A law mandating fired employees file workers compensation claims within six months of their termination is unconstitutional, according to an Oklahoma Supreme Court ruling in a case involving cumulative trauma. (WCxKit)
According to BusinessInsurance.com, a trial court in Ponca Iron & Metal Inc. vs. Jackie Wilkinson originally found that Wilkinson was entitled to medical care and up to one year of temporary total disability benefits starting in August 2006,
Wilkinson was fired in December 2005 from a job that included keyboard use and filing work.
A Workers Compensation Court upheld the trial court’s finding, but a Court of Civil Appeals reversed and remanded the case. On remand, the trial court turned down the employer’s argument that a six-month statute of limitations applied to the case.
The trial court stated that the statute of limitations in the law cited by the employer "unreasonably singles out employees who have been terminated and have sustained cumulative trauma injuries.”
The trial court also indicated the law is in direct conflict with a general, two-year statute of limitations for filing cumulative trauma injuries.
Oklahoma’s Legislature enacted the law cited by the employer to curtail fired workers from filing retaliatory workers comp claims, court records state.
In ruling on the case recently, the Oklahoma Supreme Court agreed that the state law is unconstitutional. It stated that “the classification of injured employees on the basis of continued vs. terminated employment is a false and deficient classification of the larger class of injured employees due to the fact it creates preference for members in the continued employment group and results in unequal treatment for certain members of the terminated group.” (WCxKit)
The temporary total disability benefits award was sustained.
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website 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.
Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.
Amaxx’s Workers Comp Cost-Containment Resource Center for Employers now provides workers compensation insurance-related information twenty-nine industry groups.
The industries covered are:
agriculture,
amusement parks, banks,
casinos, construction,
commercial fishing, logging and sawmills, oil and gas exploration, longshore and harbor workers, industrial equipment manufacturers,
telecommunications, food and beverage manufacturers, restaurants, professional services, schools, state and local governments, insurance companies, temporary staffing agencies, hospitals and nursing homes, entertainers, sports teams, printers and publishers, janitorial services, hotels and motels, transportation companies, retail chain stores, and horseracing. (WCxKit)
The new material includes sample transitional duty jobs for each industry. Transitional duty reduces unnecessary employee time out of work, cutting costs dramatically and is also called modified duty, alternate duty or light duty. Over 40% of workers compensation costs are related to indemnity payments (lost wages) paid when employees lose time from work so controlling these costs is paramount when developing a work comp cost-containment program.
Companies with effective transitional duty programs have lower experience modification factors. Companies with the highest return to work ratios – 95% of injured employees returning to work within one to four days - have the lowest mods, according to the 2010 RIMS Benchmark Survey. The new information in the Resource Center can be used to start a return to work program for your company. (WCxKit)
The Resource Center is located at
http://www.LowerWC.com and focuses on helping employers get a grip on decreasing their workers compensation costs. It contains several free resources including the Work Comp IQ Test, Transitional Duty Cost Calculator and Work Comp Sales Calculator.
About Amaxx: Amaxx Risk Solutions publishes the website www.LowerWC.com an online publication which provides suggestions, articles and resources for managing workers compensation costs. Amaxx is the developer of The Workers Comp Kit®, a comprehensive workers comp cost-containment resource for employers sold by Advisen Ltd. The Workers Comp Kit is an easy-to-use assessment, benchmarking and improvement plan with all the tools to reduce your company’s workers comp costs. The application is a best-in-business process that is based on 20 years of experience lowering workers compensation costs while improving overall program efficiency.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.
The Washington Department of Labor & Industries has put on hold the unveiling 2011 workers compensation premium adjustments until November, following an election that includes a proposal that would drastically change the program.
According to the Spokesman-Review, Director Judy Schurke informed legislators recently the department has not run the numbers, normally put out in September because, if Initiative 1082 passes, they would have to be removed. Releasing any numbers, she commented, might “confuse” business owners. (WCxKit)
According to business interests they are prisoners of one of the last remaining state workers comp monopolies, and one moving down the road of insolvency at that.
Businesses accuse L&I of “hiding the ball” in not unveiling large premium increases that would work to the benefit of I-1082 supporters. They also chastise the department for permitting prolonged, expensive worker absences that grossly top the norm in other parts of the country.
