Six Tips to Get the Most From Your Insurer

Six Tips to Get the Most From Your InsurerMany insurers are great providers, however, it is naïve to think every insurer has your best interests in mind. Sometimes you need to remind them, and be very specific about your needs.

 

Here are six tips to get the most from your insurer:

 

 

  1. Get Regular Reports

 

It is essential for companies to request brief, narrative reports from their insurers for all open claims at regular intervals of 30, 60 or 90 days. The frequency of reporting requirements is, of course, dependent on claims volume and availability of internal company staff.

 

A company with 1,000 lost-time claims annually may want less frequent or less-detailed reports every 90 days, for example, but, a company with only 100 lost-time claims annually may want full narrative reports every 30 days.

 

The adjuster should provide sufficient detail in describing “action items” planned for each 30-day period that indicates steps to be taken to resolve the claim.

 

Many companies requested information solely about reserve practices in the past, however, the focus of reporting requirements should be on claims resolution strategies.

 

 

  1. Ask About Recovery Potential – Get it in Writing

 

Additional items often incorporated in your Account Servicing Instructions (ASI) include requirements that “all claims should be evaluated for state second injury fund and subrogation potential.” The company should receive a report identifying recovery potential within 90 days after the claim is received by the carrier. The carrier files liens in all actions brought by its employees against third parties and these liens should not be waived or compromised without the company’s prior written consent.

 

 

  1. Benefit Checks Should Come to You First

 

In those states where permissible, benefits checks should be delivered to the company to distribute to employees. In lieu of this, copies of all checks should be forwarded to the company. Direct deposit can be a convenient way to distribute checks, but you will lose the ability to interact with your injured workers come payday.

 

All claims should be paid “without prejudice” in those states where possible, and the carrier should file for extensions of this status whenever possible.

 

 

  1. Ask Your Carrier to Reference the CIB

 

Companies should also request their carriers reference the Central Index Bureau, an insurance industry-maintained database, on all claims to determine if a prior claim was filed.

 

 

  1. Be Sure your Carrier and Insured Are On the Same Page with Denials

 

When the company requests a claim be discontinued, the carrier should be flexible enough to agree to take necessary steps to terminate benefits in a timely manner so long as the company’s position is legally supportable. The carrier should take an aggressive posture in denying insupportable claims. Conversely, the insured should be consulted before any claim is denied to avoid human resource and morale problems.

 

 

  1. Your Insurer Should Notify You In Advance Regarding Hearings

 

Furthermore, the company should be notified sufficiently in advance of all hearings and conciliations so its representative may attend the hearings. Also, the litigation manager should be consulted before appeals are filed and should retain the right to determine whether an appeal is warranted.

 

 

 

 

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/

 

©2018 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.

8 Steps For A Staffing Agency to Reduce Workers Comp Costs

Staffing Agency Reduce Workers Comp CostsImagine trying to calculate your workers’ compensation premium when you do not know the number of employees you will have at any one time or their job classifications. That’s life for the temporary staffing agencies – in their own peculiar world when it comes to workers’ compensation. Temporary staffing agencies often have a difficult time obtaining and maintaining workers’ compensation insurance.

 

In most jurisdictions, the temporary staffing agency is responsible for the workers’ compensation insurance as the worker is considered an employee of the temporary staffing agency, not an employee of the client.

 

While the broker for the temporary staffing agency can meet with an employer to get an estimate of the numbers and types of positions the agency may fill, it is only an estimate, or sometimes  a” shot in the dark.”

 

 

Misclassification of Employees Is Ongoing Problem

 

The workers’ comp premium classification code system did not have the temporary staffing agency in mind when the system for calculating workers’ comp premiums was created. Misclassification of employee job codes and under-reporting of payroll is an on-going problem for workers’ compensation insurance companies. The workers’ compensation premium audit is definitely necessary at the end of every policy year to get an accurate premium.

