Michael B. Stack - Work Comp Roundup

The Work Comp Tool Box: Employing Creative Strategies to Settle Cases

July 16, 2019 by Michael B. Stack

Settling workers’ compensation cases is an important part of being a proactive and effective member of the claims management team. It also allows interested stakeholders to concentrate their efforts on other more burdensome cases. Most importantly, it reduces unnecessary costs to a program’s bottom line. Working with an experienced workers’ compensation attorney can ensure you get the best agreement for both the employer and the injured worker.

What is the Claims Management Toolbox?

Having a “toolbox” at one’s disposal is important to being a great claims handler. Like a toolbox a mechanic uses to practice their trade, claim handlers need one as well to fix, accomplish or avoid a number of issues. Caution – use these tools with care and only when necessary.

Limited Compromise Settlements

All members of the claims management team will agree, the only good file is a closed file. In some instances, this is not possible given the interests of the claimant or on advice of their attorney. In cases that cannot completely settle, a claims handler should examine whether the claim presents an opportunity for a limited compromise settlement.

Under this type of settlement, indemnity benefits such as TTD, TPD, PPD and PTD are closed out. The only benefits available to the employee include past and/or future medical benefits.

Limited Compromise Settlements have some advantages:

Reduces costly exposures that may be present on a claim. This is especially the case when an employee is not incurring much in terms of ongoing medical benefits, but is struggling with return to work issues; and

Studies indicate claimants in workers’ compensation claims tend to reduce the frequency of their medical care and treatment after closing out indemnity benefits. Limited compromise settlements that leave open future medical benefits can also be helpful in instances where the parties may want to consider a Medicare Set-aside, but the cost and/or future medicals that are reasonable is astronomical.

Effective use of Hold Harmless Agreements

A “hold harmless” agreement is another tool members of the claims management team can use to settle cases. When using such agreements, the parties to a settlement are creating a contract where one party agrees to release another from all legal claims. In the context of workers’ compensation claims, this is mainly used when it comes to the reimbursement of past or future medical expenses and liens.

Such agreements can be used in many instances to expatiate settlements. This includes:

Delay in the receipt of medical bills related to a claim where the amount is either known, or reasonably expected to be known; and

One party to a claim has the ability to extinguish the interests or potential intervention rights of a known third-party.

Hold harmless agreements should be used with caution. While such agreements “require” cooperation from the party receiving protection, it might not necessarily be the case if litigation occurs. In fact, the indemnified party (the party receiving protection) may need to engage in litigation in order to secure cooperation.

Hold harmless agreements should also be avoided in instances where Medicare and Medicaid have an interest in a claim. The statutory framework establishing these federal programs does not prevent the applicable government agency from enforcing their rights against any party to a workers’ compensation claim. This rationale has been affirmed by a long line of case law interpretations.

Other Tools for Effective Claim Resolution

Settling workers’ compensation claims requires members of the claims management team to take affirmative steps to remove barriers to settlement by using their toolbox.

Develop strategies on their teams to identify cases ripe for settlement and take steps to close files. This sometimes includes picking up the telephone and making a settlement inquiry or offer. Once identified, these cases can be submitted to a competent structured settlement consultant who may be in the best position to determine the likelihood and course for settlement;

Using mediation and promoting the use of settlement conferences to move claims toward a timely resolution. Be prepared for these events. One may also want to consider bringing a laptop computer and printer to these sessions. This allows for the drafting of the settlement agreement on the spot and avoid delays in final execution; and

Implement effective medical management programs to lower prescription drug costs on all files.

Conclusions

The development of a claims “toolbox” is one step interested stakeholders can use to reduce workers’ compensation costs. This is accomplished by promoting the closure of files, or at a minimum resolving some issues on a file to narrow the issues in dispute.

Michael Stack - Amaxx Author 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/

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

Filed Under: Settling WC Claims

Watch Chiropractic Care for Excessive Medical Bills

July 11, 2019 by Michael B. Stack

The use of chiropractic care is a recognized way to treat many workers’ compensation injuries. This includes injuries to joints, the back, and neck. If an injured employee is receiving medical care and treatment through a chiropractor, it is important to take note of several issues that will save money in a workers’ compensation program. It is also essential to develop effective claim handling techniques to get the employee back to work promptly.

