Accountable Care and Workers Compensation: Are They Compatible?

dr. jake headshotBy Jacob Lazarovic, MD, FAAFP Senior Vice President and Chief Medical Officer, Broadspire


First let’s review the acronym glossary. Accountable Care Organizations (ACOs) were stimulated by the Patient Protection and Affordable Care Act (PPACA). A cousin of the ACO model is the patient‐centered medical home (PCMH) model. And these, and similar delivery systems, are often described as value‐ based healthcare (VBH) models.


While similar to managed care models of yesteryear, VBH models comprise three critical elements:


  1. The medical entity bears financial responsibility for the health care needs of a defined population, employing shared savings and risk arrangements that “align the incentives” among all
  2. The entity coordinates and oversees the clinical provision of care across the continuum of all services required for the population being
  3. The entity provides measured outcomes relating to both cost and health, ideally achieving both medical expense reductions and superior clinical


It is recognized that successful ACOs require both a sophisticated administrative infrastructure to manage care effectively, as well as robust information technology systems that collect data seamlessly across the system and deliver meaningful reporting and analytics.


In the inaugural issue of the American Journal of Accountable Care, the authors describe their mission as follows:


“In this time of contention, there seems to be a growing consensus among stakeholders that the traditional, volume‐based, fee‐for‐service (FFS) care is an untenable strategy to deliver evidence‐based care that is both fiscally sustainable and able to meet the clinical needs of Americans. As we look for a solution to an overspending, underachieving system, the concept of “accountable care” has received much attention as a potential mechanism to better align provider financial incentives with high‐quality care.”


ACOs have proliferated rapidly since their inception in 2010. As of June 2014, there are said to be 626 ACOs across the country, of which 329 have government contracts, 210 have commercial contracts, 74 have both, and 13 are in development. It is estimated that 20 million Americans are currently covered by ACO agreements. There is considerable variation in these statistics, as reported by multiple sources.


A recent article documents furious activity in this sector, involving major health payers such as Aetna, Cigna, United Healthcare, multiple Blues plans, and Humana, among others.


Humana also reports that its ACO business, as broadly defined, is taking off. “Today we have well over 900 relationships with provider entities that we call ‘accountable,’ ” says Renee Buckingham, enterprise vice president for the provider development center of excellence within Humana’s healthcare services segment. That includes joint ventures, medical homes and integrated delivery systems. Of the total, approximately 100 or so relationships are commercial, according to Buckingham.


Structurally ACOs come in many configurations: “if you’ve seen one ACO, you’ve seen one ACO”. They may be owned by hospitals, physician groups, or integrated systems. They may provide all services internally, or outsource some services to affiliated entities. The risk/savings may be shouldered by the entity as a whole, or flow downward to some or all participating providers.


Generally, ACOs and similar VBH arrangements are intended to provide comprehensive medical services, “population‐based care”. However, there are also initiatives underway which apply this approach to  more granular sets of services, referred to as “bundles” or “episodes of care”. Bundled care is   sometimes considered to be a stepping stone toward fully accountable care for a defined population, i.e., a way station on the continuum from fee for service, to pay for performance, to shared savings and bundling, then ultimately arriving at the goal of full capitation.


“Bundled payments encourage providers to collaborate on improving the efficiency and quality of individual care episodes, honing in on the unit cost of care. Two key features of   the bundled payment create these incentives. First the lump sum payment is shared among participating providers, establishing mutual accountability. Second, the bundled payment is typically smaller than the sum of historic individual payments, generating upfront savings for the payer. As a result, providers can only succeed under bundled payments by reducing   input costs and growing volumes to offset the reimbursement cut per case.


In a bundled payment program, providers ultimately succeed by reducing input costs and improving quality during individual episodes of care. As a result, hospitals will develop gainsharing models to reward physicians for standardizing high‐cost implantable device and care protocols. If readmissions are included in the bundle, hospitals will work to streamline patient handoffs across the care continuum and engage patients post‐discharge to reduce readmission risk.”


The Centers for Medicare & Medicaid Services (CMS) has taken the lead in establishing a program of this type:


“On January 31, 2013, the Centers for Medicare & Medicaid Services (CMS) announced the health care organizations selected to participate in the Bundled Payments for Care Improvement initiative, an innovative new payment model. Under the Bundled Payments for Care Improvement initiative, organizations will enter into payment arrangements that include financial and performance accountability for episodes of care. These models may lead to higher quality, more coordinated care at a lower cost to Medicare.