 

Some workers’ compensation insurance companies who do insure temporary staffing agencies take the process a step further. They created what is referred to as “pay as you go program” where the temporary staffing agencies workers’ comp insurance premiums are adjusted monthly or quarterly based on actual payroll data.

 

 

Captives or Assign Risk Pools

 

National staffing companies in the temporary staffing agency business set-up their own captives to self-insure their workers’ comp claims with the benefit of re-insurance to cap their total loss exposure. Smaller temporary staffing companies have joined “rent-a-captive” insurance programs in their effort to reduce their workers’ comp cost. Temporary staffing agencies with poor claim records (and some with not so bad of claim history) are forced into assigned risk plans or state pools.

 

In the past workers’ compensation premiums were such a big burden for temporary staffing agencies, some agencies were forced out of business. (For many temporary staffing agencies, the workers’ comp insurance premium is their second largest expense after payroll.) These were the staffing agencies who did not try to control their workers’ comp losses or who did a poor job screening potential employees.

 

 

8 Steps For Staffing Agency to Reduce Workers Comp Costs

 

All temporary staffing agencies regardless of size can take certain steps to reduce overall workers’ comp cost.

 

  1. Proper vetting and screening of employees you place with your clients. The screening process includes drug testing, background checks, and prior injury history.
  2. Refusing potential clients involved in hazardous or dangerous work.
  3. Testing and verifying the skill sets of employees before they are placed with an employer as improperly or inadequately trained employees are much more prone to injury.
  4. Verifying the employee has the proper safety equipment and protective gear, or the client has the equipment and gear necessary and will provide it to the employee.
  5. Training the staff of each placement office on proper and timely reporting of workers’ comp claims.
  6. Have a workers’ comp claim coordinator who actively follows up on a regular basis with any employee who is off work.
  7. Have a return-to-work program allowing you to place the employees who do get injured back to work at a different client who can accommodate any work restrictions.
  8. Have an insurance broker who is familiar with the temporary staffing agency business and who can place your company with more than one workers’ compensation insurance company.

 

Temporary staffing agencies can expect to experience periods of fluctuation making it difficult for them to obtain workers’ compensation insurance. The best way to protect your business profits and to be able to purchase future insurance coverage is to actively manage your workers’ comp insurance program now to reduce the number of claims.

 

 

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the co-author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.

 

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

 

©2018 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.

The 8 Sections of Your Workers Compensation Insurance Policy

The 8 Sections of Your Workers Compensation Insurance PolicyEvery employer buying workers compensation coverage knows it is an insurance policy for the costs associated with injured employees, but few employers ever read the actual policy. The primary reason most people do not read the insurance policy is because it is written in “insurance speak” or legalese. The following is an effort to translate a generic workers compensation insurance policy into everyday English so more people can understand it.

 

 

A workers compensation insurance policy is actually divided into two parts. The first half covers what most employers think of in workers compensation. The second part is the “Employers Liability Insurance.” Part two is designed to cover instances where workers compensation insurance does not apply and an employee brings a lawsuit against the employer. Part one’s coverage and workers compensation statutes are so broad that it is rare for an employee to be able to bring a claim under Part two. For the purposes of this article, we will only be addressing what is typically found in Part one of the policy coverage

 

 

Section A – What the Insurance Covers

 

Workers compensation insurance will pay for injuries caused by accidents, or for illness/disease caused by being exposed to an unfavorable environment. Accidents and illnesses also include death. This section limits the coverage to the policy period. The injuries or illness has to be caused by conditions associated with the employee’s employment. If the work comp claim brought by the employee is for work-related illness, the employee’s last day of exposure to the conditions causing the illness must occur within the policy period.

 

 

Section B – What the Insurance Company Pays

 

The insurance company agrees to pay for all benefits as defined by the workers’ compensation statutes of the state where the employer does business. The insurance company agrees to make timely payment of these benefits.