Areas of Concern with Chiropractors

By definition, chiropractors are considered “doctors” who are capable of providing medical care and treatment in workers’ compensation cases. They are sometimes suspect as they do not have a formal medical education that an “MD” obtains through an accredited medical school. The focus of their medical education is concentrated on the diagnosis, treatment, and prevention of disorders of the neuromusculoskeletal system. There is also an emphasis on a holistic approach to health care that includes an understanding of the central nervous system plays.

Factors to Consider When Evaluating Chiropractic Care

There are various areas where members of the claim management team should focus their review of billing and provider issues related to chiropractors. These areas should include the following:

Evidence of a reasonable treatment plan: This plan should be reasonable based on the nature and extent of the work injury. It should include information on the duration of care and its frequency.

Documentation of the details of the treatment: A common complaint of chiropractors is their treatment notes outline the same complaints and care provided with every visit – it is almost as if the provider was using the “copy/paste” function on a word processor.

The degree and duration of relief resulting from the treatment: A review of what is stated in chiropractic medical records should always be reviewed for consistency. This includes whether the care being provided is advancing the patient’s care and consistent with their deposition testimony, and findings at an independent medical examination.

The frequency of treatment: This element evaluates how often the injured employee is treating and how they are scheduling appointments. Initial care with a chiropractor is typically set at certain intervals. After a period of time, that care should diminish, or be on an as-needed basis.

The relationship of the treatment to the goal of returning the employee to suitable employment: A successful return to work should be the goal of any medical care and treatment provided to an injured employee. This becomes paramount when dealing with chiropractic care as frequent, ongoing care can leave someone at their baseline with no improvement in pain relief or functional ability; and

Cost of Chiropractic care: This is an important factor to consider, especially when an injured employee is seeking approval for care after 10-12 weeks of care.

Issues to Review When More Care is “Required”

When it comes to chiropractic care, it is important to obtain detailed information from the injured employee on how they were referred to the chiropractor. Closer scrutiny should take place when this is someone the employee has seen in the past or based on a family member referral. A claim should be heavily scrutinized if the chiropractor shares a building with, or located in close proximity to a physical therapist also treating the injured employee.

Other issues to consider when challenging excessive care, or approving additional chiropractic care should include:

The injured employee’s opinion as to relief obtained;

The duration of relief from symptoms;

Whether symptoms return once care stops;

The use of other “alternative” medical care;

Whether the injured employee is psychologically dependent on chiropractic treatment;

Whether the frequency of treatment is warranted;

The cost/benefits analysis regarding treatment provided compared to the relief obtained;

The employee’s overall activities and the extent of the employee’s ability to work; and

The potential for aggravation of an underlying condition.

Conclusions

The goal when approving medical care and treatment should always concern the nature and extent of the injury and getting the employee back to their pre-injury condition. This can be obtained through chiropractic care. When handling a claim involving this treatment modality, it is important to be vigilant and ensure it is effective in providing lasting relief.

Author 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/

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

Filed Under: Medical Cost Containment

Ensure Your Workers’ Comp Files Are Properly Documented

July 10, 2019 by Michael B. Stack

It is important for members of the workers’ compensation claim management team to document their files properly. If you do not have access to the electronic claims file, now is the time to ask. If not, it should be a condition of claim handling agreement with your third-party administrator (TPA) or insurer.

What is in a Properly Documented File?

Several items need to be in a properly documented claim file. Important issues concerning coverage should be addressed at every step of the claim. This should include:

The policy number;

The policy coverage period;

The states or jurisdictions covered by the policy;

Endorsements to the policy; and

Exclusions from the policy coverage.

If you have questions, be sure to ask – and demand prompt answers before the adjuster proceeds with the contacts and with the investigation.

Points of Contact Following a Work Injury

Prompt contact with all parties should be initiated immediately after the report of the claim. Demand action is being taken on the same day a claim is received, or within 24 hours of the loss. Points of contact should include, but not be limited to the following:

The employee;

The employer;

Any witnesses to the injury. All contact information for witnesses should be included as people change jobs over time; and

The medical provider(s), including ambulance services and law enforcement responding to a work injury.