Traditionally, Medicare makes separate payments to providers for each of the individual services they furnish to beneficiaries for a single illness or course of treatment. This approach can result in fragmented care with minimal coordination across providers and health care settings. Payment rewards the quantity of services offered by providers rather than the quality of care furnished. Research has shown that bundled payments can align incentives for providers – hospital, post‐acute care providers, physicians and other practitioners – allowing them to work closely together across all specialties and settings.”


Of the 48 bundled packages established by CMS to date, 14 of these deal with orthopedic procedures commonly required in workers compensation settings. For example one package is entitled “cervical spine fusion” which encompasses DRG groups 471‐473, and could include all hospital services as well as all related physicians (surgeon, anesthesiologist, radiologist, etc.).


The drawback of episodic arrangements is that while they can favorably impact the quality and cost metrics of each specific bundle, they do not per se address the utilization/frequency of these services, i.e., how many cervical fusions are being performed in the population.


Early results of VBH arrangements are promising, though not consistently so, both within CMS shared savings programs, and as reported by commercial payers. Total medical expenses have been reduced, as well as the rate of hospital admissions and emergency room visits.


“A March 2013 Commonwealth Fund report, exploring the experiences of seven ACOs, found that the most advanced ACOs saw reductions or slower growth in health care costs and     had anecdotal evidence of care improvements. The ACOs in the report that had been at financial risk long enough to see results have cut costs, primarily from reduced hospitalizations, lower spending per hospitalization and reduced spending on specialty and ancillary care. Newer ACOs lacked enough financial data to cite concrete results, but some saw improvements in utilization rates, such as fewer inpatient days, lower length of stay and greater patient engagement.”


An exhaustive Rand Corporation research report evaluated the success of three types of VBH models: pay for performance, ACOs, and bundled programs, and concluded that definitive results are simply not available at this time.


“VBP programs are natural experiments and inherently difficult to evaluate because program sponsors rarely withhold the VBP intervention from a matched group of providers to see what would have occurred absent the intervention. There are many weaknesses in the methods often used to evaluate P4P (and now the broader class of VBP programs), including reliance on pre‐post comparisons with populations of providers that are substantially different from the treatment group, and failure to account for other factors that may be contributing to the observed results.


The application of performance‐based payment models represents a work in progress regarding how best to design VBP programs to achieve desired goals, the optimal conditions that support successful implementation, and provider response to the incentives. We believe that continued innovation is desired at this early stage of VBP development and implementation. Concerted efforts will be required to ensure that the lessons learned from these experiments are identified and disseminated to advance the use of VBP as a strategy for improving federal and private health care programs.”


Do these alternative medical models offer opportunities to redesign the prevailing model of delivery and financing in workers compensation? It would seem that bundled arrangements would be easier to implement than population‐based models, and furthermore they would more closely match the nature  of WC events which are inherently episodic, not holistic.


Several barriers to WC application of these models exist. Historically, WC has been a volume‐driven, fee‐ for‐service model, and expectations and attitudes would need to be reformed. A pattern of micromanagement of all medical services would need to be altered, by increased delegation to provider entities. And the plethora of state regulations, dealing with reimbursement and direction of care, among others, would need to be overhauled to facilitate these approaches.


Specific recommendations offered include:


Providers/ACOs: Be receptive to closer partnership with workers compensation and group health insurers. Be prepared to embrace additional risk sharing and the occupational medicine expertise that will be required to maintain fast return‐to‐work.


Workers compensation insurers: Set up the proper risk sharing models, reduce the administrative burden, stop micromanaging physicians, and instead build networks that include only physicians who have proven they can support good health outcomes. Evaluate closer partnerships with healthcare insurers and employers, especially those that have integrated.


Regulators: Consider accelerating adoption of outcome‐based arrangements in workers compensation by providing legislative incentives for these programs.


Despite the bumps along the way, many observers feel that the future shape of medical care delivery and financing is inevitable.


“The development of the accountable care movement will be determined by early results. The majority of ACOs are using shared savings models, and most are committed to evaluating their financial returns for 2 to 3 years before moving away from these payment arrangements. ACO leaders speak of a desire to improve the value they provide, but they are hesitant to adopt any wholesale movement away from FFS‐based billing as they are not fully convinced that full provider risk and capitation/bundling is the inevitable conclusion of the accountable care movement. In the short term, however, providers are continuing to experiment with new payment models and new approaches to providing and coordinating care. The end result of the ACO movement, particularly relating to provider risk and reimbursement, is still undecided, but the consensus among these organizations is that the value‐based focus of accountable care is here to stay.”


Interesting times lie ahead.