The most damaging claim made is centered on a December 2009 independent audit of the program’s accident fund, which pays no medical costs such as lost wages and pensions. The auditors claimed insolvency was a 74.4% possibility within two years, and a 90% possibility within five years.
Business interests claim the alternative to the problems is I-1082, which would permit employers to purchase coverage from private insurers, not only the state. And the way rates are to be calculated would change.
The non-partisan public policy think tank, Washington Policy Center (WPC), recently released a report explaining how passage of the business community-backed Initiative 1082 will be a boon to business owners and workers in Washington State.
The study, Citizens Guide to Initiative 1082: To Reform Workers Compensation in Washington, concludes that terminating the state monopoly on workers comp and allowing competition from private insurers will “help keep premium increases in check, encourage innovation in rehabilitating injured workers, and most importantly, provide safer workplaces.” (WCxKit)
According to the Washington State Labor Council, business exaggerates the damage from a pair of extraordinarily bad years.
Workers comp premiums went up only 8% during the 2004-2009 periods, and fell in eight of the last 15 years.
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website 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.
Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.
Ontario's Workplace Safety and Insurance Board (WSIB) announced that it will undertake a year-long funding review to tackle its unfunded liability, which is currently projected at more than $12 billion.
Chaired by Harry Arthurs, the former dean of Osgoode Hall Law School and president emeritus of York University in Toronto, the review's advisory committee will gather expert advice and input from workers, labor and employers related to the WSIB's financial future, including a plan on how to eliminate the unfunded liability, according to a WSIB release. (WCxKit)
Unfunded liability refers to the difference between the total cost of claims in the system and funds in the system to pay for them, the WSIB explains. It has increased to over $12 billion due to "insufficient premium revenue, rising claims and health care costs and declining investment returns following the recent economic downturn."
To help slow the growth of the unfunded liability, the WSIB has decided to increase the average premium rate by two percent for 2011 and another two percent in 2012. Now, the average premium rate will rise from $2.30 to $2.35 for every $100 of insurable earnings in 2011 and to $2.40 in 2012.
The WSIB stresses that the increase is being applied to the average premium rate, meaning more than half of registered employers will see little to no increase, while other employers in high-risk industries with a history of costly claims may see increases of more than two percent.
But Satinder Chera, vice-president for Ontario with the Canadian Federation of Independent Business (CFIB), questions the necessity of a review. "If you are going to do a review, then the last thing you want to do is to predispose what the outcome will be, which is essentially what they've done by increasing rates," he contends. "What's the point of the review if you've already decided that you are going to have to increase rates?"
For CFIB members, the "payroll hit" will make it more difficult for employers to grow their businesses, Chera argues. "What it will mean is some will have to delay hiring while others may be struggling just to hold onto the employees that they do have."
While Chera understands that the increases affect the average premium rate, he argues that certain industries will see a much greater increase over the next two years.
The WSIB acknowledges this, noting that the premium rate for 2011 will increase by 20 percent over this year's rate for the 'motor vehicle fabric accessories' sector; 19.5 percent the poultry farms and agricultural services sector; and 19 percent for the fruit and vegetable products sector. Workplaces such as gold and nickel mines, machine shops and foundries, on the other hand, will see no increase. (WCxKit)
Christine Arnott, a media relations specialist with the WSIB, says that if a company's health and safety performance has been good or better than the rate group average, they may still be eligible for performance rebates under the WSIB's incentive-based experience rating programs. But the lack of reduction
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website 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.
Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.
Efforts are on going to make sure all employers in the state play by the rules, Lawrence Rebman, director of the Missouri Department of Labor and Industrial Relations, noted in his July 2010 Director’s Spotlight column.
“In every industry – not just those thought of as high-hazard – there are certain risks at the workplace. And an injury that renders a worker unable to do his or her job presents a serious financial strain on Missouri families. Missouri law recognizes this, and requires that injured employees be adequately compensated. This is the role of workers compensation insurance — to provide that important safety net for Missouri’s workforce.
