from coast to coast

including Alaska.

Communication

Injury Problems ???

Doctors

Employee/ Patient

Government

Insurance Company

Employer Supervisors

LawyersThird Party

Administrator

Family

Nurse Case

Manager

Wonder Why ?

Workers Compensation

Acts As a

On

Workplace Injuries

Insurance Companies Don’t Pay for Employee Injuries

Employers Do!

Most Influential People After Injury

Employer

Employee Doctor

Most Influential People After Injury

EMPLOYERDecides whether to support the

recovering employee through a Back-On-The-Job Program

Confusion can cost you money!

• Do your employees know what is expected by them, you and the doctor when they get hurt?

• Help your employees navigate the workers’ compensation highway.

• Providing an injury packet or injury guide is a good first step to help your employees understand what lies ahead for them when they are hurt.

Lag Time

Source: NCCI Summer 2000 Issues Report, “The High Cost of Delays: Findings on Lag-Time Study” by Glen-Roberts Pitruzello.

How to Drive Down Employer’s Tax on Injuries

Early Reporting

Train employees to report ALL injuries within 60 minutes of occurrence.

This will reduce your work comp costs!

Most Influential People After Injury

DOCTOR

• Diagnoses medical problem

• Prescribes the treatment plan

• Releases the employee back to work• Path to function or disability

Employer and medical response to employee injury can promote recovery, function, and well-being.

OR

Response can lead to needless, disability and disruption of social and economic lifestyle.

Communication and teamwork between all parties is so crucial to make it a win-win situation for everyone.

– Identify local clinic

– Invite staff physicians to tour facilities

– Review expectations of Return to Work program

– Supply clinic with Return to Work forms

Provider Ultimately Dictates Costs

Emergency Room

Surgical Specialist

General Practitioner

Occupation Medicine

Care Analytics

(CA) Preferred

Panel

Ave Cost 2 x 2 x 1.2 x 1 0.7Ave

Duration3 x 1.4 x 1.3 x 1 ?

Reason Hospital Charges, Referral Pattern

Services, Equipment, Recovery

Treat For Patient

Satisfaction

Treat For Back To Work

Optimized

– Sell your employees on clinic’s specialty: work-related injuries

– Communicate frequently with employee

– Show concern for well-being

– Discuss return to work expectations

Most Influential People After Injury

EMPLOYEE• Decides whether to try and get better as quickly as possible, or

• Let the medical problem become a life- limiting event

Check

YourExperienceModification

Factor

Myths We Hear Every Day

• “Class codes are class codes – and the rates are determined by the state – so the only way to lower my E-Mod score is to reduce my claims” (myth)

• “What kind of rates do you offer?”• “Work comp is simple – my E-Mod score goes up

when the number of injuries goes up” (myth)• “We had a huge claim that sent our score through

the ceiling” (myth)• We just had a GREAT year - safest one ever – and

our E-Mod went up! (why?)

The Experience Mod (E-Mod)

• Specific to your industry, size, and state • Statutorily used by the NCCI to punish or

reward businesses• Created by the NCCI• Controlled by the NCCI• Calculations are promulgated by the NCCI

The Data Included in E-Mod Calculation

Data 2013 E-Mod

2012 - 2013 Lag Year

2011 - 2012 1

2010 - 2011 2

2009 - 2010 3

IJ Codes

IJ Code 1 Death

IJ Code 2 Permanent Total Disability (PTD)

IJ Code 5 Temporary Total or Temporary Partial Disability (TTD/TPD)

IJ Code 6 Medical Only

IJ Code 7 Contract Medical or Hospital Allowance

IJ Code 9 Permanent Partial Disability (PPD)

IJ Codes Medical Claim

States Using NCCI or similar methodology States that have approved ERA

AK AL AR AZ CA CO CT DC FL GA HIIA ID IL IN KS LA MA MD ME MI MNMO MS NC NE NH NM NV NY OK OR RISC SD TN TX UT VA VA VT WI