Jacob Lazarovic, MD, FAAFP


Dr. Lazarovic is Senior Vice President and Chief Medical Officer for Broadspire, a Crawford Company, and a leading global third party administrator of workers compensation and disability claims. Dr. Lazarovic is a board‐certified family physician, and experienced medical administrator. He completed his medical training and residency at McGill University in Montreal, and subsequently practiced family, emergency, and geriatric medicine while teaching in a residency program.


At Broadspire, Dr. Lazarovic directs the Medical Department which produces clinical guidelines and criteria that support sound medical claim and case management practices; participates in analysis, reporting and benchmarking of outcomes, and quality improvement initiatives; develops educational and training programs that update adjusters’ and nurses’ clinical knowledge and skills; and provides expertise which enhances the medical bill review process. Additionally, the Medical Department operates a comprehensive in‐house physician review (peer review) unit that contributes to effective utilization and case management decisions, promotes the appropriate use of medical services, and facilitates timely return‐to‐work through communication with treating physicians.


The Medical Department also carries out and publishes original research and development on issues relevant to workers compensation and disability.



About Broadspire®


Broadspire (, a global third party administrator, offers casualty claim, medical management, disability and absence management solutions, and risk management information services, helping increase employee productivity and reducing the cost of risk through early  intervention, professional expertise and data analytics. As a Crawford Company, Broadspire is based in Atlanta; Ga. Services are offered by Crawford & Company under the Broadspire brand in countries outside the U.S.







  • The Accountable Care Paradigm: More than Just Managed Care 0. David Muhlestein, et al., Leavitt Partners, 2013


  • “Accountable Care Organizations: Looking for Answers to an Overspending, Underachieving System”. American Journal of Accountable Care, Mark Fendrick, MD, et al., December 12, 2013.


  • Growth and Dispersion of Accountable Care Organizations: Matthew Petersen, et al, Leavitt Partners, June


  • “ACO squeeze: How much can they really save?” Judy Packer‐Tursman, Managed Healthcare Executive, August 5, 2014


  • “Bundled payment a stepping ‐stone for ACOs? I don’t buy ” Rob Lazerow, The Advisory Board Company,



  • Succeeding as an ACO: A 6‐Step Guide for Health Care Organizations, Athenahealth, July 2013


  • Measuring Success in Health Care Value‐Based Purchasing Programs. Cheryl L Damberg, et , 2014 Rand Corporation


  • Bringing Value‐Based Healthcare to Workers Compensation. Prashanth Gangu, et , Oliver Wyman, January 2014


  • “Risk Bearing and Use of Fee‐for‐Service Billing Among Accountable Care Organizations”. David Muhlestein, JD, MHA; et al., American Journal of Managed Care, 2013, Vol. 19, No. 7

Cal/OSHA Cites Employer for More than $77K

For one Scotland-based business, fines to the tune of more than $77,000 are a major reason to improve workplace safety.

Cal/OSHA recently cited Menzies Aviation $77,250 for three serious accident related, one serious and one regulatory violation following an investigation into the February death of a worker at Los Angeles International Airport (LAX), who was thrown from the vehicle he was operating without a seatbelt.

Cal/OSHA’s investigation determined that Menzies’ safety policy on the operation of tow tractors in and around LAX did not require, and in fact discouraged, the use of safety belts in certain areas of the airport. Tow tractors are used to pull luggage and cargo trailers throughout the airport.

Menzies was issued citations for one regulatory, one serious and three serious accident-related violations of state safety standards.


Safety Plan Could Have Prevented Tragedy

“This fatality could have been prevented with a well thought-out and implemented safety plan, as is required for all worksites in California,” said Christine Baker, director of the Department of Industrial Relations (DIR). Cal/OSHA, formally known as the Division of Occupational Safety and Health, is a division of DIR.

Cesar Valenzuela, a 51-year old ramp agent employed by Menzies, was driving a tow tractor the morning of Feb. 21 to pick up cargo at the airport. He was later found with his head pinned underneath one of the tires.

Cal/OSHA’s investigation found that a portion of the vehicle’s seat belt was missing on the tow tractor. State safety regulations require the use of a restraint system such as seatbelts when originally installed on tow tractors and industrial trucks.

The employer’s vehicle inspection procedures were also inadequate.

“Employers must follow and adhere to applicable safety regulations, especially when workers are operating equipment such as tow tractors,” said Acting Cal/OSHA Chief Juliann Sum.

The Cal/OSHA safety inspector investigating the accident at LAX noted that numerous employees were observed operating tow tractors without using seatbelts or other restraints.

Menzies’ written safety program only required workers to use seatbelts when Department of Industrial Relations Release No.2014-74 Page 2 traveling on marked roadways or vehicle service roads, not when traveling to adjacent airport gates or aircraft parking areas.