 

 

Section C – The Right to Defend Claims

 

The insurance company reserves the right to determine which claims it will pay willingly and which claims it will contest. In exchange for the insurance company making this decision, the insurance company agrees to pay the cost of defending the employer from any claim brought against the employer. This allows the insurer to investigate and settle claims as it deems appropriate. It also includes the insurer’s right to not to defend a claim if it is not covered by the policy.

 

 

Section D – Additional Things Paid By Insurance

 

The insurance company agrees to pay the cost associated with the claim in addition to benefits provided by the work comp laws. This includes such things as:

  1. Attorney fees and expenses.
  2. Surveillance and extraordinary investigative expenses.
  3. Medical management expenses (triage, nurse case managers, etc).
  4. Court cost.
  5. Employer’s expenses incurred at the request of the insurer, excluding loss of earnings.
  6. Appeal bonds.
  7. Any other expenses incurred by the insurer.

 

 

Section E – When There Exists Other Insurance

 

If the employer has a self-insurance retention or large deductible, the insurer will not pay until the employer has met its financial responsibility under the policy. Also, (this rarely happens), if the employer has other workers compensation insurance that will pay for the employee’s injuries, the insurance company will not pay more than its share of the benefits.

 

 

Section F – What the Employer Must Pay

 

The insurance policy makes the employer responsible for payments when the employer:

 

  1. Intentionally fails to comply with a safety law or regulation.
  2. When the employer has serious and/or willful misconduct.
  3. When the employer knowingly employs someone in violation of the law.
  4. When the employee brings a claim against the employer for discharging, coercing or discriminating against the employee for bringing a work comp claim.

 

Also, if the insurance company is compelled to make a payment in one of these situations, the employer agrees to reimburse the insurance company for all cost associated with the situation.

 

 

Section G – The Right of Recovery

 

In exchange for the insurer paying the work comp claim, the employer and the employee agree the insurer will have the right to recover the cost of the claim from a third party who is at fault for the injury (think auto accident or equipment malfunction).(WCxKit)

 

 

Section H – Legal Stuff

 

This section includes several miscellaneous conditions including:

  1. Most states consider notice to the employer of a work comp claim to be notice to the insurer.
  2. An employer’s bankruptcy does not relieve the insurance company from paying the work comp claims.
  3. The insurance company agrees it is primarily responsible for any benefits owed under the policy.
  4. The legal jurisdiction is the state where the employer is located.
  5. The insurance company agrees the policy conforms to the applicable law.
  6. The insurance company agrees to pay any special taxes or assessments that arise due to the issuance of the insurance policy.
  7. Anything in the policy that conflicts with the state law is modified to comply with the state law.

 

Not every workers’ compensation policy will follow this generic outline, but the above outline should assist you in understanding your workers’ compensation insurance policy.

 

 

 

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/

 

©2018 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.

3 Workers’ Comp Payroll Deductions Most Often Missed by Employers.

3 Workers’ Comp Payroll Deductions Most Often Missed by Employers

.

If any of your workers are getting overtime, are those extra dollars included in your workers’ compensation premium calculations? If you answered ‘yes,’ you may be artificially inflating your payroll; i.e., paying higher premiums than is warranted.

 

Overtime, double time, and severance pay are typically allowed as deductions for workers’ compensation premium calculations. Yet companies large and small often overlook these three points. Knowing what deductions are allowed in your jurisdiction(s) and understanding how to apply them can save payers big dollars — immediately.

 

 

Accurate Payroll & Class Codes

 

Injury management is the area where most workers’ compensation cost-cutting strategies are focused, and with good reason. Reining in workers’ compensation costs through safety efforts, effective return-to-work programs, and best practices in medical management are proven to contain overall costs. But risk management is only part of the equation.