“Missouri law also requires every employer in the state with five or more employees to carry workers compensation coverage. And employers in the construction field must carry this coverage if they have one or more employees. (WCxKit)
“The vast majority of Missouri employers follow the workers compensation law: they pay their premiums and keep their coverage up to date. But there are exceptions. Employers who do not comply with the law leave their employees in the cold when an accident occurs. This is wrong and illegal, and the Labor Department’s Division of Workers Compensation (DWC) is taking action.
“So far this year, the DWC has referred 184 cases to the Attorney General’s Office, 80 more than last year at this time. These cases involved employers who either did not provide coverage or did not report the worker’s injury to the DWC. This reporting is required by law so that injured workers can be made aware of their rights. In 2009, 2,669 work-related injuries were never (WCxKitz) reported by an employer or insurer to the DWC; so far in 2010, this has happened 1,369 times.
“In an attempt to stamp out this mistreatment of workers, the Labor Department has begun new efforts to make the workers compensation system more transparent and accountable.
“First, we have created a new “Are You Covered?” online tool for our newly developed website at www.labor.mo.gov. This user-friendly tool allows users to access our workers compensation databases and check whether their employer carries coverage, and the effective dates of their policy.
“Second, we have modified our website to give the public an enhanced ability to report workers compensation fraud and noncompliance. The new feature on the website explains the various types of illegal conduct and allows users to report violators with the click of a mouse. (WCxKit)
“We owe it to all workers in Missouri, as well as all of the good employers who play by the rules and cover their workers, to catch those who cheat the system.”
\Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. Contact: Info@ReduceYourWorkersComp.com or 860-553-6604.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
Workers compensation insurance policies can be divided into three basic categories — Prospective (aka, Guaranteed Cost), Retrospective (Retro plan) and Cash Flow (Deductibles).
Defining the Plans
In a guaranteed cost plan, the premium is fixed prior to the start of the policy year and the only variable is payroll (subject to audit at the end of policy year). (WCxKit)
In a retrospective insurance plan the final premium is based on the insured's actual loss experience, with the contract providing for a minimum and maximum amount of premium.
In a deductible plan, the insured reimburses the insurer up to a set dollar amount and the insurer is responsible for all claim cost above the set dollar amount.
Most employers opt for a guaranteed cost insurance policy, but do not fully understand how their insurance premium is determined. From time to time we will hear the questions like “Why do we need to spend money on a
safety program as we have a guaranteed cost insurance policy?” or “Why do we need to have a return to work program when we have a guaranteed cost insurance plan?”
The simplest way to explain this would be to give a comparison to another type of insurance most people have – automobile liability insurance. Auto insurance is a guaranteed cost insurance policy. You know what the premium is at the start of the policy year. You do not know if you will have a claim against your policy or not, and if you do have a claim, you don't know what the claim will cost. It could be a $1,000 or $100,000. However, you do know if you have a $100,000 claim the next year the car insurance premium will be at a guaranteed cost, but the dollar amount of the insurance policy will be much higher.
It works the same way with a guaranteed cost workers compensation insurance policy. If you have many workers comp claims, you can still get the guaranteed cost insurance policy but the claim history of your company will be evaluated prior to the premium being calculated for the new policy year. A high frequency of claims tells the underwriter at the workers comp insurer that your company has poor safety controls and lacks management oversight, just like several auto accidents tells the underwriter you are a bad driver.
A key concept to keep in mind with a guaranteed cost workers comp policy is the cost is guaranteed only for one year. A poor history guarantees the cost will be higher the following year.
Regardless of whether you have a guaranteed cost insurance plan, a retro plan or a deductible plan for your workers compensation insurance coverage, you need to have a complete cost containment strategy for your company. (WCxKit)
9 Cost Containment Strategies to Reduce Cost of Workers Compensation
1. Have a strong safety program with senior management emphasis to eliminate injuries before the occur. Constantly promote job safety and preventive measures. Be sure employees are properly trained to operate equipment or machinery, and know proper lifting techniques.
2. Recognize the task(s) that create injuries on a regular basis and take the necessary steps to change the way the task(s) is/are done to remove the cause of injury from the task(s).
3. Have an established return to work program providing modified duty or light duty work for your employees before the injury occurs. This allows you to get an injured employee back to work as soon as the treating doctor allows. Request the work restrictions from the medical provider at the time of the initial treatment.
4. Have an established protocol of on-going communications with every injured worker until the worker is back on the job.