Menzies Aviation, which has its headquarters in Scotland and operates in more than 30 countries, also inaccurately reported the fatal accident to Cal/OSHA as a heart attack.

Regulations require employers to accurately report work-related fatalities within eight hours to Cal/OSHA.
A serious workplace safety violation is cited when there is a realistic possibility that death or serious physical harm could result from the violation. A regulatory violation is cited when an employer fails to comply with record keeping, posting or permit requirements.




Author Kori Shafer-Stack, Editor, Amaxx Risk Solutions, Inc. is an expert in post-injury response procedures and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%.  Contact:


©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.





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Communicate, Communicate, Communicate, With Doctor And Injured Worker

As a business owner, there are times when there is nothing you could have done to prevent an employee injury.


According to OSHA information:


  • Every day, more than 12 workers die on the job – over 4,500 a year;
  • Every year, more than 4.1 million workers suffer a serious job-related injury or illness.


Running a business takes much time and effort, but one area of focus that can oftentimes be overlooked is the follow-up time needed to make sure injured workers are recovering properly. If they are not, it ends up costing your business more money.


One way to make sure your injured employees are receiving the best care possible is to stay in regular communication with your employee and stay on top of their recovery efforts.



Develop a Relationship With Medical Professionals


It is common that many business owners fail to visit the medical professionals to which they refer injured workers. In dropping the ball on this important task, they miss out on the chance to integrate medical services into their workers compensation cost containment program.


So, why do many employers fail in this arena?


In a number of cases, they are at a loss as to what to search for and  they do not know what questions to ask.  They can also be under the assumption that the claims administrator has put the relationship in place so a personal one-on-one visit is not needed, or they simply do not understand this is an important best practice.


It is best to come up with and adhere to guidelines to meet with your medical providers, including personal visits.



Relationships are Important


The reasoning behind such visits is to formulate a relationship with the doctors who are responsible for treating your injured employees.


Face it; the medical personnel must know you are a caring business owner and are as concerned about the health of the employee as the doctor is and that you are a partner in the worker’s rehabilitation.


A face-to-face meeting is crucial to establish rapport and to demonstrate you are open to be held accountable for your employee’s recovery. You are holding them accountable, so you must also be accountable so the relationship is viewed as a partnership.


With the meeting in place, you should be able to confirm that the medical facility chosen for treatment is a high quality to provide a range of treatments.  If not, your post-injury response should incorporate methods to access off-site treatments when required.


Hours of operation are important too. Check to confirm that they are they open the hours your employees are likely to be injured.



Invite Medical Provider To Your Facility


Medical provider visits give you a chance to offer your contact information, go over in detail what your business does, demonstrate what forms of transitional duty are available and seek the medication restrictions on the first visit with the employee.


Fees are not as important as the other criteria, as paying a little more for better results is fine.


Lastly, the medical providers should be welcomed to your facility to view what you do, meet with your staff and see potential transitional duty assignments.



Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%.
Editor Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. Contact:

©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.





SUBSCRIBE: Workers Comp Resource Center Newsletter


Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.




Manitoba Notes Signs, Costs of Workplace Violence

Although no one wants to witness workplace violence, thinking it does not take place from time to time is being unrealistic, especially in today’s world.

With that in mind, officials in Manitoba (Canada) ask the simple question, Do you know how violence is defined in the workplace?

Violence is the attempted or actual exercise of physical force against anyone, or any threatening statement or behavior that gives a person reason to believe that physical force will be used against them.


Examples of threats of violence or acts of violence include:


• physical and sexual assault
• property damage and vandalism
• swearing and verbal abuse
• threats or intimidation


The negative impact of workplace violence is significant. Some of the costs of workplace violence include:


• increased absenteeism and turnover
• anxiety, depression and decreased morale
• increased stress and burnout
• reduced or negative public image
• injury costs and increased health expenses
• increased insurance premiums
• reduced productivity and lost earnings
• liability issues, should harm occur at the workplace


Assess Your Workplace for Troubling Signs


The first step in addressing workplace violence is to assess your workplace for areas, people or tasks that have an increased risk of violence associated with them.


If your assessment identifies a risk of violence, your next step is to develop a violence prevention policy and put it into action at your workplace, in consultation with your workplace safety and health committee, representative, or employees.


For more information on how to prevent workplace violence, visit:




Author Kori Shafer-Stack, Editor, Amaxx Risk Solutions, Inc. is an expert in post-injury response procedures and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%.  Contact:


©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.





