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.

Know Your Correct Job Classification Codes To Save Workers’ Comp Costs

employee class codeWhile implementing injury management best practices in workers’ compensation is the most effective way to reduce costs and improve injured worker outcomes significantly, the only challenge is tangible results from improvements takes time.  Self-insured or high-deductible programs can see tangible results in a matter of months, but an employer in a guaranteed cost program can sometimes wait years to see results in an improved experience mod and lower premium.

 

The oversimplified basic formula for calculating the total cost of workers’ compensation is:

 

Payroll x Rate x Experience Modification Factor x Adjustments = Premium

 

Premium + Claim Costs (in a loss-sensitive plan) = Total Cost of Workers’ Compensation

 

 

Double-check to make sure you Job Classification Codes are Accurate

 

Job codes are a huge component of the premium you pay for workers’ compensation.  Therefore, it’s critical codes be applied correctly. The reality of our fast-paced world is businesses change constantly.  As a business evolves, the type of worker needed changes to fit the new business model, and as the type of worker changes, so do the job codes.  Save your business premium dollars by reviewing your job codes periodically –  whether the business has changed or not.  Either way, you save money!

 

 

Where does an employer find these job codes?

 

Most states have adopted a job classification system devised by the National Council on Compensation Insurance (NCCI), consisting of 600+ job codes.  Since workers’ compensation is a state-driven system, applying the correct codes is not always an easy task.  A few states have adopted the NCCI classifications system, but have unique classifications for certain workforce exposures.  Other states have adopted their own classification systems. To make this even more complicated, NCCI doesn’t publish its complete list of codes on the Internet.  You can buy the list from NCCI, but it is not practical for most businesses to do so.

 

 

Why are there so many job codes?

 

Jobs having low-risk exposure carry a low rate; high-risk jobs carry a higher rate.  As an example, the rate for clerical workers is much lower than workers who handle chemicals because the potential workplace injury exposure associated with the two jobs is quite different. No matter what system your state uses, each job code has an associated rate used to calculate your worker’s compensation premium.  A business may also have multiple classifications.  A chemical manufacturer is further classified by the types of chemicals it produces.  Once the business classification is properly identified, classifications drill down to the type of work performed (such as chemical material handler, clerical, sales, etc.).

 

 

So, where do you turn? 

 

Your insurance carrier and broker have a list of job codes by state and will work with you to identify the correct codes for your business.  As this review may save premium dollars for you, it also benefits the carrier by ensuring the risk they cover is a known risk.  For corporations with multiple sites in several states and thousands of employees, reviewing job codes involves several stakeholders and takes time, perhaps many months.  At the table should be the insurance risk manager, insurance carrier, and broker.  You also want to invite division representatives who are well acquainted with site operations and the actual work performed there.  You may want to include a payroll representative who actually assigns job codes to individuals within your payroll system.  Once the stakeholders are identified, begin a systematic review of the operations and its jobs.  As a possible approach, first identify those job titles that are can be grouped into large classifications, such as clerical and sales, which are most easily assigned to a job code.  Then, move into the more specialized areas such as the chemical material handler mentioned above.

 

 

Repeat! Repeat!

 

Enough cannot be said of the importance of reviewing your job codes periodically, particularly if your operation has changed in recent years.  A thorough review ensures all codes are correctly applied for all workers and will likely result in a lower workers’ comp premium for the company.

 

 

 

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.

 

Ensure Closed Settlement Agreements Are Not Reopened

Settlement AgreementsThe only good file is a closed file!  In workers’ compensation, this is accomplished by settling with the injured employee via a Stipulation for Settlement or Release.  While this may “close-out” a claim, employee’s in many jurisdictions are able to re-open it by vacating the matter and pursuing additional workers’ compensation benefits.  This possibility should prompt members of the claim management team to make their settlement agreements as ironclad as possible.

 

 

Issues to Consider When a Petition to Vacate Has Been Made

 

The standard to reopen a settled workers’ compensation claim varies in each jurisdiction.  There are common themes that members of the claim management team should consider when working with defense counsel on these matters.

