Top 5 Misconceptions Surrounding Workers Compensation

Top 5 Workers compensation mythsEveryone has opinions on what workers comp is. Some are correct, but most are misconceptions. The commercials seen on TV about people collecting hundreds of thousands of dollars are not true for the average claim.  When looking at the bottom of the screen it indicates that the people on the commercial are actors, not even the real claimants.  Most of the marketing material surrounds auto and liability accidents, where pain and suffering are translated into a certain dollar amount.  This is not exactly true in workers comp.  There is no pain and suffering payment.  Insurance companies/TPAs are there to provide reasonable and necessary medical treatment and wage loss.  Some states even allow a permanent partial disability payment, or impairment rating, on top of wage loss, but that is it.

 

 

Below we discuss the top 5 misconceptions surrounding the mystery world of workers compensation.  Not all of these will apply exactly to every jurisdiction but are general.  Remember to discuss with the adjuster and counsel any exact questions surrounding certain details regarding.

 

 

  1. Workers Compensation is not Welfare

Compensation is not a free payment a worker is entitled.  Just because you are injured at work, it does not mean a guaranteed payment or coverage for medical/wage benefits.  There are a lot of criteria to meet in order for a claim to be compensable.  Even if the claim is compensable, it also does not mean anything can be done.  Claimants have to play by the rules and do as they are told by the adjuster.  The adjuster must make the effort and take the time to explain to each claimant what the rights are, and what they can and cannot do. The biggest issue is miscommunication between the carrier/TPA and the claimant, so having an open dialogue will end any misconceptions that a claimant may have in regards to what their rights are, and what is covered; if indeed the claim is determined to be compensable.

 

 

  1. Nobody gets rich from Workers Compensation

Depending on the jurisdiction, employees give up the right to sue in civil court in exchange for what are essentially no-fault benefits.  Workers compensation pays lost wages, medical care, and vocational rehabilitation.  Pain and suffering as an additional payment is not available or applicable to a compensation claim.  The amount of money a person receives is a percentage of average gross pay.  There are typically no increases for inflation, and each state has a maximum limit that a person can get per week as workers comp payments.

 

Michigan, for example, has a maximum rate of $921 per week (as of 2019).   So even grossing $2000 per week as an average weekly wage, that amounts to $921 per week in Michigan.  High-wage employees that fall into these criteria are usually not very happy when they find this out, but the rules are the rules.  These statutes are set up within the workers’ compensation system, and they have to be followed by all parties.  Even if a claim is settled for a certain amount of dollars, it is typically not a retirement jackpot.  It may end the exposure for the carrier/TPA, but these claims that settle for very high amounts of money are the result of a very serious, extremely disabling injury.  And even those are few and far between.

 

 

  1. Workers compensation benefits will be stopped if the worker declines reasonable employment.

If the employer offers up a light duty job, within the injured employee’s medical restrictions, a claimant cannot refuse it and still get paid wage loss benefits.  This opens a Pandora ’s Box, because an issue will come up about whether this light duty job is something an injured worker is trained to do or is the job offer seen as an insult to their professional skills, etc.  If there is a welder sitting in a chair staring at a clock for a job, then maybe a case could be made that this work is not a benefit to the company.  For light-duty jobs, they have to be deemed something that the employer gets a “gain” from performing, and almost all jobs within an employment facility can fall within these parameters.  Certainly, if you provide a degrading job that is of no benefit, then you may get into legal trouble.  But in all reality, I do not think any employer would take a risk in stopping a compensable case by trying to make a person sit outside and stare into space.

 

 

The bottom line is any light duty job, that provides a service to the employer, must be performed if it is offered to the injured worker.  If the worker declines, then wage benefits will cease.

 

 

  1. Workers comp fraud is extremely low

Actual workers comp fraud is less than 10% of all claims.  And that number may even be high; I would go as low as 5% or less.  For a case to be deemed as fraudulent, it must meet certain criteria within whatever state statutes are in the jurisdiction.  That is hard to meet, and most cases will not even come close to being worth the pursuit of fraud in a legal court case.  If a certain worker is claiming to be out of work, and you get surveillance of them outside roofing their house, this may not make the case actual “fraud,” it falls more within the injured worker not following their medical restrictions and going outside of their treatment plan as deemed appropriate by their treating doctor.  This will provide the adjuster with the ammo to dispute ongoing benefits, but not exactly to pursue the case as overall fraud.

 

 

Workers comp fraud, as a whole, is not a major problem within the worker comp system.  Sure there are a lot of people that do not follow their medical restrictions, or they may miss doctor appointments, or ignore physical therapy demands, but this provides only a dispute for ongoing medical benefits, not fraud.  There is a difference between the two.  If you think you have an actual fraud case, you need to discuss it right away with the carrier/TPA and counsel before taking any such action to pursue official fraud in a legal venue.

 

 

  1. The vast majority of workers comp claims are paid and do not go to court

Generally, most comp cases are accepted, the injured worker gets treatment, and eventually goes back to work.  The idea that someone stays home and avoids work when they are able to actually work is not the norm.  Sure, there are those people out there who try to do what they can to avoid going back to work, but after an independent medical exam (IME) is performed, or after some surveillance discovers them being active out and about running errands, they are quickly flushed out and denied ongoing benefits.