SUBSCRIBE: Workers Comp Resource Center Newsletter

Fighting Back…The War Against Skin Cancer


Playing a round of golf without taking the proper precautions can lead to something far more dangerous than uncomfortable sunburn. Damaged cells can develop into a life-threatening cancer known as melanoma.

Skin cancer is by far the most common type of cancer. Anyone can get skin cancer, regardless of skin color.



What is Skin Cancer?


Skin cancer develops when skin cells are irreversibly damaged and begin to grow and divide uncontrollably. Skin cancer can spread and cause destruction of nearby healthy tissue as well as to other parts of the body.



Leading Causes


Sun exposure and indoor tanning are leading causes of skin cancer. Increased likelihood to develop skin cancer is at­tributed to sun exposure time, frequency and intensity. Even laying out during the summers years ago increases one’s lifetime risk.





Never use a tanning bed or sun lamp. Research shows that using a tanning bed increases your risk of getting the most le­thal type of skin cancer (Melanoma) by 75%.


Limit exposure time. Whenever possible, limit time outside when the sun is strongest (between 10 a.m. and 2 p.m.).


Use sunscreen and lip balm. Every day, apply sunscreen to all skin that will be ex­posed to the sun (face, ears, hands, neck, etc.). Use only products with labels that say UVA/UVB or broad-spectrum pro­tection and provide sun protection factor (SPF) of at least 30.


Utilize sunglasses. Make wearing sun­glasses with ultra violet ray protection part of your daily routine. Skin cancer (Mela­noma type) can develop in the eyes.


Proper clothing choice is important. Clothing can protect you from the harm­ful ultra violet rays of the sun. As a gen­eral rule, clothing that you can see through when held up to bright light does not pro­tect well against UV rays. Additional UV protection can be added to clothing.





An early detection of skin cancer can save your life.


Self-exams are critical. It is important to know what existing moles or other skin le­sions (abnormal growths) look like and be able to identify when there are changes or recognize when new ones originate.


Meet with a dermatologist. Schedule an appointment for an examination with a der­matologist if you have any of the warning signs of skin cancer.



Warning Signs


Melanoma is the most lethal type of skin cancer. Look for the important “ABCD” warning signs:


A – Asymmetry

B – Border irregularity

C – Color variations

D – Diameter larger than a pencil eraser


NOTE: melanoma can, at times, be small­er than a pencil eraser.


If you have questions or concerns about skin cancer, schedule an appointment with your physician or contact the National Cancer Information Center.




Author Gregg Cognac, PA-C, Clinical Affairs Director, Medcor is a certified Physician Assistant, and works with Medcor’s medical directors to provide oversight and support for on-site clinic staff in more than 170 locations nationwide.  Gregg earned his degree in PA studies from Midwest University in 1999, then completed post-graduate training in Emergency Medicine culminating in a Master’s degree.  Gregg’s clinical experienced has been in Emergency Medicine, Occupational Medicine and Cardiology.  Gregg contributes to policy and service development, QA, training, and other clinical support for clinic staff operating in a wide range of industries.  Contact:

Minnesota Sees Small Drop in Fatal Work Injuries

While the number was small, Minnesota did have good news recently in reporting a drop in fatal workplace mishaps.

A preliminary total of 67 fatal work-injuries were recorded in Minnesota in 2013, a decrease from the final count of 70 fatal work-injuries in 2012 and higher than the 60 fatal work-injuries in 2011.

The 2013 total is above the average of 65 cases a year for 2008 through 2012.

These and other workplace fatality statistics come from the annual Census of Fatal Occupational Injuries (CFOI), conducted by the Bureau of Labor Statistics, U.S. Department of Labor. Final 2013 data from the CFOI program will be released in spring 2015.

Fatalities Highest in Trade, Transport and Utilities

The CFOI also provided the following statistics for Minnesota’s workplace fatalities during 2013.



• Trade, transportation and utilities recorded the highest number of worker fatalities, with 16 cases, an increase from 15 cases in 2012.
• Agriculture, forestry, fishing and hunting had the second-highest number of fatalities, with 15 cases, compared to 20 cases in 2012. Most of the fatalities were caused by either transportation incidents or contact with objects and equipment.
• Construction had the third-highest number of fatalities, with 12 cases, compared to 13 cases in 2012.

Types of incidents

• Transportation incidents accounted for 32 fatalities, the most for any incident type. Eight of these fatalities occurred in the agriculture, forestry, fishing and hunting industry sector and 10 fatalities occurred in trade, transportation and utilities.
• Contact with objects and equipment was the second most frequent fatal work-injury event in 2013, with 12 fatalities. Most of these cases involved the worker being struck by an object or equipment.
• Eleven of the fatalities were due to falls, with five in construction.
• There were six fatalities resulting from violence in 2013, compared to 11 fatalities in 2012.