 

  • Mistake of Fact: This can occur in several different instances: Mutual mistake of fact, which involves an unforeseen consequence of foreclosing an employee’s then unrecognized right to various workers’ compensation benefits; Unilateral mistake of fact, which occurs when a party or their attorney lacks knowledge of a material fact that would unquestionably have caused them to not settle the workers’ compensation claim; Mistake of law; Misunderstanding; or Lack of counsel;

 

  • Newly Discovered Evidence: This is generally limited to cases where the evidence is in existence at the time of the settlement agreement, but was not discoverable through a diligent investigation. Examples of this include medical records that were not made available but requested by a party.  Courts have not allowed medical and other evidence that was available or could have been available, but efforts were not made to discover them;

 

  • Fraud: This occurs when there is a false representation of a material fact, the fact must be of suspectable knowledge, the representing party must know the fact is false, the representing party must intend for another to be induced to act based on the false representation, the other party must have acted on the false representation, and the misrepresentation must be a proximate cause of actual damages (g., a settlement closing out various workers’ compensation benefits);

 

  • Substantial Change in Condition: This includes a number of different medical factors.  It can include a change in diagnosis, change in the employee’s ability to work, additional permanent partial disability, the need for more costly and/or extensive medical care (g. – the need for in-home nursing services), and a worsening of the employee’s condition that was not anticipated at the time of settlement; and

 

  • Null and Void: This comes down to questions of “competency,” and whether the employee who enters into the settlement can understand the significance of it. Factors to consider can include the age of the injured employee or their mental capacity.

 

 

Making the Settlement Final

 

It is important to understand that the workers’ compensation settlement is like a contract – it is only as good as the person who drafts it.  Basic rules of contract construction are taken into consideration.  The chief concern from a claim handler’s perspective is it being constructed against the party who drafts it.  Steps that can be taken into consideration include:

 

  • Make sure the nature of the dispute is clearly stated in the settlement agreement. This includes outlining in detail the claims and contentions of each party;

 

  • Outline the terms of settlement in a clear and concise manner. Correctly state the nature and extent of the work injury – and make sure all work injuries being closed out are listed in the agreement; and

 

  • State with certainty what the terms of settlement and benefits being closed out under the agreement. Consider highlighting and underlining these material terms.

 

If allowed, have the injured employee acknowledge they have read the entire agreement and had it explained to them by an attorney. They should understand their condition might change in the future or become substantially worse, and that if the condition, unfortunately, becomes worse in the future, it could involve a very large amount of medical or surgical expense and disability of a very serious and prolonged nature.  If the employee is not represented, they should also acknowledge in the agreement they had the right to be represented by an attorney but decided to forego this right.

 

 

Obtain Help Drafting Settlement Agreements

 

A settlement agreement is a legal document which should be drafted and reviewed by skilled professionals.  These professionals include the use of an attorney, as well as settlement consultant for the planning and negotiation of the agreement.

 

 

 

Conclusions

 

Settlement of a workers’ compensation claim should include finality and peace of mind.  While this might not always be the case, effects can be made to make the settlement agreement as ironclad as possible to avoid it being vacated and incurring additional litigation expenses.

 

 

 

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.

Use Collaboration, Technology for ADA Compliance and Positive Return to Work Outcomes

collaboration and return to workReturning an injured worker to the job before he’s physically ready can be a nightmare. The last thing an employer wants to do is put the employee at risk of reinjury.

 

On the other hand, waiting to bring an employee back until he is 100 percent recovered prolongs the number of lost work days and impedes the worker’s recovery. Reinjuries, as well as extended disability durations both, add costs to the claim.

 

What’s needed is an accurate depiction of the physical requirements of a job, along with a deep understanding of exactly what the injured worker is physically able to do or not do. Armed with such information, the employer can make the best decisions for the injured worker and the organization.

 

 

ADA Considerations

 

One issue that may come into play when returning an injured worker is the Americans with Disabilities Act. Employers cannot refuse to let an employee return if he can perform the essential functions of that job — even if that requires reasonable accommodations.

 

Following return to work best practices will ensure compliance with the ADA. Return to work has even been described as the “ADA on steroids.”

 

Both return to work and the ADA involve a collaborative process between the employer, employee, and possibly, the medical provider. Whether the disability is work-related or not, the first question to ask is whether the person can do his original job.