AL AR AZ CT DC FL HI IA ID ILIN KS KY LA MD ME MI MN MO MSMT NC NE NH NV OK RI SCSD TN UT VA VT WI

1 2 3 D - 4 5 EXPECTED 6 EXP PRIM 7 CLAIM 8 O 9 ACT INC 10 ACT PRIMCODE ELR RATI PAYROLL LOSSES LOSSES DATA IJ F LOSSES LOSSES

CARRIER 13145 POLICY NO. EFF DATE 06/01/04 EXP - DATE 06/01/057380 260 17 6218 162 28 NO 5 6 * 667 6678810 014 19 171081 240 46 211036 6 F 2880 28808833 068 18 1273775 8662 1559 222251 6 F 5820 50009040 205 20 282611 5794 1159 223175 6 F 6234 50009807 ADDITIONAL PREMIUM [ 0] [ 0]

POLICY – TOTAL 1733685 (SUBJECT PREMIUM =37378) 15601CARRIER 13145 POLICY NO EFF DATE 06/01/05 EXP-DATE 06/01/067380 260 17 5183 135 23 286237 4 O 141702 50008810 014 19 232664 325 62 248298 5 F 6802 50008833 068 18 1321793 8988 1618 NO 6 6 * 1642 16429040 205 20 293176 6010 1202 261759 6 F 6208 50009807 ADDITIONAL PREMIUM [ 0] [ 0]

POLICY – TOTAL 1852816 (SUBJECT PREMIUM =40891) 156354CARRIER 13145 POLICY NO EFF DATE 06/01/06 EXP-DATE 06/01/077380 260 17 7158 186 32 322308 4 O 25196 50008810 014 19 261478 366 70 293195 5 F 1658 16588833 068 18 1413332 9611 1730 NO 5 6 * 3129 31299040 205 20 313286 6422 12849807 ADDITIONAL PREMIUM [ 0] [ 0]

POLICY – TOTAL 1995249 (SUBJECT PREMIUM =45277) 29983RATING RELECTS A DECREASE OF 70% MEDICAL ONLY PRIMARY AND EXCESS LOSS

DOLLARS WHERE ERA IS APPLIED(ARAP) IF APPL: 1.49

(A) (B) (C) Expected (D) (E) (F) Actual (G) (H) (I)Excess (D-E) Excess (H-I)

010 38089 46902 8813 159678 20400 183332 23654* Total by Policy Year of all cases $2,000 or less.

# Limited loss

C Catastrophic loss ACTUAL (I) (C) x (1-W) + (G) (A) x (F) (J)D Disease loss 23654 54680 15968 94302E Employers Liability Loss EXPECTED (E) (A) x (C ) (K) (J)/(K)

DATE 01/25/08 8813 54680 3809 67302 1.40

The Experience Rating Process & Formula

This number is now 10,000

You can control your Experience Modification Factor

CURRENT MOD 1.09 = $115,450

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000 $114,450

$64,050 $50,400

0.25

0.50

0.75

1.00

1.251.09

0.610.48

Know the gap between your Current Mod and Minimum Mod

Minimum Mod 0.61 = $ 64,050

Controllable Mod .48 = $ 50,400

Know and Communicate Your Min E-Mod Rate

– The current experience mod rate is: 1.00 but projected to increase to 1.24 on 04/01/12

– Minimum Mod rate is: .75

2010 2011 20120

0.2

0.4

0.6

0.8

1

1.2

1.4

0.89

1

1.24

0.710000000000001 0.730000000000001 0.750000000000002

0.18

0.27

0.49

Exp Mod

Min Mod

Cont Mod

-----$90,300

If no wages are paid to the employee by the insurance company, your cost for the claim is reduced by 70%.

Case Example - 70% Rule:

$2,000 Medical Only claim vs. $2,100 Med/Indemnity claim

MED ONLY - $2,000

(reduced by 70%)IJ Code: 63-year Premium Cost $1,800

MED/INDEMNITY - $2,100

($2,000-Med plus $100-Indem)IJ Codes: 3,4, and 53-year Premium Cost $6,600

The $100 Indemnity Payment costs $4,800 in increased premium!!!