The clock is ticking. Steps taken during the initial phase of a claim are important. Other important notes from a claim handler should be noted. Important information to obtain should include:

Accident details as stated by the employee in the recorded statement, the employer’s version of the accident, and any witnesses’ version of the accident;

Index Bureau information and any history of prior insurance claims;

Analysis regarding the potential for subrogation;

The current disability status of the employee, and projected return to work date;

The employee’s job description, including title, duties, equipment utilized, etc.;

Length of time the employee has worked for the employer;

The availability of modified duty for the employee not yet back to work;

Information on the nature of the injury, the treatment plan, diagnosis, and the prognosis;

Subjective information such as the employee’s attitude toward the employer, returning to work, and the quality of the medical treatment;

The explanation of benefits provided to the employee and the action plan information provided to the employee;

If there is an attorney representing the employee, if so, obtain the representation agreement.

Moving the Work Comp Claim Toward Settlement

Any time is the right time to move a workers’ compensation claim toward settlement. Steps toward resolving the claim can also be taken after a work injury. Part of this process includes obtaining documentation that is required to evaluate the claim and set reserves. Documentation the claim handler needs can include:

First Report of Injury;

Recorded statements of the employee, the employer, and any witnesses;

Medical authorizations. These will be needed to obtain a complete set of medical records regarding other conditions possibility contributing to the employee’s disability;

Wage records from the employer to calculating the average weekly wage;

Complete set of medical records. This may include past records, records related to the work injury, and for other records created in the future;

Other required state workers; compensation forms;

Police reports, EMS reports, OSHA reports, other governmental reports on an accident;

Independent medical evaluations (IME) or peer review;

Vocational and rehabilitation reports;

Subrogation documentation;

Second injury fund correspondence and/or documentation;

Correspondence to/from employee’s attorney;

Correspondence to/from defense counsel;

Workers’ Compensation Board/Industrial Commission correspondence and records; and

File notes on every telephone call, e-mail, or any other activity related to the file.

The claim file may also contain other important information on the claim handler’s efforts to resolve the claim, including:

Case evaluations and status reports regarding causation, legal defenses, and settlement;

Exposure analysis and case valuation;

A synopsis of any legal questions and the efforts to resolve those questions;

Information concerning the disability rating or the potential disability rating;

Legal analysis regarding a litigation strategy;

The “action plan” to bring the claim to a conclusion; and

A history of the settlement negotiations.

Conclusions

The claim handler’s file notes contain the main details of all file documentation received regarding a workers’ compensation claim. It is important for employers to play an active role in every workers’ compensation claim and be engaged. Failure to do so can prove to be costly and increase program costs. The file documentation itself, whether maintained in the computer or by paper, must be complete and answer any questions you have about the file.

Author 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/

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

Filed Under: Claim Management

Workplace Safety for Non-English Speaking Employees

July 9, 2019 by Michael B. Stack

The American workplace continues to evolve and workplace safety for non-English speaking employees is paramount. Stakeholders running an effective workers’ compensation program need to be aware of this issue and implement policy to ensure workplace safety.

The American Workforce – By the Numbers

America has always been a land of opportunity for people with many backgrounds. In the past, immigration was mainly driven by European populations seeking a fresh start. Times have changed. This now includes shifting immigration patterns with people from Africa, Asia, and Latin American countries coming to the United States in search of a dream.

Unlike immigration in the past, newer immigrants are not dropping their native language for English. This presents a challenge to employers as they seek to promote a workplace that reduces work injuries. Now is the time to act.

Workplace Injuries and Hispanic Populations

The American Society of Safety Professionals has paid particular attention to workplace safety for non-English speaking Hispanic employees who may generally speak Spanish as their primary language. Studies indicate the following characteristics:

Nearly 70% of Hispanic employees who died in the American workplace were born outside the United States;

Hispanic immigrants account for over 20% of the construction workforce in the United States. These are jobs that require employees to work at heights and use safety equipment to prevent falls. Impacted industries include roofing, ironworkers, and other physical labor positions. A common denominator in these fatal incidents is workers not using proper equipment, work practices used in their native country (or by custom), or not being trained in the use of required equipment; and

Employees identified as Hispanic account for 15% of all fatal injuries – a rate of 3.7 per 100,000 full-time equivalent (FTE) employee, compared to a rate of 3.5 per 100,000 FTE for workers as a whole.