 

If you’re not reviewing your payroll (remuneration) and class codes for accuracy, you may be missing significant opportunities to quickly and easily reduce workers’ comp costs. Depending on the jurisdiction, there can also be an opportunity for deductions from uniform allowances, to officer excess and gratuities, to employer-provided perks. Ask your premium auditor or audit manager to reveal deductions you are allowed to take and still have an accurate assessment of your risk.

 

 

The Big 3

 

A majority of jurisdictions allow deductions for

 

  • Overtime pay
  • Double time pay
  • Severance pay

 

Workers’ compensation premiums are designed to assess risk exposures appropriately. But paying someone double time to work on a Sunday, for example, doesn’t double his risk of injury; nor days paying out a golden parachute to a worker who has left the company. Taking allowable deductions can drastically lower your payroll — and your workers’ compensation premium.*

 

*Note: Compared to a guaranteed cost structure, employers in a high-deductible program may not be as greatly impacted by payroll deductions due to the significant latitude carriers possess with adjustments and credits/debits in the premium formula.

 

 

How to Do it

 

Getting the most out of allowable deductions is dependent on accurately presenting your payroll. Your workers’ compensation premium is based on your gross payroll (remuneration) including, for example, salaries, commissions, bonuses, vacation, holiday and sick pay.

 

Overtime and other payments can be excluded. But it’s important to exclude only premium portion greater than the standard rate:

 

Here’s how to figure your payroll with overtime deductions:

 

Say your company pays overtime — time-and-a-half — for someone who works on a Saturday and double time for working on Sunday. A worker who makes $10 per hour would get $15 for working on a Saturday and $20 for working on a Sunday. Let’s say he worked 8 hours both days.

 

To determine accurate payroll, you would deduct the $5-per-hour extra he made on Saturday and the $10-per-hour extra he made on Sunday. To calculate the exclusion:

 

Saturday                                  8 Hours x $5 =   $40

Sunday                                    8 Hours x $10 = $80

 

Total amount excluded from payroll = $120 ($40 for Saturday and $80 for Sunday)

 

You only need to pay premium on the worker’s regular $10-an-hour rate for the extra hours he worked, not the additional dollars.

 

Employers need to maintain payroll records that show the regular rate of pay, the overtime earnings, and a summary by type of operation performed, in order to get credit for the overtime excess.

 

It’s also important to understand that increases in wages are not eligible for exclusion. If you increase a worker’s base wage, that increased amount would need to be included in the payroll.

 

For severance pay, the calculation is easy. You can exclude these dollars paid to someone who no longer worked at the company to the extent it does not include pay for time worked or accrued vacation.

 

While these deductions may not seem significant, they can add up quickly and result in major savings.

 

 

Conclusion

 

You want to make sure your employees are properly covered for any work-related injuries they incur. However, you don’t want to pay any more workers’ compensation premium than necessary.  Knowing and applying allowed deductions can go a long way to dramatically reducing your workers’ compensation premiums while still paying the appropriate amount.

 

 

 

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/

 

©2018 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.

6 Common Mistakes Made In A Workers’ Comp Premium Audit

6 Common Mistakes Made In A Workers’ Comp Premium AuditAn annual premium audit is a great opportunity to review your workers’ comp class codes and included payroll for accuracy.  Employers that understand the process and prepare early should, at the very least, have no surprises from the audit. Unfortunately, far too many organizations view the audit as a necessary evil, don’t take the time to understand it, and are later presented with a bill they did not expect and may not even be able to pay.

 

The best way to face a premium audit is head on. That means knowing what to expect and preparing ahead of time, along with avoiding the most common errors.

 

 

The Audit

 

Insurance carriers conduct premium audits to verify a company’s payroll for the period during which it provided coverage. It occurs after the policy expires to determine the accuracy of the payrolls for that year to see if the premium must be adjusted. If the payroll exceeds the estimated projected payroll, the carrier will send a bill seeking more money. On the other hand, if the payroll is lower than projected, the employer may get money back.