 

In many cases, the worker may be able to perform the essential functions of the job with some modification or reasonable accommodation. That may involve an ergonomic change or schedule alteration, for example. As long as it does not impose undue hardship — either financially or operationally — on the employer, accommodations should be explored, both from a return to work and ADA standpoint.

 

Return to work best practices entail resuming work as soon as possible, both to help the worker heal and to reduce claim costs. A work accommodation or transitional duty that helps the worker get to the point where he/she can fully do the job is the best course of action.

 

If the worker cannot perform the essential functions of his job even with accommodations, providing a transitional job elsewhere within the company, or a position off-site would be the next step.

 

A key to ensuring compliance with the ADA and getting the best outcome from a return to work standpoint is to engage the employee in what is formally called the interactive process. This allows for an open and honest discussion about what the employee can do and how the employer can facilitate the process.

 

 

Defensible Return to Work Solutions

 

There have been new tools developed that can accurately match a person’s physical capacity with specific jobs, allowing for a solid decision as to what the person is capable of doing, whether with reasonable accommodation or not.

 

An example is a digital job profiles integrated with automated job-matching analysis, developed by MyAbilities, combining ergonomic research with artificial intelligence-powered software that allows for ADA compliance and RTW best practices. It addresses the employee’s physical degree of fitness for the current job and runs those capabilities against all the digital profiles in a company’s job bank. If the injured worker is unable to perform his job, even with accommodation, the tool can identify other positions within the company that he might be capable of performing within his physical restrictions.

 

Digital job profiles comprehensively describe the physical requirements and features of every possible job. Each job includes graphics and video profiles, which significantly help evaluate and depict its physical requirements. The company’s automated physical assessment used in conjunction with the job-matching tools can quickly and accurately provide a picture of the worker’s physical capacity for various positions.

 

Under ADA law an employee is required, with or without accommodation, to perform the essential functions of a job achieving the same work product as other employees. However, this same stipulation does not apply under workers’ compensation RTW best practices which take ADA requirements a step further.

 

The job-matching tool allows employers to leverage the digital job profiles and interactive process to modify the employee’s original position with or without accommodation or provide an alternative transitional duty position.  Exceeding ADA compliance requirements, this RTW best practice would be true even if the worker is unable to perform all of the essential functions of the job or their work product is less than comparable to other employees.

 

 

Conclusion

 

Getting injured employees back to work is a win-win for everyone — as long as the job involved is appropriate for the worker’s level of fitness. By collaborating with the injured worker and using sophisticated tools, such as the job-matching analysis developed by MyAbilities’ will ensure the best outcomes.

 

 

 

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.

Social Security Disability Offset and Workers Compensation

ssdiSocial Security disability benefits (SSD) are paid through a government disability program for workers who have had enough earnings paid into the Social Security system, regardless of whether their injury or illness is work-related. Injured workers are only entitled to SSD if they have a long-term impairment that precludes any gainful employment. SSD is only payable to workers unable to engage in any substantial productive activity whose physical or mental impairment is expected to last at least a year or result in death.

 

 

Duplication of Benefits

 

When an employee is so seriously injured that they receive a workers’ comp rating that classifies them as permanently and totally disabled, the injured employee may be eligible to receive both workers’ comp permanent total disability benefits and SSD.

 

If they receive both workers’ comp and SSD at the same time, they may get more compensation on a weekly or monthly basis than what they would if they were still working.

 

 

Offset

 

To prevent this duplication and overpayment of disability benefits, Social Security and state workers’ compensation statutes have offset provisions reducing the amount paid to the disabled employee.

 

The offset counterbalances the amount that the injured worker would be overpaid. The intent of the offset provisions is to ensure that an injured worker does not receive excessive pay from the combined workers’ comp and SSD. However, the combined payments after the reduction will not be less than the amount of the total SSD before the offset.

 

 

Average Current Earnings

 

Disabled employees cannot receive more than 80% of what was their “average current earnings” pre-disability. The Social Security Administration (SSA) defines average current earnings as the highest of:

 

• The average monthly earnings from “covered employment and self-employment” (where Social Security taxes were paid) during the highest five consecutive years

 

• The average monthly earnings in the calendar year of highest earnings from covered employment during the five years ending with the year in which the disability began

 

• The average monthly wage on which the disabled employee’s unindexed disability primary insurance amount is based

 

Disabled employees who have second jobs where they receive payments “under the table” without paying Federal Insurance Contribution Act (FICA) taxes cannot collect SSD (or workers’ comp) on the undeclared/untaxed income.