Avoiding Workplace Stigmas

All interested stakeholders in the workers’ compensation system should ensure employees, especially those who do not speak English as a primary language, are treated with respect and dignity. This is an opportunity to put aside differences of opinion people have regarding immigration (legal and illegal) and make sure employers step up when it comes to making the workplace safe, and ensuring work injuries are reported in a timely manner. In sum, one’s immigration status should never serve as a barrier to denying workers’ compensation benefits. This is a policy decision best left to state legislatures, and not one’s personal preference.

Taking the Next Step – Creating a Positive Work Environment

The first step to ensure workplace safety for non-English speaking employees is making sure everyone is on the same page when it comes to employment practices, and safety education. Steps interested stakeholders should consider can including:

Hiring safety individuals that speak multiple languages. If an employer has a significant number of Spanish speakers on staff, efforts should be made to have a safety professional who is fluent in that language;

Educate non-English-speaking employees on proper safety standards and procedures. This includes creating materials in other languages and reinforcing these best practices in the field; and

Involve all interested stakeholders in the safety process. This includes management, and organized labor. It is important to lead by example!

Additional attention needs to be geared toward employees who generally work as day laborers. These are people who typically work for someone for a short period of time – sometimes only a few hours on occasion. People involved in the workers’ compensation system can also ensure these employees understand the system, know how to report a work injury, avoid common errors such as working for employers without insurance coverage, and engaging in safe work activities.

Conclusions

The changing American workforce places many demands on employers and employees. One such change is to ensure workplace safety for non-English-speaking employees in the workplace. Now is the time to get engage and ensure these workers understand the process, receive proper safety training, and have access to resources to promote a better work environment

Contact: mstack@reduceyourworkerscomp.com.

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

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

Filed Under: Safety and Loss Control

Five Effective Ways to Communicate Safety Messages

July 8, 2019 by Michael B. Stack

Communicating safety messages needs to be communicated consistently and continually. It is something that needs to involve all interested stakeholders. Taking the following steps can ensure the workplace remains safe for all employees, and provide a consistent response once an injury occurs.

Five Suggested Ways to Communicate Safety Messages

A safe workplace starts with an employer dedicated to safety. There are countless opportunities to communicate safety messages and promote a safe work environment. It starts with a commitment by all interested stakeholders to be involved in the process and not putting profit ahead of safety.

Employee Safety Meetings (for all shifts): Taking this step reinforces the message that safety is important in the workplace. Anyone from the president to mailroom clerk can talk about safety and promote a better work environment, but it is important for those who are perceived as leaders to do the talking – job titles do not matter. These leaders should also practice what they preach to ensure follow-through.

Posters and Bulletins: This can go beyond posters required by law. Keeping safety reminders visible and in conspicuous places around the workplace reinforces important safety reminders. Dedicated employers can also have posters produced in different languages if any employee does not commonly use English as a primary language. Graphics can also reinforce the message of a safe workplace.

Newsletters: Every company newsletter should include a blurb about safety. It can highlight changes suggested by an employee on how the workplace became safer. It can also update employees on changes to protocols and procedures. Other common highlights can include information on how to report a work injury and where to receive medical care and treatment.

Safety Suggestion Box: People are sometimes afraid to make suggestions on how to improve workplace safety. Anonymous suggestion boxes can provide people the ability to make suggestions. It is important to follow-up and highlights how these suggestions improved a defective condition and how remediation was made.

“Toolbox” safety talks conducted informally by supervisors with their employees: Safety should be emphasized every workday. Supervisor and managers can play an important role in explaining to their direct reports on how work injuries impact company and program efficiency. Do not be afraid to go beyond the basics when it comes to safety.

Other Requirements: Beyond the Basics of Workplace Safety

Training records must be kept that refer to federal and state regulations related to workplace safety. It is important to offer safety training in languages that match the workplace demographics.