 

Insurers conduct audits to ensure the premium paid to them accurately reflects the company’s risk. That includes making sure the business and employees are properly classified. It’s imperative to have the proper documents and information ready for the audit.

 

Here are common errors employers make — and how to avoid them.

 

  1. Failing to include deductions. Everything in the payroll is not necessarily subject to the workers’ compensation premium. The allowable exclusions vary among states, but several are universal to all jurisdictions, such as

 

  • Overtime (premium portion, or the half part of time and half)
  • Double time (premium portion, or the double part of double time)
  • Severance pay

 

Severance pay for someone who has not worked at the organization incurs no risk and, therefore does not need to be included in the workers’ compensation premium calculation. Overtime and double time pay may be excluded — to a certain extent.

 

For example, if ‘Joe’ makes $10 per hour, but you give him overtime, or time-and-a-half for working weekends, the extra portion of his pay can be excluded. So, if Joe works 8 hours on Saturday at a rate of $15 per hour, the extra $5 per hour, or $40 (8 hours x $5 per hour) can be excluded. The same exclusion applies for double time.

 

Depending on the jurisdiction, additional deductions may apply.

 

  • Officer excess
  • Uniform allowances
  • Tips/gratuities
  • Employer-provided perks
  • Bonuses

 

  1. Neglecting to inform the auditor. You will be charged for your $100,000 in overtime, double time and severance if you do not report them to the auditor!

 

  1. Omitting the necessary paperwork. Once you’ve informed the auditor of the deductions you’ve found, you need to back it up with the proper paperwork. For example, if a portion of your payroll went for severance pay, you will need the proper documentation. Other documents you may need to have at the ready include:

 

  • Payroll records
  • Payroll tax returns
  • Certificates of insurance
  • Invoices for contracts that show a breakdown of labor and materials

 

  1. Forgetting to consider state differences. In addition to the overtime, double time and severance pay exclusions, jurisdictions often have additional deductions. However, they are not the same in every state. A multi-state employer that assumes exclusions in one state apply to another may be sorely mistaken. You can check your state’s Basic Manual, ask your insurance broker, or ask your premium auditor to direct you to the allowable deductions for a particular jurisdiction.

 

  1. Improperly classifying employees. Your business operation determines what your ‘governing class’ will be; i.e., the classification code in which the bulk of your employees will fall. Employees such as clerical workers who incur little risk may fall into a different category, but only if they NEVER do other work. For example, if ‘Sally’ is an administrative assistant but once or twice a year she is involved with inventory control on the manufacturing floor, she cannot be classified in the clerical class.

 

  1. Failing to ask questions. If you’re not sure which classification applies to your company or you don’t know what paperwork is required to back up your deductions, ask. Resources are typically available through state insurance bureaus, NCCI, or your broker or insurer.

 

Conclusion

 

Premium audits don’t need to be a gut-wrenching ordeal. Document and prepare for the premium audit on an ongoing basis, so you don’t have to spend hours or days getting ready. Asking the right questions, understanding deductions that apply, and gathering the proper documentation will make the process smooth and painless.

 

 

 

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/

 

©2018 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.

5 Ways to Get Started Reducing Workers’ Compensation Risk

5 Ways to Get Started Reducing Workers’ Compensation RiskA lot of employers strive to be a safer, more productive workplace for their employees. Every business would love to reduce costs and increase profit margins. The cost of workers’ compensation claims can have a significant impact on the company bottom line, particularly if you are self-insured or self-administered.

 

So how do you get started? Where do you start, or better yet when do you start? The answer is RIGHT NOW, and here is how:
 

  1. Know Where Your Risk Lies

 

Observe your workplace. Go through department statistics and see how they all compare to each other regarding losses. Perhaps 75 percent of your injuries occur in the shipping department. Go down there and talk with the supervisor. Find out what their issues are and why they think injuries are happening. Then, work together to solve the problem.