 

 

Total Family Income

 

The maximum amount of benefits, instead of determined by average current earnings, may be determined by the total amount of SSD received by all members of the injured worker’s family in the first month that workers’ comp is received.

 

 

Who Is Affected By the Offset Provisions?

 

The offset of SSD applies to disabled workers under the age of 65 and their families. Benefits for a worker’s spouse or dependent children are offset before the offset is applied to the worker’s benefits.

 

 

Which Payment Is Offset

 

SSA defers to each state’s laws as to whether the workers’ comp or the SSD payment will be offset. In most states, the SSD is reduced to an amount that equals 80% of the average current earnings when added to the workers’ comp disability payment.

 

A few states have laws that require the SSD payment to be primary, so that the state workers’ comp disability payment is reduced to make up the difference between what the SSD payment would be and the 80% of the average current earnings. Take, for example, an employee under the age of 62 at the time the combined Social Security disability and workers’ comp disability payments began. The employee was earning $900 per week before the injury and is receiving a workers’ comp permanent total disability payment of $600 per week. Based on the employee’s SSA earning records, the employee is entitled to $250 per week after the SSA approves them as permanently disabled. Instead of collecting $850 per week ($600 from workers’ comp and $250 from SSD) the employee will collect a total of $720 per week (80% of the $900 per week earnings – assuming the employees earnings immediately prior to the injury were their highest “average current earnings”). Social Security pays their disability benefits monthly.

 

In most states, the employee in this example would still collect the $600 per week from workers’ comp and the equivalent of $120 per week from Social Security, for a total of $720 per week. In the states where the SSD payment is primary, the employee still gets $720 per week, but the workers’ comp payment is $470 per week ($720 minus the $250) for their permanent disability payment, and SSD pays their $250 per week equivalent on a monthly basis.

 

 

Other Disability Benefits

 

There is no further offset or reduction if the employee receives other types of disability benefits or other income including:

 

• Private disability insurance

 

• Federal, state or local government disability

 

• Veteran’s Administration disability

 

• Railroad Unemployment Insurance Act sickness

 

• Black Lung Part B

 

• Proceeds from a third party liability settlement

 

• Jones Act payments

 

• Payments from a tort lawsuit

 

• Unemployment

 

• Private pension or private insurance

 

 

Lump Sums

 

If the disabled employee takes a lump sum settlement instead of weekly payments for their workers’ comp permanent total disability benefits, SSA will consider it as an offset. When this happens, SSA will prorate the lump sum settlement over the period that weekly benefits would have been paid and reduce their SSD payment accordingly. If the lump sum settlement indicates that a portion of it is for future medical expenses, that portion will be excluded from their calculations.

 

 

 

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.

 

Selection Criteria for New Third Party Administrator (TPA)

third party administratorWhether you are just starting your self-insured claims program or have decided it is time for a switch to a new third party administrator (TPA), the selection of the new TPA is one of the most important decisions you can make in the administration of your self-insured program.

 

Employers switching TPAs often ask questions of potential new TPA partners that address the issues they have had with their current TPA. Employers frequently make the mistake of not asking the new potential TPA partner about areas where the current TPA performs well.

 

 

Areas that need to be explored with all potential TPAs before selecting the next TPA include:

 