For those states under NCCI jurisdiction, only Colorado, Massachusetts and Oregon will not be ERA states after Alaska (1/1/2013), Georgia (3/1/2013), and Louisiana (5/1/2013) adopt the rule in 2013.

How Can You Lower Your Experience Mod?

• Work Comp is the most controllable form of insurance you have. It isn’t a commodity and if you view it that way you are ultimately paying more than you should.

• The goal is to increase profitability and understanding work comp can increase your profits.

Demonstrate Your Commitment to Injury

Prevention

Did You Know When You Prevent A Workplace Injury You.. Keep Your Workers Comp Costs Down

You Help Your Company Remain Productive

You Increase/Preserve Workers Incomes

You Maintain/Improve The Quality of Employee’s Lives Higher Incident of Divorce, Substance Abuse, Depression Among Seriously Injured

All The More Reason To Be Proud Of What You Do

Safety Attitude-Culture Makes a Difference

–An attitude from the top to the bottom of the organization.

–Prevents injuries –Keeps the company OSHA compliant–Prepares for the unexpected–Improves work environment and

morale

Loss Causes

Many companies fail in their loss prevention efforts because they are not based on correct principles of organization and effectiveness.

• 88% of all employee injuries, liability & vehicle losses are caused by unsafe acts of employees.

• 10% of all employee injuries, liability & vehicle losses are caused by unsafe physical conditions.

A strong safety culture brings other Savings & Benefits

• When a company has claims there are indirect costs associated with the claim.

• These costs are not covered by insurance.

• These expenses come directly out of the bottom-line of the company.

The real cost of accidents can be measured and controlled

$1

$4 to $10

…….

…………...

Insured Costs Medical Compensation

Uninsured Miscellaneous Costs Investigation time Cost of hiring and/or training

replacements Overtime Extra supervisory time Clerical time Wages not compensated Down time Negative public image Legal fees Reduced employee morale

Impact of Accidents on Profits and Sales

Direct Costs

Indirect Costs

Direct Costs + Indirect Costs = Total

o Medical costs + Indemnity payments

o Multiply direct costs by a cost multiplier

0 - $2,999 4.5$ 3,000 - $4,999 1.6$ 5,000 - $9,999 1.2$10,000 + 1.1

Example:

Direct cost of injury:

Indirect cost of injury:

Total cost:

Impact on Profitability$ 340,000 (total profits)

$8,500,000 (total sales)

$ 52,500 (total costs)

0.04 (profit margin)

= 0.04 (profit margin)

= $1,312,500 (sales)

$25,000

$25,000 x 1.1 = $27,500

$25,000 + $27,500 = $52,500

Financial Impact:

Indirect Costs

• Indirect Costs Affect Profitability – Per OSHA Statistics: One $2,300 claim costs your

company $12,650

• Assume a 10% profit margin– Additional sales required to offset one $2,300 claim:

$126,500

Have anEffective

Return-To-WorkProgram

Recovery at Work (RTW) Myths

• “What’s the big deal about recovery at work…this is why I

buy workers compensation”

• “Their peers get angry when they see someone doing light

duty”

• “My workers will never do that kind of job”

• “RTW looks good on paper, but never works in real life”

• “I don’t want my workers here if they can’t do their job”

• “The doctor says that he can’t return to his / her job”

The Workers’ Comp Paradox

The frequency of

job-related

injuries is down 40%

over the last 10 years

But the severity of

injuries and total costs

are up!

Costs/Severity

# ofInjuries

Time is of the Essence

0 4 8 12 16 20 24 32 36 40 44 48 520%

1000%

2000%

3000%

4000%

5000%

6000%

7000%

8000%

9000%

10000%Time away from work in weeks

At 12 weeks, employees have only a 50% chance of ever returning to work.