 

Typically after a denial, and wage loss payments stop, these workers get on the wagon and get their treatment, so they can return to work and have their comp case end.   Some will run to plaintiff counsel and try to get what they feel they are entitled to, and they will file for mediations and hearings, but the litigation usually is settled before a case is tried in front of a judge.  Doctors can disagree on the causal relation of an injury, and this can speed up the case to go into litigation, but these cases are typically settled within 2-6 months.  A low percentage of claims will stay in the litigation system, and go on for months or years, but these cases are usually quite complex and can involve several defendants and several employers, and that contributes to the complexity and the duration of the litigation.  For the most part, on the normal workers’ comp claim that gets disputed and goes into litigation, these cases resolve themselves in the early stages of litigation and the files eventually close. But even those cases are not the common ones.  The common claims are legit injuries, where benefits are paid and the worker returns back to work at full duty within whatever timeframe is needed depending upon the severity of the injury.

 

 

Summary

 

Everyone may have heard of someone that tried to get away with milking the comp system.  Most of these people are caught through a good investigation, and their cases get resolved.  The stereotype of work comp being a total pain can be true in some cases, but for the most part, work comp claims are legit, paid, and the worker returns back to work.  There are always some exceptions, but if all parties communicate, know what their rights are, and know what they can and cannot do, their claims are resolved as quickly as possible and everyone can move on with their respective lives.

 

 

 

Rebecca ShaferAuthor 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 co-author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:.

Contact: RShafer@ReduceYourWorkersComp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

 

 

Protecting the Injured Employee in Workers’ Compensation is Paramount

injured employee workers' compensationThe injured employee is the reason workers’ compensation laws exist.  Without employees and their sacrifice, businesses would not accomplish their goal.  Now is the time for every member of the claim management team to approach claims with this critical mindset.

 

 

Forget the Golden Rule – Follow the Platinum Rule!

 

The “Golden Rule” taught us to “treating others as one’s self would wish to be treated.”  This is a common denominator handed down in both secular and religious societies. The problem with this Rule when applied to workers’ compensation claims is it view things from the perspective of the claim handler.  Now is the time for members of the claim management team to put themselves in the shoes of the injured employee, and follow the Platinum Rule – To treat others as you would want to be treated!

 

By adopting this mindset, one will realize the following:

 

  • Being a true professional in every sense of the word is essential;

 

  • Treating all employees – regardless of ability with the respect and dignity they deserve is essential; and

 

  • Engaging every claim with good faith, fair dealing, and placing ethics at the pinnacle of every decision is essential.

 

 

Protecting the Injured Employee Through Injury Prevention

 

Members of the claim management team can be proactive when it comes to preventing injuries in the workplace.  This can include educating their insureds on best safety practices.  Their obligations also extend to their post-injury response.  Here are some important steps include in every workers’ compensation claim:

 

  • Avoid unfair claims practices and bad faith denials;

 

  • Complete a timely and thorough investigation of all injuries;

 

  • Not exploited the financial vulnerabilities of policyholders;

 

  • Not make unreasonable demands on the policyholder during the claim process; and

 

  • Take all reasonable steps to preserve evidence.

 

Employers also play a role in this process.  It must include promoting a culture of safety.  Steps should include:

 

 

  • Allow regular breaks for employee – especially those performing repetitive tasks;

 

  • Ensure the proper use of machinery, tools, and safety equipment – never cut corners; and

 

  • Lead by example!

 

 

Getting the Injured Employee Back to Work

 

Interested stakeholders need to take the lead on return-to-work issues and dispel the common myths that prevent employers from protecting their MVPs.  Common misconceptions of injured employees include:

 

  • Injured employees are lazy – they sit around all day and do nothing;

 

  • Injured employees would rather stay at home;

 

  • Injured employees will only get re-injured – we need to get a voluntary resignation on every workers’ compensation claim; and

 

  • Injured workers receiving Social Security Disability are not allowed to return-to-work.

 

 

FACT: A vast majority of injured employees would rather get back to work.  Getting them back to work can reduce program costs. 

 

 

The challenge of effective return-to-work requires all interested stakeholders to move past the physical, educational, medical, and emotional barriers inherent in the workers; compensation system.  Important steps to consider include:

 

  • Communication with the injured worker. This can include having a dedicated liaison for any employee off work.  Employers can buy goodwill by returning phone calls from an employee not able to work due to restriction.  They should also be proactive in initiating contact with an employee.

 

  • Communication with treating doctor. A return-to-work liaison can also serve as a point of contact with the employee’s treating physician.  This can also include making certain communications between the physician and workers’ compensation insurer is taking place.

 

  • Providing legitimate written job offers. The requirements of job offers vary in each jurisdiction.  It is important specific elements are satisfied.  There are other legal requirements where consultation with an attorney may help facilitate this objective.

 

Interested stakeholders should also consider learning more about, and implementing a “Work on Loan” program, or hiring an injured employee through the Social Security Administration’s “Ticket to Work” program.