  • Obtaining a copy of the TPA’s Best Practices to confirm their claim handling standards
  • Obtaining a list of the current clients and former clients to contact for their impression of the TPA’s abilities
  • Verifying the TPA has a claims office in each state where you have business locations
  • In large states, verifying the claims office(s) are located near your business locations
  • Verifying the TPA will assign dedicated adjusters to your account in areas where your claim volume is large enough to occupy all of one or more adjusters, and will assign a designated adjuster to handle all claims in locations where you have inadequate claim volume to keep one adjuster busy
  • Determining the claim reserving authority the adjusters will have
  • Determining the claim settlement authority the adjusters will have
  • Confirming the experience level of each of the dedicated or designated adjusters
  • Determining the frequency of the claim file reviews by the claim supervisors and the extent of the directions and guidance provided by the supervisors
  • Confirming the licensing of each adjuster and each claims office
  • Establishing the claims intake process
  • Establishing the maximum number of claims that will be assigned to each adjuster
  • Establishing who the legal defense firm(s) will be when defense counsel is needed
  • Establishing who the medical triage company will be
  • Establishing who the medical management company will be when medical management is needed
  • Establishing who the pharmacy benefit manager will be
  • Establishing who will provide the medical fee schedule reviews
  • Determining the capabilities of the claims management system used by the TPA
  • Determining whether your claims management system can be integrated with the claims management system of the TPA and who will be responsible for maintaining the systems integration
  • Verifying that the TPAs claim management system will be able to provide all the data and claim management reports needed to manage your claims programs
  • Determining who will be responsible for correction of data errors that occur
  • Determining the security measures the TPA will take to protect the confidentiality of your data and financial information
  • Determining the nature and extent of the financial data available on each claim file
  • Determining if the TPA data system will allow the creation of ad hoc reports
  • Verifying the TPA will allow annual independent claim file audits to verify compliance with Best Practices including the prevention of claim leakage

 

 

This list provides just some of the areas that need to be considered when selecting a new TPA. By addressing these issues during the TPA selection process, further problems with the new TPA can be reduced, if not eliminated.

 

 

 

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.

NCCI Report Highlights Early Identification of Prescription Drug Abuse

Prescription Drug AbusePrescription drugs continue to contribute to a significant portion of medical costs in workers’ compensation claims nationwide.  This is due in part to opioid addiction and its negative impact.  Gains are being made, which means proactive members of the claim management team need to be continually engaged and implement best practices to avoid addiction and reduce the portion of claims consumed literally by prescription drugs.

 

 

NCCI Report Highlights the Problem

 

The National Council on Compensation Insurance (NCCI) recently released a report regarding prescription drug costs in workers’ compensation case.  The report sets forth the following encouraging conclusions:

 

 

  • While the prescription drug share of medical costs in workers’ compensation cases is at 13.7%, this amount declined by 2% in 2015, and 4% in 2016; and

 

  • Main drivers in prescription drug usage include Lyrica, OxyContin, and Gabapentin, which account for more than 15% of prescription drug costs in 2016.

 

While some of these trends are positive, it should still be understood that more can be done by proactive claim handlers to control the costs of prescription drugs in workers’ compensation claims and run a more effective program.

 

 

Early Identification of Prescription Drug Abuse

 

All interested stakeholders should be on the look-out of for overuse and abuse of prescription drugs.  Signs of misuse include the following:

 

  • Identification of injured employee’s with risk factors that include past/present history of substance abuse, family history of substance abuse, and various psychological and/or psychiatric conditions;

 

  • Injured employees that specifically request prescription medications by their name brand and refuse to accept generics; and

 

  • Instances where someone regularly claims to lose their prescription drugs and is requesting a refill.

 

The existence of a pain management agreement is a common feature in most workers’ compensation laws in instances where an employee is using opioid-based drugs.  This agreement should be strictly followed.  There should also be a renewed effort on the part of everyone to direct an injured employee back to work, even if it is in a light-duty/sedentary capacity.  Studies suggest strong return-to-work efforts significantly reduce the medical spend on any type of personal injury claim.

 

 

Multi-Faceted Approach to Reducing Prescription Medical Expenses

 

Proactive stakeholders in the workers’ compensation system can advocate for change to reduce the cost and human toll prescription drugs – mainly opioid-based – take on injured employees.  This includes an effective three-pronged approach.

 

  1. Prevent new cases of opioid-based prescription medication abuse from occurring: This all starts with the use of a pain management agreement – and making sure it is strictly enforced.  This zero-tolerance approach will ensure powerful pain medications are not misused or abused.  Terms within the agreement should include exactly how the medications are to be used, random drug testing and consequences for false/positives, failed tests and missed testing, how replacement medications are to be dispensed and where all prescriptions are to be filled – avoiding physician dispensing protocols.