Study:Most Lost Time Injuries Can Be Avoided

Fewer than 10% of work-related injuries should require employees to take more than 3

days off work for medical reasons. (ManagedComp Survey) Nationally, 24% of workplace injuries result in lost time greater than 3 days.

60% to 80% of lost time is avoidable.

FACT

OSHA - Only 4 out of every 100 claims reported to the NCCI in 2008 truly required the injured employee to miss more than 7

days – with no possibility of light duty return to work

Most business owners are not aware of just how many thousands of dollars they are wasting on injuries that could easily be light duty

After all, “…that’s why I have Workers Comp coverage.”

Benefits to the Employee

Reduced or Eliminated stress, boredom and depression from the injury or illness and from being unproductive.

Shortened recovery time.

Injured worker remains active and productive.

Prevention of loss of physical fitness and muscle tone due to inactivity.

Feelings of dependency and lack of control are alleviated.

Reduced accident and injury related costs may help preserve benefits and jobs as well as contribute to improve work environment.

Benefits to the Employer

Essential Components:

Develop a Formal Plan• Develop a written policy

– Policy should be approved/supported by management

• Ensure employee understanding of policy

• Explain thoroughly during new employee orientation program– Also, review periodically with current

employees

• Obtain employee sign off – their agreement to follow program in event of an injury

Early RTW Ideas

• Don’t be afraid to be creative• Off-Site Transitional Duty Tasks if on-site is unavailable• Break down jobs into tasks• Organizing or cleaning drawers or cupboards• Making customer satisfaction or survey phone calls• Running needed errands• Viewing safety videos or CE requirements• Answering the phone• Miscellaneous clerical duties• Inventory

Stay Active

In Reviewing

Open Claim

Reserves

Reducing Reserves

The most important day of the year – It’s not what you think!• Too many Workers Compensation policyholders think that

the most important date of the year is their renewal date. Guess what, it’s not.

• Without question, the far more important date of the year is six months after your renewal date. If your broker doesn’t know this, or talk about the importance of the Unit Statistical report and the Valuation date, you have the wrong broker.

Many Agents and Brokers state that they ‘monitor and review’ claims Do you actually see the data of the results they are obtaining for you?

Do you know the results of open claim reserves that they have monitored and lowered for you?

It is critical that your open claim reserves be reviewed and audited.

Open claims have a direct impact on your experience modification.

The key period is the 60-day window prior to your experience modification effective date.

UNICOMP ClaimReserve Monitoring

From 2006 to 2013

We helped lower open claim reservesby over $10 million.

This resulted in experience modification factors decreasing substantially!

• In 2012 Our Claims Advocate was successful in lowering open work comp claim reserves by over $2,800,000!

• This saved our clients just under $900,000 in work comp premiums!

• Are you claim review meetings producing results like this?

Reserve Reductions

Claimant:

DOL: 03/38/09

Insured:

Policy period: 04/23/08 – 04/23/09

Claim #: 101478998

Adjuster: Jeanie

Ins. Co.:

Close date: 10/08/09

Nature of Injury: The claimant sustained a broken wrist.

Accident Location: NE Compensable: YesAve. Weekly Wage: $ Comp. Rate: $

Treatment: The claimant underwent open reduction internal fixation (ORIF) surgery on her wrist on 4/06/09.

Work Status: The claimant has not lost any time from work

Indemnity Payments: The claimant has not received any indemnity benefits

Maximum Medical Improvement (MMI)/Permanent Impairment Rating (PIR): Dr. does not expect the claimant to reach maximum medical improvement until around 1 year post op, which will be 04/06/10.

Indemnity

Medical

Expense

Total

Paid Amount

$0.00

$11,424.39

$30.86

$11,455.25

Reserves

$0.00

$0.00

$0.00

$0.00

Total Incurred

$0.00

$11,424.39

$30.86

$11,455.25

Reserve ReductionsSurveillance: Surveillance is not warranted.