Worker characteristics

• Men accounted for 63 of the 67 fatally injured workers in 2013.
• Workers age 55 and older accounted for 34 fatalities, with 10 of these fatalities in the agriculture, forestry, fishing and hunting industry sector.
• Self-employed workers accounted for 16 fatalities, including 12 fatalities to workers in agriculture, forestry, fishing and hunting, and three in construction. There were 21 fatalities of self-employed workers in 2012.

The Census of Fatal Occupational Injuries, part of the Bureau of Labor Statistics’ occupational safety and health statistics program, provides the most complete count of fatal work-injuries available. Workplace fatalities due to illnesses are not included.




Author Kori Shafer-Stack, Editor, Amaxx Risk Solutions, Inc. is an expert in post-injury response procedures and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%.  Contact:


©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.





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Experience Modification Method To Calculate Workers Comp Premium

Experience Modification premiums are developed from, gross payroll, losses reported to the state for the past three years, job classification codes, and application of credits discounts, assessments and penalties derived by the state insurance department.



Gross Payroll Figures Must Reflect True Wages


Gross payroll figures must reflect only the true wages for the employees of the organization.  Sort out leased employees, contractors, vendors, and sub-contractor persons working.  It is necessary for the employer to transfer risk back to these suppliers.  Obtain Certificates of Insurance from these suppliers naming the employer as an also insured.  Use contractual hold-harmless and indemnification clauses in all contracts with the supplying organization.



Proper Employee Job Classification


Proper employee Job classification coding is the next step. The National Council on Compensation Insurance (NCCI) has developed the codes used by most states. The states not using NCCI codes have developed their own lists. Most job codes reflect the overall business.  Hence multiple codes could apply for the same type job. Each could have a different rate. Furnish the agent, broker, risk manager, or underwriter with complete job descriptions.  Detail all tasks and hours.   A few NCCI job class code examples are: 3632 machine shop repair employees, 8810 clerical persons, and 5022 masonry workers.


North Carolina currently has the class code rates and group rates for:


- Machine Shop coded 3632 has a basic rate of $2.69

- Clerical coded 8810 have a basic rate of $0.21

- Masonry coded 5022 has a basic rate of $5.79



Experience Modification Rate


In  addition to the basic premium states assign the experience modification rate.  This is developed by the state insurance department using the loss experience of the employer.   A rate of 1.00 is considered average for the industry. A poor loss experience will lead to a experience modification factor of greater than 1.0 and a positive loss experience will lead to a mod of less than 1.  Each employer will have a minimum mod which would reflect a zero loss history.



Discounts, Penalties, And Assessments


The final step is the application of discounts, penalties and assessments.  Credits are determined based on many potential factors. A few are: employer safety programs, substance abuse programs, low loss experience.  Penalties or assessments can be due to poor loss experience, poor operational conditions, OSHA fines and many other causes.



Final Calculation Formula


(Gross Payroll) x (Job Classification code rate) X (MOD Rate) + or – (adjustments) = Premium.

Assuming the net Gross payroll is $100,000.00 and the employer qualifies for a 5% safety discount, the numbers for the Machine Shop premium would be:


$1,000,000 x 2.69% (class code rate) x 1.15 (experience modification rate) – $1,547 (5% safety credit) = $29,388 as final premium.


Carrier earnings cause impacts on premiums.  Good earning years from carrier investments or income, may allow them to deviate from the state rates.  They may grant premium reductions based on a percentage of those earnings.  During lean earning years, or years with lost profit, carriers more than likely will charge full premium value.



Unit Statistical Reporting:


All data used in the experience modification calculation must be reported to the state insurance department six months prior to policy renewal.  If a policy expires August 1 2014 the losses must be valued and reported by February 1, 2014.  Since the modification calculation runs for three policy years that means policies that expired 8/1/13 and 8/1/12 must also have the current values reported.




Author Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  Contact:


©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.





SUBSCRIBE: Workers Comp Resource Center Newsletter


Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.


Pair of Brit Employers Fined

While injuries were avoided, a pair of British employers still got the message that safety is paramount.

A Kidderminster carpet company and a Surrey-based firm have been fined after a large pressure vessel, in which carpet fibers are dyed and processed, exploded, propelling the vessel’s quarter-ton lid six meters into the air.

No-one was injured in the incident at Brinton Carpets Ltd’ssite at Halesfield, Telford on June 4, 2013, but the dangerous incident could have been prevented.

