WC Claim Cost Reduction Strategies for Contractors Willis Claim Practice
September 12, 2013
The information in this presentation was compiled by Zurich American Insurance Company and Wilils from sources believed to be reliable for informational purposes only. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this presentation, including any information contained herein.
5 Key Issues for TakeawayWC Trends indicate economy is recovering,
frequency is down, severity is up, recession recovery driven severity
Aging Workforce and Obesity affecting WC Industry
Two factors (people) determine the WC Claim Outcome
Keep ScoreYou need to manage the medical, especially the
drugs
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Key Issue #1
WC Trends indicate economy is recovering, frequency is down,
severity is up, recession recovery driven severity
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Employment slowly recovering ..Along with industry payrolls
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Economy RecoveringSignificant recession impact, very slow recovery
Source: Bureau of Labor Statistics
Frequency DownInjury and Illness Incidence Rates Cases per 100 Full-time Employees
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Frequency & SeverityBy State : All WC Claims
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
AL
AK
AZAR
CA
CO
CT
DE
DC
FL
GAHI
ID
IL
IN
IA
KSKY
LA
ME
MD
MA
MI
MN
MSMO
MT
NE
NV
NH
NJ
NM
NY
NC
OK
OR
PA
RI
SC
SD
TN
TX
UT
VTVA
WI
States AVG $250/EE $500/EE $1000/EE
Frequency (Claims Per 100 Employees)
Severi
ty
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Frequency and Severity Lost-Time Claims for all NCCI states
Frequency: -3% per year
Severity: +6% per year(7% Medical; 5%
Indemnity)
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Data developed to Ultimate; 2011 preliminary
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SeverityCost per Claim Trends: Lost-Time
Cost per LT claim at 12 months: Trending higher for SIC 15
(Building Construction) Roughly flat for SIC 16
(Heavy Construction) and SIC 17 (Specialty Trades)
2010 dip and 2011 bounce likely recession related
Developed cost (at 60 months) is roughly 2x that for 12 months
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Key Issue #2
Aging Workforce and Obesity affecting all WC Industry
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AGING WORKFORCE Avg. age of injured workers rising, higher average WC cost with older workers
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OBESE WORKFORCE Obesity is rising in U.S.
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Obesity & Workers Compensation Duke Study
5.8
11.65
0
2
4
6
8
10
12
NormalBMI (18 -
25)
BMI >= 40
WCClaims
Claims Per 100 FTEs
14.19
183.63
0
50
100
150
200
Normal BMI(18 - 25)
BMI >= 40
Lost WorkDays
Lost Work Days per 100 FTEs
Truls Østbye, MD, PhD; John M. Dement, PhD & Katrina M. Krause, MA (2007). Obesity and Workers' Compensation Results From the Duke Health and Safety Surveillance System, Arch Intern Med.167:766-773.
The average medical claim costs per 100 employees were $51,019 for the obese and $7,503 for the non-obese.
AGING AND OBESE WORKFORCEEmployee selection, orientation & training
A shortage of qualified workers will only increase this risk A 2013 AGC study suggests that there is a quickly developing
workforce shortage issue* Macro construction economy is expanding, estimated at 5% for
the next 5 years Contractors are facing staffing shortages as the work force ages Many construction workers permanently left the industry during the
recession, forcing contractors to bring on inexperienced labor By 2017, there will be two million fewer workers than
positions available: How are you going to get the best possible workforce?
* AGC News – Worker Shortage in Construction Industry, January 2, 2013
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Key Issue #3
What do you think are the two most important predictors of the
outcome of a WC claim? Who matters the most in the process?