 

 

Conclusions

 

Employees are of paramount importance to every workers’ compensation program.  Treat them respect and dignity.  To run an effective and efficient program, interested stakeholders need to understand their claims, assess and evaluate risks, and look for opportunities to engage all parties in the process.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

 

ADA – Is it against the law not to hire a person with a disability for a physical position?

Wheelchair walk - ADAWe had very successful wc mastery training recently on How to Coordinate Return to Work with ADA Compliance.  There were many questions from the audience.  Find below the responses to the questions related to the Interactive Process given by Aaron Konopasky, Senior Attorney Advisor, US Equal Employment Opportunity Commission, and Michael Stack, Risk Consultant, Co-Author Your Ultimate Guide to Mastering Workers Comp Costs

  

This post is one of a series as a follow up to training:

 

 

A prior training on Return to Work and the ADA initiated the following questions:

 

If a person with a disability applies for a physical position, is it against the law not to hire them?

 

Additional information: I work at a pharmaceutical packaging plant. The line operator job tasks are physically demanding, they have to lift, bend, squat, etc.

 

The answer to this question depends on several factors. Some disabilities will not affect the ability to do these things (e.g., someone with a psychiatric disability may be perfectly able to do this). Some people with disabilities might be affected, but because their condition is under control it wouldn’t actually interfere (e.g., epilepsy). In some cases, it will affect the ability to do the job, but a reasonable accommodation would overcome the difficulty. (Without knowing the details, it’s hard to come up with a realistic example of this. But perhaps a modified workstation would be an example.)

 

The employer must consider the possibility of reasonable accommodation before rejecting the individual. However, if the individual could not accomplish what he or she is required to accomplish even with a reasonable accommodation (or if all effective reasonable accommodations would cause undue hardship) then he or she is not qualified and may be rejected.

 

 

When we do the interactive process, when and how do we coordinate the workers’ compensation carrier/administrator?

 

Both the ADA law and workers’ compensation best practices run concurrently, and it is recommended to do everything required under both systems.  Following workers comp cost containment best practices, good communication systems with your claims handler are an effective solution.  Working with the adjuster in the ‘team approach’ to claims handling early in the process is recommended.

 

 

I encounter employers delaying the interactive process due to being afraid of a 132A violation.

 

Labor Code §132a states in pertinent part: “(1) Any employer who discharges, or threatens to discharge, or in any manner discriminates against any employee because he or she has filed or made known his or her intention to file a claim for compensation with his or her employer or an application for adjudication, or …Oct 23, 2016

 

It doesn’t make sense that a conflict would exist between Labor Code §132a and the interactive process. Labor Code §132a appears to be a state workers’ compensation law that states the employer is prohibited from discriminating on the basis of intent to file a workers’ comp claim. Engaging in the interactive process (e.g., asking whether the person could do the job with a reasonable accommodation) shouldn’t constitute discrimination. It’s not a threat to discharge or other form of discrimination. Also, the ADA is a federal law; doing what you are required to do under federal law can’t constitute a violation of state law.

 

 

How to Coordinate RTW with ADA Compliance

 

 

Author:

aaron konopaskyAaron Konopasky is a Senior Attorney Advisor in the ADA/GINA Policy Division at the U.S. Equal Employment Opportunity Commission (EEOC) headquarters in Washington, D.C.  He assists the Commission in interpreting and applying the statutes it enforces, and participates in drafting regulations, policy guidance, and other publications.

 

Dr. Konopasky joined EEOC after receiving his J.D. from Stanford Law School.  Prior to law school, he received his Ph.D. in philosophy from Princeton University, and served as an adjunct professor of philosophy at Rutgers University, Tulane University, and the University of New Orleans.

 

 

Author:

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center.

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

ADA – Do All Work Comp Injuries Fall Under the Americans with Disabilities Act Amendments Act (ADAAA)?

Disabled man on a wheelchair

We had very successful wc mastery training recently on How to Coordinate Return to Work with ADA Compliance.  There were many questions from the audience.  Find below the responses to the questions related to the Interactive Process given by Aaron Konopasky, Senior Attorney Advisor, US Equal Employment Opportunity Commission, and Michael Stack, Risk Consultant, Co-Author Your Ultimate Guide to Mastering Workers Comp Costs

 

 

This post is one of a series as a follow up to training:

 

 

A prior training on Return to Work and the ADA initiated the following questions:

 

Can you offer transitional duty to workers with work-related injuries (Workers Comp) and not offer to workers who have non-work related injuries (disability)?

 

It depends on what you mean by “transitional light duty.” If it involves lowered production standards or elimination of an essential part of the normal job, then the employer can provide it to people who have been injured on the job to the exclusion of others. If “transitional light duty” does not involve lower production standards or elimination of an essential part of the normal job, then it could qualify as a reasonable accommodation, and would have to be provided to employees who need them because of disabilities, regardless of where the disability was caused.

 

In other words, if an individual has a disability and a reasonable accommodation would allow him or her to do the job, then the employer must provide the accommodation absent undue hardship whether or not the disability is a work-related injury.