The Health and Safety Executive (HSE) carried out an investigation this September and prosecuted Brintons Carpets Ltd, the owner and user of the pressure vessels and Allianz Engineering Inspection Services Ltd, who were contracted to carry out periodic thorough examinations of the dye vessels.

Telford Magistrates’ Court heard that each of Brintons Carpets’ four stock dye vessels, each described as industrial pressure cookers, were pressurized while in use.

During a production run, one of the vessels exploded. The lid, which weighed approximately 250kg, was torn off its locking mechanism and hinges and hit the roof of the factory six meters above. Such was the force of the collision that it left a dent in one of the factory roof girders.

One worker was standing just a few feet from the where the lid came to rest.

The explosion was found to have been caused by a failure of the vessel’s regulator and pressure relief valve. HSE found Brintons Carpets Ltd had not ensured that suitable and sufficient maintenance of the vessel’s safety devices was being carried out. In addition to this, the periodic statutory thorough examinations had not been completed for three years.

A Written Scheme of Examination was in place at Brintons Carpets Ltd, which included the stock dye vessels in question. Although Allianz Engineering Services Ltd were carrying out periodic thorough examinations on the other pressure equipment on site, the HSE found that the four stock dye vats had been overlooked for a number of years. Allianz Engineering Services Ltd, therefore, failed to carry out the required examinations on the vats properly.

Both Businesses Plead Guilty

Brintons Carpets Ltd of Stourport Road, Kidderminster, Worcestershire, pleaded guilty to breaching Regulation 12 of The Pressures Systems Safety Regulations 2000 and was fined more than $16,000 and ordered to pay costs of nearly $2,000.

Allianz Inspection Services Ltd of Ladymead, Guildford, Surrey, pleaded guilty to breaching Regulation 9(2) of The Pressures Systems Safety Regulations 2000 and was fined more than $21,000 and ordered to pay costs of more than $1,800.

Speaking after the hearing, HSE inspector Lyn Mizen remarked,“There are clear standards set out in the regulations and strict inspection regimes whereby the user has a duty to ensure that equipment, and its safety devices, are properly maintained. This is backed up by the periodic thorough examinations by competent persons to ensure this is happening and is appropriate and suitable.”




Author Kori Shafer-Stack, Editor, Amaxx Risk Solutions, Inc. is an expert in post-injury response procedures and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%.  Contact:


©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.





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Structured Settlements: Finding Value At No Cost

Structured settlements are a unique tool available for all stakeholders in personal injury and workers’ compensation claims.  Not only does a structured settlement allow these parties to reach efficient settlements, but they also provide all parties the necessary “win” in the case.  Due to the different types of options, it is important to understand how you can maximize your settlement dollars through differing types of structures.



What are Structured Settlements?


A structured settlement is a tool that can be used by parties in a personal injury or workers’ compensation claim to reach a creative solution that benefits all parties.  The “structured settlement” is an arrangement entered into parties where a settlement amount is paid out over a period of time via an annuity.


When using a structured settlement, it is important to be aware of the special tax rules that apply.  A structured settlement must be established by:


  1. An agreement for a party to accept periodic payments for personal damages that are excludable from gross income as set forth in 26 U.S.C. §104 (a) (2); or
  2. An agreement for a party to accept periodic payments for applicable workers’ compensation benefits that are not considered income per 26 U.S.C. § 104 (a) (1); and
  3. The payments are also those as described in subparagraphs (A) and (B) of Internal Revenue Code Section 130(c) (2), or 26 U.S.C. § 130(c) (2).


These periodic payments must also be paid as follows:


  1. A party to personal injury type lawsuit or workers’ compensation claim; or
  2. A party who has assumed liability for the periodic payments under a qualified assignment per 26 U.S.C. § 130.



How are Structured Settlements Used?


In a typical structured settlement, an initial lump sum that is paid is referred to as “seed money.”  Additional sums of money are then paid out usually on an annual basis, which is called “feed money.”  These amounts are paid out at a fixed or variable interest rate.  The terms of payout can also be negotiated through the life of the party or for a fixed period of years.



Benefits of Structured Settlements


Structured Settlements provide the necessary “win-win” dynamic that is important when trying to resolve troublesome personal injury and workers’ compensation claims.  It also allows the parties to be innovative and collaborative in the settlement process where all parties can be involved.


In addition to these factors, the use of a structured settlement benefits the injured parties and insurance carriers.



Benefits to the Injured Party


When a person suffers a disabling personal injury, they are often left in a position where they are facing loss of income and future expenses that make financial planning a necessity.  By using a structured settlement, an injured party has the following additional benefits:


  1. Flexible terms that include guaranteed or deferred income;
  2. Tax-free settlement monies, provided they meet the Internal Revenue Code criteria;
  3. Better interest rates than available in traditional savings or money market accounts; and
  4. Interest bearing annuity that provides payments in the future.