 

  1. Treat people who are addicted with compassion: No process is foolproof, and anyone can become addicted.  It is important to treat individuals who suffer from this consequence are treated with respect and dignity.  All reasonable and necessary forms of treatment should be made available; and

 

  1. Use drug utilization measures to better target prevention and treatment: This is one of the most effective tools available to members of the claim management team in combating the abuse and overuse of opioid-based prescription medications.  Drug utilization review (DUR) is the process of reviewing all aspects of prescription drug usage – prescribing, dispensing, and use of medication.  It examines the individual usage of someone against predetermined criteria based on evidence-based medicine to ensure an effective and efficient result.  The recent NCCI report also credited the effective use of DUR in driving down the amount of money spent on prescription drugs in workers’ compensation claims.

 

 

Conclusions

 

There are many negative consequences of prescription drug abuse and misuse in workers’ compensation cases.  Steps are being taken to hold these adverse effects in check and also reducing workers’ compensation program costs.  This can be accomplished by implementing an effective approach that includes drug utilization review in your program.

 

 

 

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.

Workers’ Comp Mediation – Getting to “YES”

workers' comp mediationWorkers’ comp mediation and other alternative dispute resolution methods can be effective in the settlement of workers’ compensation cases.  It also helps promote program efficiency that frees up funds set in reserve, which in turn can be used to settle other claims.  Notwithstanding the benefits of using dispute resolution mechanisms, it is important for members of the claim management team and other interested stakeholders to prepare.  Failure to do so can waste everyone’s time and energy.

 

 

Selecting the Right Mediator

 

In most jurisdictions, there are no specific requirements or training someone needs to have to serve as a mediator.  The result is the parties to the workers’ comp mediation have the unfettered right to select the person to serve as the neutral.  With this in mind, it is important to note every mediator brings a unique skill set to the table.  This should include someone knowledgeable in a particular workers’ compensation act, and have a reputation for being able to cut through the smoke and mirrors of contentious litigation and get everyone to “YES!”

 

 

Preparing for a Successful Workers’ Comp Mediation

 

A mediator may often ask that parties submit a confidential mediation statement in advance.  This document can serve as the framework for reaching a favorable settlement and avoid wasting time.  Each mediator may have their own preference as to what is covered in the mediation statement.  Common points that should be considered can include:

 

  • An itemization of the benefits claims/defenses and potential recovery/exposure: The value of a workers’ compensation case is the starting point for settlement.  This often includes calculations for the employee’s average weekly wage (AWW), exposure for various indemnity benefits (TTD, TPD, PPD, and PTD) and medical benefits.  Other items to consider include the need for vocational rehabilitation services and the possibility of retraining.  All parties should consider the strengths and weaknesses of defenses such as causation issues, the reasonableness/necessity of medical care.

 

  • Expectations regarding a reasonable settlement range: The goal of mediating a case is to find common ground.  This requires compromise on the part of the defense interests and injured employee.  Attorneys, settlement consultants, and other interested stakeholders need to evaluate their cases and have an understanding as to where this case may settle.  This will allow the mediator to work with all sides in reaching an agreement.

 

  • The status of any prior negotiations, offers, and demands: Any settlement needs to start with a settlement demand.  This information should be communicated by the employee or their attorney to the employer/insurer before mediation takes place.  In the same regard, the defense interests should obtain reasonable settlement authority.  A claim handler ideally will be physically present at the mediation and able to get additional authority if necessary.

 

  • An honest assessment of your cases that includes its strengths and weaknesses: All parties needs to be honest about settlement and participate in good faith.  Attending a mediation just to see how the other side views the case can be unproductive and delay settlement on other cases.  A good mediator will challenge the parties if there is a sense they are not negotiating in good faith.

 

  • Confirmation that all intervenors and/or interested parties have received proper notice. It is important that all interested medical providers, private insurance carriers, and government agencies such as Medicare or Medicaid be made aware of their potential right of recovery.  This should be completed well in advance of settlement negotiations so they can provide all parties with an updated benefit resume.

 

 

Conclusions

 

Reaching a settlement on every case is not practical given the contentious nature of workers’ compensation litigation.  Notwithstanding these barriers, all parties should consider workers’ comp mediation as a tool to resolve cases.   It can also deliver the “win” all parties are looking for as they work hard in resolving disputes.

 

 

 

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.