 

If an on-the-job-accommodation wouldn’t help, or would cause significant difficulty or expense, the employer would need to consider unpaid leave as a possible accommodation (Employers with greater than 50 employees are required to provide up to 12 weeks of unpaid leave under FMLA).  If additional leave would allow the person to return eventually, and would not cause significant difficulty or expense, then the employer should provide the leave.

 

 

I have heard that ADAAA applies to Work Comp but not all Work Comp applies to ADAAA. Would you outline the cases where ADAAA doesn’t apply to Work Comp?

 

The idea here seems to be that not all medical conditions that qualify someone for Workers’ Comp are disabilities under the ADA. This could be true, but that’s much less clear after the ADA was amended—many more things now qualify as disabilities.

 

As a practical matter, often it’s not worth the time or effort to determine whether a medical condition is “bad enough” to qualify as a disability under the ADA. The less serious the condition, the less likely an accommodation will be needed. The more serious the condition, the more likely it will be a disability. Employers are encouraged to assume that medical conditions serious enough to interfere with work are disabilities, and to spend more time thinking about possible accommodations that would enable full productivity.

 

 

How does the Pregnancy Act fit into the ADA?

 

Application of the Pregnancy Discrimination Act is complicated. If the person has a pregnancy-related medical condition that qualifies as a disability, then the ADA applies and the analysis is the same. If there is no pregnancy-related medical condition then you will need to do a Pregnancy Act analysis, which depends on how the employer treats people with similar limitations who are not pregnant. Here are some resources:

 

https://www.eeoc.gov/eeoc/publications/pregnancy_health_providers.cfm

https://www.eeoc.gov/eeoc/publications/pregnant_workers.cfm

 

 

Also, if the employer doesn’t complete this, when are fines are assessed?

 

There are no fines under the ADA. The individual’s recourse is to file a charge of discrimination with the EEOC, which will then proceed through EEOC investigation, and then potentially through conciliation and litigation stages.

 

 

How to Coordinate RTW with ADA Compliance

 

 

Author:

aaron konopaskyAaron Konopasky is a Senior Attorney Advisor in the ADA/GINA Policy Division at the U.S. Equal Employment Opportunity Commission (EEOC) headquarters in Washington, D.C.  He assists the Commission in interpreting and applying the statutes it enforces, and participates in drafting regulations, policy guidance, and other publications.

 

Dr. Konopasky joined EEOC after receiving his J.D. from Stanford Law School.  Prior to law school, he received his Ph.D. in philosophy from Princeton University, and served as an adjunct professor of philosophy at Rutgers University, Tulane University, and the University of New Orleans.

 

 

Author:

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

ADA – If light duty cannot be accommodated, should FMLA run concurrently?

Americans with Disabilities actWe had very successful wc mastery training recently on How to Coordinate Return to Work with ADA Compliance.  There were many questions from the audience.  Find below the responses to the questions related to the Interactive Process given by Aaron Konopasky, Senior Attorney Advisor, US Equal Employment Opportunity Commission, and Michael Stack, Risk Consultant, Co-Author Your Ultimate Guide to Mastering Workers Comp Costs

 

 

This post is one of a series as a follow up to training:

 

 

A prior training on Return to Work and the ADA initiated the following questions:

 

 

 

If a worker is being paid Temporary Total Disability (TTD) because light duty cannot be accommodated, should FMLA run concurrent?

 

FMLA leave is unpaid time off. However, in lieu of FMLA leave, an employee may take sick days, vacation days or disability leave with pay, unless the employee is receiving workers’ compensation benefits. In that case, the employer cannot require substitution of vacation, sick or other paid leave. If the employer properly designates the workers’ compensation leave as FMLA leave, the absence can be counted against the employee’s 12-week entitlement. Regardless of how many weeks of paid leave an employee decides or is required by his or her employer to use for FMLA leave, the employee is still entitled to take the remainder of the 12 weeks as unpaid leave.

 

If the workers’ compensation leave runs concurrent with FMLA leave, the employer must comply with the FMLA requirements to maintain group health insurance benefits. Employees who return to work after a concur-rent FMLA and workers’ compensation leave are entitled to reinstatement of all benefits without any qualify-ing restrictions and at the same levels as when the leave began. For this reason, employers may choose to pay for life, long-term disability and related insurance coverage during workers’ compensation leaves of absences unless it is clear that employees are unable to return to the positions because permanent disabling conditions render them no longer qualified to work with or without a reasonable accommodation.

 

 

What happens if FMLA leave is exhausted and the employee receives a letter that reasonable accommodations can no longer be made?

 

Additional information: The employee had been out for cancer related surgery related issues on & off. The job requires travel 50% of the time, but there are times when the employee may need 2 straight weeks in the office. FMLA ran on a rolling calendar and the 12 weeks had been exhausted. So, the employee had been out, FMLA ran out of time & the employee received a letter that reasonable accommodations could no longer be made.

 

 

The term ‘audit’ is being interpreted as simply a requirement to be out of the office at a client location.

 

First, a clarification: it doesn’t sound like any reasonable accommodations were made in this case. It sounds like the individual was given FMLA leave, which is a separate legal right under a separate law.