5. Be a drug-free workplace with an active drug-testing program, including pre-employment, post accident and random drug testing.
6. When the medical provider will not permit the employee to return to work on modified duty, have a nurse case manager assigned to the claim to provide medical management, which will have a positive impact on the medical cost.
7. If your business operation is large enough, have an on-staff nurse or doctor treat workers comp injuries on-site. If not, consider nurse triage which occurs at the moment the injury occurs. The nurse determines the urgency of treatment and/or whether ER, clinic visit or self-care is appropriate.
8. Have a pre-employment screening program.
9. Have an active fraud prevention program including posters, anonymous tip line and check endorsement program.
Cost containment in a guaranteed cost insurance plan is no different that cost containment in any other type of insurance. The better your safety record and the fewer claims you have had, the lower the overall cost of your workers comp insurance. Any steps your company takes to minimize the number of claims you have and any steps your company takes to lower the cost of the claims that do occur, will have a positive impact on your guaranteed cost insurance policy.
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website 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.
Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.
Records indicate the Ohio man, owner of a bear that mauled its caretaker to death, did not have workplace injury insurance to cover the man, an apparent violation of state law.
According to the Associated Press, an Ohio Bureau of Workers Compensation spokesperson stated investigators were looking into whether Sam Mazzola had paid 24-year-old Brent Kendra or other employees since coverage lapsed in late 2005. (WCxKit)
Ohio requires business owners who pay even one employee to carry insurance in the event of injury or death, the spokesperson said.
OSHA, regulator of workplace safety, is also attempting to determine whether Brent Kendra was Mazola’s employee or just a friend who occasionally assisted Mazzola.
Brent Kendra was mauledAugust 19 after opening the bear's cage for a feeding at the home where Mazzola maintains his exotic animal menagerie of bears, tigers, wolves and a lion. Kendra died the next day.
John Kendra indicated his son worked for several of Mazola’s businesses over a number of years, erecting highway guardrails and fences, overseeing petting zoos Mazzola would take to malls, staffing his pair of pet stores or feeding the exotic beasts.
"Basically he was a part-time, fill-in guy. He had just started back after not working for him for a year," John Kendra commented. "He'd work part time on his days off so he didn't collect a paycheck. He'd be paid $20 or $40 in cash on a day off, probably under the table, and Sam would feed him dinner. They were friends."
The Ohio WCB spokesperson said investigators are looking for evidence Brent Kendra worked for Mazzola, like canceled checks, lists of duties or work schedules. (WCxKit)
She added the state was seeking $5,379.78 in unpaid workers comp premiums when Mazzola filed for bankruptcy last year. After he informed the state his business, World Animal Studios, had halted operations in 2005, the state decreased his bill for outstanding premiums to $27.47.
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website 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. RShafer@ReduceYourWorkersComp.com or 860-553-6604.
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.
No employer sets out to waste money on workers compensation, but many employers do so unwittingly. The following seven myths are financial mistakes often made by employers in the handling of their workers compensation insurance program.
1. Workers Comp is a Cost of Doing Business
Too many employers think of workers comp as a state mandated expense, just a cost of doing business which cannot be controlled. However, a properly managed workers comp program can have a major impact on the cost of workers comp by avoiding the cost of claims through a safety program, and by controlling the cost of claims through claim management and medical management. The cost of the workers comp program should be viewed in terms of the return on investment. When approached from this perspective, the financial profitability of managing workers compensation is absolute.
2. Injured Employees are a Drain on the Company
When an employer wishes an injured employee would “just go away,” they are making a terrible mistake. The cost of employee turnover (due to workers comp or any other reason) has a negative impact on the profitability of the company. Depending on the industry, the cost of hiring, training and supervising a new employee can be from 50% to 100% of the annual salary for the job position. (WCxKit)
Instead of treating the injured employee as a nuisance, the employer is much better served by communicating with the employee that they are needed at work. The employer who has a return to work program in place prior to an injury, and who offers the employee a modified duty position until the employee is able to handle their prior job fully, will benefit through lower cost of employee turnover and lower indemnity cost.