Case Study: More than $1.5 Million in Savings Through Generic Substitutes

Generic drugs in workers' compensationThe latest Drug Trend Report from myMatrixx once again showed a substantial cost difference between brand-name and generic drugs. In fact, while the costs of brand name drugs are increasing, prices for generics are steadily decreasing. Unfortunately, some workers’ compensation stakeholders overlook this issue when preparing Medicare Set-asides.

 

Medications prescribed for the injured worker are expected to be included in the MSA to gain approval by the Centers for Medicare and Medicaid Services. There are exceptions; however; such as when it can be demonstrated the injured worker is no longer taking the medication. But switching from brand-name to generic medications is one of the most efficient and effective ways to reduce costs.

 

 

Generics vs. Brand-Names

 

Some people are concerned that generic drugs are of lower quality than brand-name medications. The Food and Drug Administration stipulates that all generic drugs must be equivalent to their brand-name counterparts. Additional FDA requirements include:

 

  • That generic drugs have the same active ingredient, strength, dosage form, and route of administration as the brand-name drug.
  • The generic manufacturer must prove its drug is the same (bioequivalent) as the brand-name drug.
  • All manufacturing, packaging, and testing sites must pass the same quality standards as those of brand-name drugs.
  • Any generic modeled after a single, brand name drug must perform approximately the same in the body as the brand name drug.

 

The FDA also points out that many generic drugs are made in the same manufacturing plants as brand-name drugs.

 

Are there differences between generics and brand name drugs? Yes, but as the FDA points out: “There will always be a slight, but not medically important, level of natural variability just as there is for one batch of brand name drug compared to the next batch of brand name product. This amount of difference would be expected and acceptable, whether for one batch of brand name drug tested against another batch of the same brand or for a generic tested against a brand name drug.”

 

Generic drugs are cheaper than brand-names because the manufacturer making the generic version does not have to go through costly clinical trials that new drugs do. Also, they don’t generally pay to advertise, market or promote the drug, since the brand-name maker has already established the drug in the marketplace. The competition created by multiple manufacturers developing a generic version of a brand-name medication further drives down the price of the medication.

 

The only reason for any patient to use a brand-name over a generic medication is if the generic drug causes unusual side effects to a particular person or, in rare cases, is less effective. In the vast majority of cases, patients do just as well with generic medications as with their brand-name counterparts.

 

The biggest difference between generic and brand name medications is the price. A case study of a recent MSA is a dramatic example of this.

 

 

Case Study (Provided by Tower MSA Partners): More than $1.5 Million in Savings Through Generic Substitutes

 

An injured worker who had been diagnosed with Post Traumatic Stress Disorder, anxiety and mood disorders was taking a variety of medications to treat his conditions. Among the more costly drugs were Wellbutrin, Klonopin, Rozerem, and Neurontin — all brand-name medications.

 

When discussions about settling the claim began, the initial MSA included $1,657,022 for medications and $30,058 for future medicals.

 

Total MSA Exposure — $1,687,081.

 

 

Solution

 

After identifying the brand-name medications as the key cost drivers in the initial MSA allocation, Tower recommended working with the injured worker’s attorney and the treating physician to switch to generic substitutes. The switch from brands-to-generics took several months to complete, to ensure the effectiveness of each.

 

When the conversion was completed, a physician’s statement was obtained confirming the switch from brand to generic, as well as an updated prescription history documenting ongoing generic use. Tower promptly submitted an MSA with an allocation of $112,572.

 

Results

 

CMS approved the MSA within eight days, allowing the parties to settle. The switch from brand-name to generic medications resulted in savings of $1,574,509 — and assured the injured worker would have enough funds for his future medicals and medications.

 

Conclusion

 

Developing and getting FDA approval for a medication is a long, complicated process. Drug manufacturers charge for a medication based on their expenses for creating and bringing the drug to market. Once the patent expires for a particular medication, other manufacturers are free to produce the same drug — as long as it meets the FDA standards for generics; i.e., it is the same drug.

 

The cost difference between generic and brand-name medications continues to grow further apart. By carefully looking at the medications prescribed for an injured worker and working with various stakeholders involved, an appropriate, cost-effective MSA can be created.

 

 

 

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: https://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.