 

If what this person needed was to stay in the office, the employer should do a reasonable accommodation analysis. Permission not to do 50% of the regular job would not be a reasonable accommodation that is required under the ADA. However, this may not be the only possibility. The details of the job are not given, but it might be possible for the person to “visit” the distant worksites virtually (e.g., using Skype).  If nothing like that is possible, a temporary reassignment might work, if there is an open position that the employee could do. (The employer would not need to create an empty position, but if there was an unfilled job then a temporary transfer may be possible).

 

If neither of those solutions would work, and what the employee really needs is leave, then he could ask for leave as a reasonable accommodation. Even when FMLA leave has been exhausted, a person with a disability may be entitled to extra unpaid leave under the ADA, as long as granting it wouldn’t pose an undue hardship.

 

 

How to Coordinate RTW with ADA Compliance

 

 

Author:

aaron konopaskyAaron Konopasky is a Senior Attorney Advisor in the ADA/GINA Policy Division at the U.S. Equal Employment Opportunity Commission (EEOC) headquarters in Washington, D.C.  He assists the Commission in interpreting and applying the statutes it enforces, and participates in drafting regulations, policy guidance, and other publications.

 

Dr. Konopasky joined EEOC after receiving his J.D. from Stanford Law School.  Prior to law school, he received his Ph.D. in philosophy from Princeton University, and served as an adjunct professor of philosophy at Rutgers University, Tulane University, and the University of New Orleans.

 

 

Author: 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

4 Ways to Lower Your Experience Modification Rate and Why it Matters

experience modification ratingLosses are just one factor in your overall workers’ compensation costs. The other is premium. Many calculations are involved in setting the premium; it comes down to how much of a risk the carrier thinks it is taking by insuring your company. One of the biggest components of the premium calculation is the experience modification factor, or ex mod — a perception of risk.

 

The experience modification factor can add up to significant dollars if it is not properly managed. Fortunately, a basic understanding of the ex-mod and a few tips can help you not only stabilize your workers’ compensation costs but lower them.

 

 

What the Experience Modification Rate Is and How it Works

 

When you’re making a major purchase as a consumer, companies typically look at your credit report. They want to see how much of a risk they’re taking with you, compared to others. A good credit rating close to 800 is golden; you easily get approval for purchases at the lowest interest rates. A credit rating below 500s will cause significant complications.

 

In the same way, the ex-mod is used as an indication of risk regarding workplace injuries. Carriers look at your company’s ‘actual incurred losses’ and compare them to those of other companies in your industry, to determine your expected losses. If your rate of injuries is higher, your ex mod will be higher, and you’ll be charged a higher premium. The reverse is true if your company has fewer injuries and fewer costs.

 

It boils down to actual vs. expected costs. Ideally, you want your actual losses to be lower than the expected losses: the lower your ex mod, the lower your premium.

 

An ex mod factor of 1.0 is average, like getting a ‘C’ on a report card. It means that your company is on par with others in your industry in terms of the number of, and costs of claims.  Your goal is to be as close to your minimum experience modification factor as possible.

 

 

Tips to Change Your Ex-Mod

 

The best way to lower your ex mod is to reduce the costs of your losses, both frequency, and severity. Using best practices, such as effective return-to-work strategies, will lower ultimately lower the ex-mod and reduce the premium.

 

Here are several additional strategies that can help lower your ex mod.

 

  1. Experience Rating Adjustment (ERA). Many states have a rule that allows a 70 percent discount on what is reported as ‘actual incurred losses’ for medical only claims.

Example:  For a medical-only claim that costs $10,000, just $3,000 would be reported as ‘actual incurred losses.’

Claim total = $10,000 – 70% reduction – ($7,000) = $3,000

The ERA rule was devised by rating bureaus as a way to encourage reporting of smaller claims. It’s important to note that this only applies to medical only claims.  Check with your state rating bureau or insurance broker to see if this rule applies in your state.

 

  1. Net deductible. About 15 states allow companies to exclude from the ‘actual incurred losses’ any amount paid on a claim that is below the deductible amount, whatever it is. If the deductible is $5,000 and a claim costs $6,000, only $1,000 would be included.
  2. Injury triage. Many injuries can be handled with self-care. There is no reason for minor cuts or bruises to become full-fledged claims. Using telephonic nurse triage can help separate insignificant injuries from those that require medical attention, meaning many can be kept off the books and not included in ‘actual incurred losses.’
  3. Unit statistical date. The unit statistical date is the date your total incurred losses are reported to the state rating bureau for the calculation of your next period’s experience rating. Included in total incurred losses is BOTH what has been paid AND outstanding reserves for open claims. Overinflated outstanding reserves can make a significant difference in your total incurred losses.

 

Unit Statistical Date Example:

 

  • Amount paid to date on an open claim:
    • $1,000
  • Amount reserved on an open claim:
    • $50,000 due to an upcoming surgery
  • Amount reported as Actual Incurred Losses to state rating bureau on Unit Statistical Date:
    • $51,000.