3. Workers comp Can be Measured by the Cost of the Premium
If an employer thinks the way to measure the cost of workers comp is by the price of the insurance premium, they are measuring only a small part of the total cost of workers compensation. The cost of workers comp not only includes the direct cost of the premium, but also includes the much larger indirect cost of lost production, lost supervisory time, temporary replacement cost or overtime cost, increased training, equipment or property damage, lower morale and unhappy customers.
4. The Insurance Carrier should be Selected Solely on Price
It is tempting for an employer to think all insurance carriers are alike and to make the selection of the insurance company (or the third party administrator if self insured) based on the price quoted. The wise employer looks beyond price to the quality of service the insurance carrier provides. The quality of the claim handling by the insurance carrier should be the primary factor. A low initial price for the insurance coverage will not last very long if the claim handling quality is poor, as the experience modification factor will come into play in calculating the next premium. The financially savvy employer investigates the level of service provided by each insurer under consideration and the track record of the insurers in raising (or lowering) the premium charged.
5. The Broker Relationship is Unimportant
When the broker and the employer have a relationship only as salesperson and customer, the employer loses out on a valuable resource. If the employer selects a broker who has an in depth understanding of workers compensation, a partnership in controlling and managing the workers comp cost can then develop. With a strong relationship between the employer and the broker, the employer has a knowledgeable source of information readily available to assist with the management of the workers comp program.
6. Lower Job Classification Rates will Equal Lower Cost
Employers often believe that a reduction in the job classification rate means a lower cost of insurance. That is not always so. The calculation of the workers comp premium is based on the job classification code rate, the total amount of payroll and the experience modification factor. The calculation of the premium is: the job classification rate X $100 of payroll X the experience modification factor. If the employer has had higher than average workers comp cost compared to other employers with the same job classification codes, the overall cost of workers compensation will most likely increase due to the higher experience modification factor being used to calculate the insurance premium. (WCxKit)
7. Safety Programs Cost Too Much
Unenlightened employers when faced with lower profit levels often look at the safety program as a place where cost can be cut. When safety programs are cut or eliminated, there is an increase in both the number of work place injuries and the severity level of the injuries. The experience modification factor shoots higher, resulting in significant increases in the cost of the workers comp insurance premium.
Summary
Workers comp myths are easy to believe. The common factor through all the myths is taking the path of least effort. When the employer puts forth the effort to understand workers compensation and to properly manage the workers comp program, the myths fade away and are replaced by sound financial decision making.
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website 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.
Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604
.
\ Join WC Group: http://www.linkedin.com/groups?homeNewMember=&gid=1922050/
Modified Duty Calculator: http://www.LowerWC.com/transitional-duty-cost-calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.
An employer/owner of a roofing company allegedly defrauded his insurance company of over $107,000 in workers compensation premiums by misclassifying his workers on insurance policies.
The individual was arraigned in Hampden Superior Court and charged with two counts of workers compensation fraud and 4 counts of larceny over $250. He pled not guilty and was released on personal recognizance. (WCxKit)
The Attorney General’s office began an investigation after the matter was referred by the Massachusetts Insurance Fraud Bureau (IFB), which initially learned of the man’s activities from AIM Mutual Insurance Company (AIM). Investigators discovered during a four-year period the man allegedly misclassified his workers as carpenters, instead of roofers, in order to avoid paying higher workers comp insurance premiums.
Proper insurance premiums are calculated by the Workers’ Compensation Ratings and Inspection Bureau (WCRIB) which provides these rates based on the risk exposure of work conducted.
Authorities allege the man classified his workers as performing less risky work (as carpenters) in order to avoid paying a higher amount of workers comp insurance premium if he correctly classified them as roofers, a higher risk job classification. (WCxKit)
Authorities said the man told his insurance company he had a carpentry business and that any roofing was subcontracted to other businesses. IFB investigators discovered the man had employed full-time roofers since his first policy with AIM in May 2004 and, as a result of his fraudulent activities, he defrauded AIM of over $107,000 in workers comp premiums.
\
Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. Contact: Info@ReduceYourWorkersComp.com or 860-553-6604.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
The Executive Director of a governmental pool could not understand why the cost of the pool's workers compensation claims was significantly higher than the workers comp claim cost of a second governmental pool operating in the same state. The Executive Director had an inkling the claims handling was not as good, but a claims file audit two year earlier found the claim handling to be good with few exceptions.