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What are Most Important Factors of a WC Claim:
THE CLAIM
The Worker-attitude
-job satisfaction-integrity
The Doctor-RTW mentality
-Focus on worker
Claim Rep
DefenseCounsel
SupervisorEmployer
Nurse
Union
Yourbroker
HR
2 Most Important FactorsHow to get best Employees
• Background Check
• Drug Test
• Financial Background Check
• Integrity Testing
• Skills/Personality/Academic Testing
• Physical Capabilities Testing
• Training
• Conditioning
• Orientation
• Supervisors
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Zurich study indicates that 25% of workforce has been on the job less than 2 years
Those same workers generate 43% of WC losses
2 Most Important FactorsHow to get best Doctors
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Traditional· Preferred Provider Networks· Nurse Case Managers· Adjuster Feedback
Advancements· Early Intervention· Outcomes Based Network
Connecting with the Injured Worker
First Fill text
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Two Most Important Factors Reduce Lag Time: Claim Intake App
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Two Most Important FactorsHow to get the best Doctors
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Beware of physician dispensed medsBeware of unnecessary ER VisitsOver prescription of physical therapyMeet with your doctor/clinic when
appropriateInvite physicians to job site when possible
Key Issue #4
“If you aren’t keeping score, you’re practicing.”- Vince Lombardi
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Keeping ScorePitfalls of Metrics
Skip MetricsSkip to MetricsFail to align with your
strategyFail to consider impactToo many metricsNot understood by users
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Keeping ScorePrimary and Secondary Metrics
Primary
• Direct measurement ($)
• Clear correlation
• Normalized, developed
• Examples• Closed LT Claim at 24
months• Developed cost per
$100/payroll• Accident Frequency Rate
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Secondary
• Indirect measurement
• Examples• Lag Time – 24 hour
contact• Claim Closure Rate• PPO penetration rate• % of Savings from
Carrier/TPA
Keeping ScoreMetrics for you
Experience Modification FactorAFR: Accident Frequency RateCost of Closed Lost Time claim at 12, 24 monthsCost of Closed Medical Only claim at 12, 24 monthsAverage LTWD by year/per EEDeveloped Losses per 100 FTEs per $100 payroll.
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Key Issue #5
You need to manage the medical, especially prescription drugs.
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Pharmacy IssuesTrends with opioids
National epidemic Growing concern in work comp Originally end stage cancer drugs Actiq “lollipops”= $30 42% get opioids in year 1, 16% are still on opioids in year 2. 16,000 deaths per year from opioid usage, WA had 33 deaths
in one recent year Claim is 4X as likely to have a total cost over $100,000 In California, 3 % of the state’s doctors prescribe 55% of the
opioids
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Pharmacy IssuesA Growing Concern in Work Comp
Source: WCRI data from Oct. 1, 2008 – Sept. 30, 2009 claims, with fills thru March 31, 2011
CT NJ IL MI CA PA GA NY MA IA IN VA SC AZ TX WI MN TN LA NC AR0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percent of Claims with PainGiven Opioid Medications
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Pharmacy IssuesThe longer the use, the more the risk User trends vary widely by state
Source: WCRI data from Oct. 1, 2008 – Sept. 30, 2009 claims, with fills thru March 31, 2011
AZ WI NJ IN IA MN AR MI IL MA GA TN VA CT NC CA SC PA TX NY LA0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Percent of Non Surgical Claims with NarcoticsIdentified as Longer-Term Users
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Pharmacy IssuesIt’s not just Rx Drugs:
Within the construction and mining industries, it is estimated that 1 in 7 workers has a serious alcohol problem: In addition, workers in these industries are 25% - 45% more likely
to have a serious alcohol problem than the average U.S. worker
2011 Society for Human Resource Management survey found: The number of employers reporting high WC incidence rates prior
to a drug-testing program decreased by approximately 50% after introducing testing
Drug testing has also been found to reduce claims as much as 12%, first aid injury reports by 18%, accidents by 51% and EMRs as much as 11.4%
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Come Monday…. Use metrics and determine where you are today. Are you doing
better or worse? Where do you want to go? How do you get there?
Your workers are getting older and weigh more. How are you going to get better workers? Get with HR and come up with plan to test and validate candidates. Train, condition your athletes. Change the way you do things.
Get the best docs. Make sure your employees know how to access the docs.
Know that as soon as opioids are prescribed, you have a potential problem claim.
Construction industry needs to communicate. Different forms, different methods, different sources, and often. Multiplicity and duplicity is key to success.
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