 

 

Over-inflated reserves:

 

On revisiting the claim, you find that the worker is progressing better than anticipated, and it is clear he will not need surgery. With input from the medical provider, you can determine what treatments the worker will actually need going forward. Since the surgery is no longer needed, that amount reserves could be reduced, for example, to $15,000. That $15,000 now in reserves plus the $1,000 already spent brings the total for ‘actual incurred losses’ to $16,000 — not $51,000.

 

The key is to identify such a change before the ex-mod is calculated. Six months prior to the policy renewal date is when the numbers must be reported in order to ensure an accurate ex mod. If the policy renewal date is Jan. 1, the unit statistical date would be July 1 of the previous year.

 

 

Conclusion

 

Lowering the ex-mod lowers the premium. It’s important to note, however, that the impact will not be seen immediately. When calculating the ex-mod, carriers have a three-year ‘look back’ period; meaning if the company had many losses last year but has since improved its frequency and severity rates, it will be several years before the ex-mod is lowered. Organizations that have a long-term strategy to reduce injuries, return injured workers as soon as possible, and ensure accuracy in their actual incurred losses, will see their premiums improve.

 

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is the founder & lead trainer of Amaxx Workers’ Comp Training Center.

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

Properly Prepare A Confidential Mediation Statement

Mediation is frequently used in workers’ compensation cases to settle claims and avoid the uncertainties of litigation.  This is because it allows all interested stakeholders to be involved in the process and allows for outcomes not otherwise attainable in court.  When preparing for a mediation session, it is important for those involved to prepare and assist the neutral third party in better understanding the case.  One tool to accomplish this goal is to prepare a confidential mediation statement.  It not only helps the mediator but allows those involved to reflect and understand their claim.

 

 

Getting the Process Started – Agreeing to Mediate

 

Mediation can be a formal or informal process to settle a workers’ compensation case.  The structure involves a neutral third party who understands the process and controlling statute to help the parties evaluate their position and move a case toward settlement.  Selection of a neutral third-party requires cooperation between the defense and employee interests.

 

In very few instances is mediation “required” as part of the workers’ compensation claims process.  However, this should never prevent parties to a workers’ compensation case to use it as a means to settle a dispute.

 

 

We’re Going to Mediate – Now What?

 

Mediating a workers’ compensation case must be taken seriously.  It requires preparation and evaluation by all parties.  In many instances, the selected mediator will request the parties to prepare a mediation statement.  This is a letter prepared by the respective parties and should be kept confidential.  It should be factual so the third-party assisting in the settlement can help.  It can also contain other important documents relevant to the case that outline a party’s position.

 

There is no one right way to draft a mediation statement.  Important elements to consider should include the following:

 

  • Defining the claim: When both parties outline the claim, it will allow the mediator to ensure both sides are beginning from the same starting point.  A classic example of this is a determination of the average weekly wage (AWW).  Because most indemnity benefits are based on this number, the value of a claim can hinge on the AWW.  It is also important to outline defenses to a claim.  This has a huge impact on potential recovery and future exposures.

 

  • Procedural posture and prior negotiations: Providing this background information allows the neutral third-party to understand a case’s starting point and what the ultimate objectives of the parties include.  It will also allow the mediator to understand other important case dynamics.

 

  • Honest assessment cases strengths/weaknesses: This is especially important in instances where there is a denial of primary liability or the reasonableness/necessity of medical care and treatment.  Going through the process in an honest manner allows all attorneys and members of the claims management team to better understand the claim and set realistic expectations.

 

  • Pertinent medical and vocational reports: These documents include IMEs, IVEs, FCEs and narrative reports from the employee’s treating doctor.  These reports and documents typically provide a good summary of the claim and help the mediator better understand the case.  It also allows the parties to understand the strengths and weaknesses of a claim.

 

 

Other Things to Consider

 

A mediation statement is also a great tool to inform the mediator about the case intangibles and dynamics.  It is important for a mediator to know information such as the special needs of a client and issues that are a “must have” in any settlement.  This often includes a global settlement and voluntary resignation of the employee as part of settlement.

 

 

Conclusions

 

The use of mediation in workers’ compensation is growing in popularity given its practical uses in settlement.  When preparing for mediation, it is important for all parties to prepare.  Part of this includes the use of a confidential mediation statement to provide a background to the neutral third-party and help the parties better evaluate their case.  It also serves as a means to make efficient use of time and reduce costs.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center.

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

Defending Permanent Total Disability (PTD) Cases in Work Comp

Permanent total disabilityMembers of the claim management team face many challenges when it comes to dealing with injured employees seeking entitlement to permanent total disability (PTD) benefits.  Exposure for these types of claims is high.  It is important to be proactive on these claims in order to reduce costs in a workers’ compensation program.

 

 

The Aging Workforce and Workers’ Compensation

 

Notwithstanding the recent economic upturn and increasing wages, Americans continue to suffer from the effects of the Great Recession.  Proof of this can be found labor market statistics from the U.S. Department of Labor.  According to a recent survey, the “greying” of the workforce continues:

 

  • In 1994, 11.9% of the U.S. labor marker was 55 years old and older.

 

  • In 2014, this age group comprised 21.7%.

 

  • By 2024, people 55 years old and older will make up 24.8% of the labor market.