Litigation:Claimant Attorney: Not Represented Defense Attorney: Not Represented

Settlement Status: At this time the claim has been closed.

Subrogation: Claim file does not support subrogation.

Special Disability Trust Fund (SDTF).Second Injury Fund (SIF): Claim file documentation does not support SDTF/SIF Recovery.

Reserve Reduction/Recovery Potential: Our audit began on 8/13/09. The unit stat filing date for insured is 10/23/09. Our audit revealed that the Clmt tripped while moving a pallet from the dock on 3/02/09. Clmt fell backwards which caused her to break her wrist. Clmt underwent open reduction fixation surgery on her wrist on 4/06/09. On 8/13/09, UNICO learned that there was no lost time from the injury. Dr. does not expect the clmt to reach MMI until around 4/06/10 (1-yr post op). The adjuster plans to follow up with the clmt in 6 months to see how she is getting along. On 10/02/09 UNICO asked the adjuster about the possibility of getting the reserves reduced as the clmt had not missed any time from work to date and most medical bills from surgery should be covered. The adjuster sent a referral to her spvsor for approval to lower the medical and TTD reserves before the unit stat filing date. The adjustor’s spvsor would not approve w/o contacting the clmt first regarding the need for further care. The adjuster has been unable to reach the clmt. UNICO will f/u with the adjuster in 1 week regarding the reserves. On 10/07/09 UNICO and the adjuster conference the clmt in on a phone call to determine if the clmt felt she would be in need of add’l care. Clmt stated that she feels her injury has healed completely and does not plan to return to the Dr. in the future. The adjuster advised the clmt that she would send a letter informing her that the claim was being closed. This caused the med/indem reserves to be wiped out resulting in a reserve reduction of $40,175.61. By closing the claim it will be kept medical only resulting in an ERA reduction of 70%. UNICO will continue to audit the claim and verify the accuracy of your reserves in preparation of the 10/23/09 unit stat filing date.

Reserve Reduction/Recovery: $40,175.61

Reserve Reductions

If your open claims are not being reviewed prior to the time those claims are sent to NCCI more than likely you have overpaid for your workers’ compensation premiums.

Result- Your profitability has been reduced from an inflated experience modification factor!

New NCCI Changes That Will Impact You

• The new filing calls for an increase in the split point to an inflation-adjusted $15,000 over a three-year transition period, and will further increase this amount thereafter on an annual basis using a countrywide inflation index. The details are as follows:

• In Year 1, initially increase the split point to $10,000• In Year 2, increase the split point to $13,500• Beginning in Year 3 and annually thereafter, increase the

split point to the indexed value for $15,000, where the index would be based on annual changes in the average cost of a claim

New NCCI Changes That Will Impact You

• On an individual risk basis, most employers currently receiving credit mods generally will see larger credits under the proposal.

• Most employers currently receiving debit mods generally will see larger debits under the proposal.

• It has been over 20 years since NCCI has made a change like this.

• Your claims NOW will be affected by this change!

Changes In Annual Claim Cost

“We quote it out to three or four agents each year”

“We put them all on a spreadsheet and pick the lowest price”

Living Breathing Service Timeline

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

UN

IT S

TAT

New E-Mod

Ren

ew

al

Audit Results

Claims Status

Unit Stat Prep

Ince

ptio

n

Audit Prep Audit

Marketing

Forecasting

Loss Control Safety Implementation

Back to Work PracticesRTW Program

Implementation Meeting

EE handbook Rework

Injury Process Occ Med Provider

Rehab Facilitator

Investigations

Q1 Review Q2 Review Q3 Review Q4 Review

Carrier Introductions

Alt Financing Options

Loss Control Review

Certificates

E-Mod Explanation Ltr

Discuss Industry Changes

Utilize the services and the resources available to you.

Use a broker that has a proven

track record with outcomes that

will help you increase your

profitability

“If you do what you’ve always done,

- W. Edward Deming

you’ll get what you always got.”