Employers should also consider the implementation of a Safety Recognition Program. Before developing a Safety Recognition Program, consider the following:

You cannot “buy” safety, but you can expect safe behavior and recognize employees who deliver.

Concentrate on results (i.e., fewer injuries) AND on behaviors (i.e., use of personal protective equipment, safety inspection scores).

Establish clear, measurable goals for both results and behaviors.

Employees should know that there will be serious consequences for not reporting accidents.

Awards should have true value and be more than just cash (something tangible to remind the employee why they won the award and presented by senior management during an employee celebration (pizza party, for example).

Senior management must completely support the Safety Recognition Program and be visible in the process.

Consider rewarding individuals for safe behaviors and groups for safety results.

Conclusions

Now is the time to communicate safety messages and promote safety in your workplace. This requires all parties to be fully engaged, and leadership in management to follow through on their commitments. This includes effective communication and engaging employees on all aspects of a safe work environment.

Contact: mstack@reduceyourworkerscomp.com.

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

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

Filed Under: Safety and Loss Control

The RED FLAGS of Workers Comp Fraud

June 19, 2019 by Michael B. Stack Leave a Comment

A critical part of controlling workers’ compensation costs is to put into place solid investigation techniques. No matter how severe or minor a workplace injury, each case needs to be reviewed to identify any fraudulent claims and take appropriate action.

When communicating with employees, make it clear that the company will:

Immediately investigate each accident when it occurs to determine the root cause

Identify corrective measures

Watch for minor extensions of days out of work and outright fraudulent claims.

Review these Red Flags of Fraud and request an investigation if you suspect a claim is illegitimate or exaggerated.

Injured Worker Red Flags:

Injury reported late, to an attorney or to the state commission before reporting it to the employer.

Fails to attend weekly meetings.

Is uncooperative, e.g., refuses to try a transitional duty job.

Is never home when you phone, especially during regular workday hours.

Has only a postal box rather than a home address.

Misses doctor appointments.

Is known to perform seasonal activities, hobbies, or work.

Has moved out of town or out of state.

Disputes average weekly wage due to additional income.

Files for benefits in a state other than the main location.

Disputes information supplied by the employer on “First Report of Injury” notice.

Refuses to cooperate in claim investigation.

Has an unstable work history.

Has recently been terminated, demoted, or passed over for promotion.

Has a prior history of injury management or liability claims.

Makes excessive demands or is pressing for a quick settlement.

Carries little or no health insurance.

Medical Flags:

Medical reports are repetitive, indicating continuing, constant pain with conservative medical treatment

The word “disproportionate” is used in medical reports

The doctor mentions there is “facial grimacing”

Positive “Waddell Tests” (test for low back pain) are mentioned

Workplace Flags:

Employer experiencing labor difficulties (i.e., layoffs, strikes, walkouts).

Tips from fellow workers, friends, or relatives.

The insurance company wants to settle the claim for a considerable amount of money.

“Things” just don’t ADD UP! Trust your gut, and if something seems off, be sure to check it out.

Contact: mstack@reduceyourworkerscomp.com.

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

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

Filed Under: Fight Workers Comp Fraud & Abuse Tagged With: Combating Fraud, Controlling Fraud, Fraud & Abuse, Lowering Work Comp Costs, Red Flags of Fraud, reduce workers comp, reduce your workers comp, Reduce/Lower WC Costs, Reducing Workers Compensation Costs, WC Fraud, workers comp, Workers Comp Fraud, Workers Compensation

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

June 10, 2019 by Michael B. Stack

Losses 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.

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.

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.
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.’
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.

Author 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/

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

Filed Under: Lowering Premiums & Experience Mod

Properly Prepare A Confidential Mediation Statement

June 6, 2019 by Michael B. Stack

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 - Amaxx Author 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/

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

Filed Under: Settling WC Claims

Defending Permanent Total Disability (PTD) Cases in Work Comp

June 5, 2019 by Michael B. Stack

Members 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.

Contact: mstack@reduceyourworkerscomp.com.

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

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

Filed Under: Claim Management

How to Calculate Your Minimum Experience Modification Factor

June 3, 2019 by Michael B. Stack

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 Do With 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 - Amaxx Author 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/

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

Filed Under: Assessment & Diagnostics