 

Older people miss work for longer periods of time compared to their younger counterparts.  On average, someone over the age of 55 will miss up to two weeks following an injury.  Those between the ages 20-24 will only miss four days.

 

 

Permanently and Totally Disabled Defined

 

According to Prof. Arthur Larson, someone is totally disabled when the “claimant has been able to earn occasional wages or perform certain kinds of gainful work does not necessarily rule out a finding of total disability or require that it be reduced to partial. The task is to phrase a rule delimitating the amount and character of work a man can be able to do without forfeiting his total disability status.”

 

Reduced into a general rule, courts in many jurisdictions will review the following factors when determining if someone qualifies for permanent total disability benefits:

 

  • Job Search: Employee’s in most jurisdictions are required to conduct a reasonable and diligent job search.  Examples of what is “reasonable and diligent” includes time spent looking for work, the location where one seeks employment, and the overall effort spent.

 

  • Cooperation with Vocational Rehabilitation Assistance: In many states, employees have access to a Qualified Rehabilitation Consultant (QRC) to assist in job search efforts.  A QRC performs a variety of roles when it comes to assisting an injured employee re-enter the workforce.

 

  • Earning Capacity: This factor takes into consideration the employee’s ability to work and earn a wage comparable to what they were making prior to the injury.  It is important to note an employee working in a limited capacity can be successful in their efforts to obtain permanent total disability benefits.

 

  • Refusal of Suitable Job Offer: The employee’s willingness to accept a job offer often comes down to concerns of whether they are able to perform a job offered by the employer.  When reviewing this factor, it is important to evaluate medical and vocational evidence to determine if the work offered by the employer is similar to what they were performing at the time of injury, and uses their training and experience in a manner that would advance the interests of all parties.

 

 

Other Defenses to Consider in Defending PTD Claims

 

There are other issues to consider when defending PTD claims.

 

  • Withdrawal from Labor Market: Employees seeking workers’ compensation benefits are required to stay active in the labor market until they demonstrate an inability to secure suitable gainful employment.  A withdrawal from the labor market can include a move to another geographic location that has fewer job opportunities, or an area where jobs pay lower wages.  It may be necessary to secure a vocational expert to successfully employ this defense.

 

  • Retirement Defense: Most states allow for the termination of PTD benefits when an employee retires.  This is often not a clear-cut distinction, and requires investigation.  This can include statements made by the employee as to how long they intended to work prior to their injury and application for Social Security retirement benefits, and receiving payments from a pension.

 

 

Conclusions

 

The aging workforce is driving members of the claim management team to be proactive when it comes to claims for permanent total disability (PTD) benefits.  This requires a complete investigation and determination as to the employee’s job search efforts, cooperation with their QRC, earning capacity, and refusal of a job offer.  Failure to take the necessary steps can add costs to a claim and reduce a program’s effectiveness.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is the founder & lead trainer of Amaxx Workers’ Comp Training Center.

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

 

Medicare is Issuing Denials

The Centers for Medicare and Medicaid Services (CMS) asserts it has the right to deny paying for a treatment if a settlement recipient still has funds in a Medicare Set Aside (MSA) or has not properly reported their full exhaustion of those funds.  Some attorneys, adjusters and injured parties have questioned over the years – is Medicare really denying bills? The truth is that Medicare is issuing denials.

 

Below is an image of a true denial letter from CMS. The following document is a Medicare Summary Notice sent to a Medicare beneficiary. On page 2, you can see that a service was not approved, and looking at footnote E, CMS explains:

 

“Your claim has been denied by Medicare because you may have funds set aside from your settlement to pay for your future medical expenses and prescription drug treatment related to your injury(ies).”

 

In this instance, a man settled his case in 2014, without a professional administrator. Unfortunately, he did not spend his MSA funds in accordance with CMS guidelines. He was receiving denial letters from Medicare, and they were not paying for treatment, so he reached out to us asking for help.

 

This document shows that CMS is becoming savvier and denying treatments that should be paid for with settlement funds. Injured parties that do not expend their settlement funds appropriately are at risk of jeopardizing their future Medicare benefits.

 

 

 

 

Author Marques Torbert, CEO Ametros. Prior to Ametros, Marques worked as an investor and consultant within the insurance and business services sector. Marques was previously the principal adviser to Millbrook, an Associate with Clarion Capital Partners (a middle market private equity firm), and an investment banker with Lazard Freres. He has been instrumental in working with multiple privately held organizations within the claims solutions management and managed care industries. Marques obtained his B.A. in Economics from Columbia University and his MBA from Harvard Business School. He is currently on the Board of Directors of Ametros Financial, and is also a member of the Board of Trustees for Merrimack College, as well as, University School, a private K-12 school in Cleveland. Marques currently resides in Boston with his wife Alexandra and (un)fortunately is also a Cleveland Browns fan.