Due to the high cost of premiums, pool members were withdrawing from the pool and joining the other pool in the state. The decline in membership in the pool was jeopardizing the existence of the pool. In desperation, the Executive Director sent out a Request for Proposal to various claim file auditors. The claim auditor from two years ago responded with a proposal with the lowest price, significantly lower than the other audit proposals. The Executive Director did something he had never done before, he excluded the low bid proposal.
After interviewing several of the claim file auditors, the Executive Director selected an auditor who demonstrated a keen understanding of the cost of workers compensation. The claims auditor compared the claim handling guidelines of the third party administrator (TPA) with the claim files. The auditor was dismayed by the total lack of compliance by the TPA with their own claim handling guidelines. (WCxKit)
During the course of the claim file audit, the auditor interviewed the Executive Director, the claims manager at the TPA and several of the workers comp adjusters. The reasons the governmental pool had higher than average cost for workers compensation became clear to the auditor. The high cost of claims related directly to decisions the Executive Director had made.
Three years earlier, when the pool was looking to replace the prior TPA, the Executive Director had selected the current TPA because their claims handling proposal had been nearly $250,000 per year lower than the average bid from other TPAs bidding for the business. (The prior TPA had also been chosen based solely on having the lowest price). The claim auditor from two years earlier who had been chosen solely on price quoted had not done an in-depth review of the files and had overlooked various mistakes in the claim file handling.
The TPA, who had bid the job at a flat price for the program, had each workers comp adjuster handling from 175 to 225 files at any one time, a workload the adjusters could not properly handle. If the TPA hired additional adjusters to handle the claims, the TPA would lose money on the program. The low price proposal the Executive Director had accepted did not have any provisions in regards to the number of claims each adjuster would be assigned. (The executed claims handling contract was also silent in regards to the overall claims handling service standards).
The workers comp adjusters had low morale due to their overworked situation. The adjusters did not have time to properly investigate the claims, the adjusters were too busy to assist the pool members on early return to work for the employees, and the adjusters were not working with nurse case managers to control the medical treatment. Most of the workers comp claims were out of control.
The end result of the Executive Director's short term thinking of price only in selecting the TPA was much higher payments on the workers comp claims and a loss of pool members due to the overpayment of claims (resulting in increased pool premiums). The Executive Director saved nearly $250,000 per year by selecting the lowest cost TPA over the average bid of other TPAs. An actuarial study using National Council on Compensation Insurance data estimated that the workers comp claims payments for claims occurring during the year 2007 were nearly $1.7 million higher than the average for other workers in the same NCCI job classification codes. The cost for short term thinking of price only in selecting the TPA? Nearly $1.5 million a year.
The second claims auditor included in his proposal not only a review of the claim files, but also a review of the claims management process. As a result of the claims audit, the following recommendations were made to the Executive Director:
1. The Executive Director should meet with the current TPA, advise the workload of the adjusters was unacceptable and renegotiate the remaining year of the three year contract to provide for proper staffing by the TPA at a profitable level
3. The next TPA should have experience handling governmental pools and be willing to provide contact information for all their governmental pools.
4. When the final 3, 4 or 5 TPA candidates are chosen for the next claims handling contract, comparisons should be made of:
· the average value of closed indemnity claims;
· the average number of days open for the closed indemnity claims;
· the percentage of claims that went into litigation;
· the average settlement cost of litigated claims;
· the amount spent on expenses and the ratio of expense cost to claim cost.
5. The nurse case management should be selected as carefully as the TPA whether provided by the TPA or handled as a separate contract. (WCxKit)
The Executive Director selected the easy way of making a choice of a TPA using only the price for the TPA services. This resulted in an immediate, short term price savings, but a much higher total cost in the long run. When selecting any service provider, an in-depth investigation into the services that will be provided should be made prior to making a decision. A balance between price and quality of service should be reached prior to the start of the service contract.
For those of you who have read to this point, when you speak with Senior Management, trying to sell them on selecting the "best" service, with the most cost-effective outcome, refer to it as "value." The Total Loss Costs will ultimately be lower if you choose the service that provides the best "value."
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website 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.
Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
Join WC Group: http://www.linkedin.com/groups?homeNewMember=&gid=1922050/
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com.
Posted in