Benefits to the Insurer


There are also benefits to insurance carriers for using a structured settlement in a personal injury or workers’ compensation claims.  Some of these benefits include:


  1. Creative settlement solution to provide for the future needs of person who may require future medical care, treatment, disability and/or loss of future earning capacity;
  2. Expedited resolution of claims—especially troublesome claims; and
  3. Provides for release of future liability by the carrier.


The use of structured settlements can also be used to fund Medicare Set-Asides in personal injury and workers’ compensation claims.  This provides a “savings” to the employer and insurer and lessens the chance the Medicare Set-aside will be depleted prematurely.



Example of Savings through a Structured Settlement


A Hypothetical:  The parties to a workers’ compensation settlement are struggling to settle a significant claim with the following factors:


-   Claimant Projected Annual Medical Cost = $20,000

-   Total MSA exposure = $552,600


Cost to Fund MSA  with Lump-Sum Payment  =  $552,600


Instead of funding the MSA via a lump sum payment, the insurance carrier is able to use a structured settlement, which includes a rated age.  The annuity has an initial payment (seed money) of $40,000, plus annual payments over the course of the annuity totaling $287,708.  As a result, the followings savings are realized by the carrier:


Cost of Fund MSA with Structured Settlement = 



Total Savings = 






There are clearly benefits to settling a workers’ compensation or personal injury claim through a structured settlement.  However, the savings can vary depending on the type of settlement you use and other factors, including the use of a rates ages.  It is important to consider these factors to maximize your settlement dollars—both real and perceived.




Author Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  Contact:


©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.





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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

Universities Partner for Workplace Health in Kentucky

An effort is off and running in Kentucky to make for better health and safety for workers in one region of the Commonwealth.

Eastern Kentucky University and the University of Kentucky are partnering to advance occupational health and safety in central Appalachia.

The Central Appalachian Regional Education and Research Center (CARERC), housed in the UK College of Public Health but incorporating an EKU academic program, has received a five-year, $5 million grant from the National Institute for Occupational Health and Safety (NIOSH) at the Centers for Disease Control and Prevention (CDC). The funds will support CARERC as a cohesive, fully equipped and recognized resource for occupational safety and health research and training in central Appalachia.

Just as Kentucky and Appalachia experience elevated rates of many preventable health problems, including obesity, cardiovascular disease, stroke, and diabetes, rates of occupational injuries and fatalities are also higher than the rest of the nation.

Each of the central Appalachia states included in the scope of the CARERC reports high proportions of fatal occupational injuries related to transportation and highway incidents; injuries in agriculture, forestry, fishing and hunting, and mining – industries that are vital to the region and state but also require highly trained health and safety professionals across multiple disciplines to ensure the well-being of employees and the public.

In order to address the urgent regional health and safety needs – particularly in the face of anticipated shortages in the occupational health and safety workforce – CAREC was formed in 2012 as a combination of the academic resources of the Colleges of Nursing, Public Health, and Engineering at UK as well the College of Justice and Safety at EKU. One of only 17 ERCs in the country, it provides interdisciplinary graduate education for students and health professionals in five academic programs: agricultural safety and health, occupational epidemiology, mining engineering safety and health, occupational health nursing, all at UK; and occupational safety at EKU.


Training Looks to Identify Job Hazards

The CARERC works to train professionals who are well equipped to identify and address workplace safety and health hazards, thereby preventing injuries and their associated costs.

A full 70 percent of the current funding goes directly to support students in the CARERC program, who receive multiple forms of assistance and career development opportunities to prepare them as expert health and safety professionals.

In addition to tuition and a stipend, they also benefit from the opportunity to attend professional conferences where they can engage with and learn from national leaders in their field.

Through a field studies course, they network with professionals and gain site experience in diverse industries ranging from coal mining to dairy processing to bourbon distilling. And, most importantly, they learn and train in an interdisciplinary program that exposes them to the complex and interconnected dynamics of occupational health and safety.

CARERC is also partnering with stakeholders in the mining industry to develop new methods to reduce coal dust exposure for miners.

In response to an increase in black lung disease, which had been declining, last year’s CARERC annual conference convened government, academic, industry, and labor stakeholders to discuss the problem.




Author Kori Shafer-Stack, Editor, Amaxx Risk Solutions, Inc. is an expert in post-injury response procedures and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%.  Contact:


©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.





SUBSCRIBE: Workers Comp Resource Center Newsletter

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