How to Calculate Your Minimum Experience Modification Factor

 

 

The experience modification factor in workers’ compensation, it can be an overwhelming and complicated number. There’s a lot of math involved, and that can be overwhelming to look at and interpret what it means. But at its core, it’s a predictor of your future losses of how you’d handled workers’ compensation claims. Just like your credit score, as a predictor of how well you’re going to handle debt in the future, of how well you’ve handled it in the past. It’s no more complicated than that, as far as what it means. But it impacts your pricing significantly, as far as your premiums are concerned in workers’ compensation, particularly if you’re in a guaranteed cost program.

 

Example – Calculating Minimum Experience Mod

 

Hello, my name is Michael Stack, and I’m the CEO of Amaxx. Today, I’m going to be walking you through a concept to calculate your lowest possible mod, or what’s also known as your minimum mod, and what that means as far as potential savings in your organization.

 

First thing let’s do, I want to take you to this example, and I want to show you how to calculate your minimum mod. It’s a very simple calculation. If you look here on the screen, what you’re going to see is an NCCI rating worksheet. There’s a whole bunch of numbers that are on the screen, but there’s only two that you need in order to calculate this minimum mod.

 

The first thing you’re going to do, is you’re going to look down here at this bottom part of the formula and you’re going to see the stabilizing value, and you’re also going to see your expected totals.

In order to calculate your minimum mod, or your lowest possible mod, also known as the mod that you would have, had you had zero injuries. The mod you would have if you have zero injuries and zero claim costs. So you would take that stabilizing value over your expected totals. Stabilizing value over your expected totals, and that’s how you calculate your lowest possible or minimum mod.

 

 

What To Once Calculate Minimum Experience Mod

 

Now, the next thing then is to factor in what do you do with that? What does that actually mean as far as your organization is concerned? I want to take you to this example here on the board.

 

Here’s how your rating works in a guaranteed cost program. There’s a couple more elements, but I’m going to walk you through this, particularly if you’re in a high deductible or a loss sensitive plan as far as what that means for your total work comp costs, but this is a basic formula.

You take your payroll, in this case we use $10 million in payroll, times your class code rate. In this example, I just use 0.5 rate just to keep the numbers simple. This here is also known as your manual premium. So manual premium is your payroll times your rate. You may have a few different class codes, you may have different numbers of payroll in each class code, but ultimately it’s going to all factor in to what is ultimately your manual rate.

 

Then you take whatever adjustments are appropriate, in this case your experience mod. There’s also going to be some scheduled debits and credits at the discretion of your carrier, and that’s not in this formula here but that’s going to be in your ultimate total work comp payments formula. If you’re in a loss sensitive plan, those are going to factor in here as well. But just keeping this simple as far as this example, you take your manual premium times your experience mod and that’s your work comp premium in a guaranteed cost program.

 

In this example, your mod is 0.8. So if we go through some of the elements of an experience mod, 1.0 is considered average for the industry, whatever industry that you’re in. So the actuaries take, what are all the claim costs that happen for everyone in the trucking industry, what was the total cost, what was the average, and that’s a simplified version of how they come up with what is expected for that industry. All this is, is are you doing better or worse than average? Are you doing better or worse than average for your industry?

 

This one is 0.8, so you’re doing 0.2 below that 1.0, you’re doing better than average. Then it comes out to 400,000. So this is 500,000 times 0.8, and that gives you 400,000.

 

 

Reveal More Room to Improve Experience Modification Factor

 

The mistake that I see companies make a lot of times in this, is you say we’re at 0.8, we’re below 1.0, we’re doing really well. Good job for us. Hooray for us. Yay, we’re doing so great. We saved $100,000 from what we would be if we were at average for our industry. While that’s true, there’s a lot more to the story, and that’s where this minimum mod comes into play.

 

If you went through that stabilizing value over your expected totals, a lot of times, particularly the larger your organization is, the lower possible minimum mod you’ll have, and that has to do with the weighting value. We’re not going to get into that today. But the larger your organization, the lower lowest possible mod that you have.

Let’s say you do that calculation and your lowest possible mod is a 0.4. So you do the same calculation, the manual premium, which is 500,000, and you times that by 0.4, and you come up with 200,000 as you see here.

 

In essence, what this means is you’re paying twice as much as you could. You’re paying twice as much as you could if you had zero claim costs. What it does is it gives a very vivid example when you’re talking to your senior managers, when you’re talking to your clients as an insurance broker or any other service provider, to let them know how much room there still is to improve.

 

So when you’re patting yourself on the back here, and you’re throwing yourself a parade and a party for how well you’re doing, good job, just keep going. Keep implementing return to work programs, keep implementing injury response programs, keep implementing safety, wellness, injury prevention programs in order to continue to drive this number down, because there’s still a lot more room to grow. Don’t get lulled to sleep up here, because there’s a lot more improvements that can be made.

 

Obviously, there’s a lot more to talk about or we could talk about with the experience mod, but if you can understand this concept, understand how some of these numbers start to put together, it can put a lot more meaning behind what we’re doing in injury prevention and injury management.

 

Again, my name’s Michael Stack, I’m the CEO of Amaxx. Remember, your work today in workers’ compensation can have a dramatic impact on your company’s bottom line, just as we showed here, but it will have a dramatic impact on someone’s life, so be great.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2019 Amaxx LLC. All rights reserved under International Copyright Law.

 

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

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