11 Tips for Safe Use of NSAIDS to Treat Pain in Workers’ Compensation

NSAIDs in Workers' CompensationThere’s good news about the latest drug usage in the workers’ compensation, although it comes with a word of caution. The good news, according to the latest Drug Trend Report from myMatrixx is that the use and spend on opioids have once against decreased. Alternative medications treatments are being used more often to treat pain. While that’s good in the effort to prevent unnecessary use of opioids, one class of medications need to be taken with caution.

 

NSAIDs — nonsteroidal anti-inflammatory drugs— have become one of the medications of choice to treat pain. These can be very effective and don’t carry the risks of addiction or dependence of opioids. However, the problem is the potential negative effects on the cardiovascular system. Care needs to be taken when prescribing them, especially to older workers.

 

The situation is something of a Catch-22; older injured workers often have pain, but they are typically more vulnerable to problems of the cardiovascular system. Payers can help protect injured workers who are prescribed these medications by understanding the risks, educating patients and exercising caution.

 

 

NSAIDs and Cardiovascular Issues

 

NSAIDs are often used to treat mild to moderate pain. They are especially helpful for pain caused by inflammation, such as arthritis or a sports-type injury.

 

NSAIDs are drugs with analgesic, anti-inflammatory, and antipyretic activity. Some of the commonly used over-the-counter varieties are ibuprofen, such as Motrin and Advil; and naproxen sodium, or Aleve and Anaprox. Prescription NSAIDs include Celecoxib, or Celebrex; and diclofenac, known as Cataflam and Voltaren. Aspirin, which is an NSAID, does not pose a risk of heart attack or stroke and is commonly used to prevent those conditions.

 

Gastrointestinal problems associated with NSAIDs are well known. But researchers have also found that these medications can increase blood pressure and lead to congestive heart failure, as well as acute myocardial infarction.

 

The Food and Drug Administration warned of the potential risks of heart attack or stroke from NSAIDs in 2005. Ten years later the agency strengthened its warning, based on the advice of an expert panel that had reviewed additional information.

 

The risk was especially noted when the drug rofecoxib, or Vioxx, was on the market. It was removed in 2004, after being associated with as many as 140,000 heart attacks in the U.S. during the five years it was sold. It prompted further research about the risks of heart attack and stroke from NSAIDs in general.

 

According to the FDA:

 

  • The risks of heart attacks and strokes increase even with short-term use of NSAIDs and may begin within a few weeks of taking the medications.
  • The higher the dose of NSAID, the higher the risk. Also increasing the risk is the length of time the medications are taken.
  • People most at risk are those who already have heart disease, although others can also be at risk.

 

Patients taking diuretics may be at the highest risk of heart attack or stroke, especially during the first few weeks of taking NSAIDs.

 

 

Preventing NSAID Risks

 

Taking NSAIDs for a few days to relieve pain generally carries just a small risk, for most people. Employers and payers can help ensure injured workers are less at risk of developing heart attacks or strokes from the medications through the following strategies:

 

  1. Monitor for signs and symptoms of adverse effects.
  2. Educate injured workers and family members on the risks, especially those more at risk.
  3. Prescribe the lowest dosage possible.
  4. Prescribing taking the drugs for only a limited period of time.
  5. Try alternative remedies for people who have heart disease, if at all possible.
  6. Do not take more than one type of NSAID at a time.
  7. Try alternative medications, such as acetaminophen. Be aware, however, that this drug can cause liver damage if the daily limit exceeds 4,000 milligrams or if the person drinks more than three alcoholic beverages a day.
  8. Suggest week-long NSAID ‘holidays’ on occasion.
  9. Advise the injured worker to get medical attention immediately if he experiences chest pain, shortness of breath or sudden weakness or difficulty speaking.
  10. For muscle or joint pain, suggest hot or cold packs or physical therapy before NSAIDS, for those more at risk.
  11. Injured workers already taking aspirin to prevent a heart attack should talk with their physician first, as some NSAIDs may hamper the aspirin’s effectiveness.

 

Conclusion

 

The workers’ compensation industry has made inroads in curbing the unnecessary use of opioids. However, care needs to be exercised before giving an injured worker a blanket recommendation or prescription for NSAIDS, especially for people who have pre-existing heart-related conditions. As with all medications, moderation is key.

 

 

 

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: https://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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