 

Another helpful thing to look at is your loss run. Talk to your carrier or adjuster and see if they notice any trends in injuries, or which people are getting injured. Maybe the newer hires account for a lot of the injuries. This may show that a focus needs to be directed towards training and safety right from day one of their employment.

 

Look at your business. What do you do? What are the risks involved? You could have risk in several areas, stretching from workers comp to automotive issues with your fleet and the drivers, to liability risk from customers in your store. Break it all down, and start to track your statistics. Identify issues, and work on thinking of ways you can reduce your injuries or occurrences from happening in the first place.

 

 

  1. Plan Your Attack

 

If you have identified a few areas in which you could improve by reducing injuries or claims reports, what do you do to fix it?

 

The answer lies in the resources you have all around you. The first step is to talk to your carrier. Chances are they have the loss-prevention specialists ready to help you work with what needs to be fixed, and how to fix it. Ergonomic professionals can be brought in to address your workstations, and suggest possible solutions to reduce exposure.

 

Utilize your medical clinic contacts to see if occupational physicians can watch employees doing their work to identify potential issues with certain movements or repetitive motion injuries. Or, maybe it’s time to consider having your own in-house occupational clinic for a proactive strategy. Utilize your local council, and have them come in to explain the risks and costs associated with potentially serious injuries, automotive accidents, failure to drug test your employees, etc. Any or all of these will help you get to your goal of reducing your exposure.

 

 

  1. Implement Your Solution Plan

 

Once you have identified what needs to be fixed, and how it should be fixed, now it is time to fix it. Get rid of that old equipment and bring in new equipment that has better safety features. They cost less to maintain and repair, and they are quicker to operate. Most new machines use less energy than the old ones, reducing your utility bills and creating worker ease of operation. Get some padding on the floor for workers to stand on during work at their workstations (also known as “fatigue mats”). This reduces strain on their feet and legs, and reduces body fatigue, potentially making them more productive after long hours at the workplace.

 

Whatever the fix may be, get it done — out with the old, in with the new.

 

 

  1. Measure Your Success Statistics

 

Once new equipment is installed, and in place, it is time to measure your reductions. Measure your numbers in a two, four, and six-month stretch. Did you see any drop in claim activity? Did claims increase, making your plan backfire? You have to see how you did, and most importantly, you have to give it time. Change is disruptive to employees, but they will get used to it. Give it time, and measure your numbers post-change against the ones you first noticed back when you were figuring out where your risk was coming from.

 

 

  1. Get feedback from your workers

 

After all, you have done, you left out the most important thing: To talk to your staff of workers about the changes. How do they feel it impacted their workday? Were the changes helpful, or did they hurt production? How do they feel at the end of the day? Do they feel less sore or are the new workstations worse than the old ones?

 

Ask as many questions as you can. This makes your staff feel that their input is important, and taken into account. After all who better to talk to about the changes that were implemented than those who were directly affected day after day?

 

 

Summary

 

It is hard to break old habits and accept change. Even though it is hard work to find out what your risks are, how to attack them, implementing your changes, measuring your success, and getting worker feedback, in the end, it will be worth it. Lean into the task; don’t try to tackle it all at once.

 

 

 

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/

 

©2018 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.

5 Strategies to Avoid Mega Problems in Large Deductible Policies

Large deductible insurance policies can be a tremendous advantage for employers. Significant cost savings and increased control over expenses and safety are among the benefits for companies that are aptly suited for this tool. However, they are not appropriate for all employers and can have catastrophic consequences. Increased costs, legal disputes and insolvencies – its own and/or the insurer’s – can result if a company is ill equipped or misunderstands the complexity of these arrangements.

 

Employers considering large deductible policies need a deep understanding of their own companies and a thorough vetting of the contract before signing up. There are several strategies that employers should undertake before considering a large deductible policy.

 

 

The Policy

 

These arrangements include a set deductible amount for each claim. However, those in the workers’ compensation system differ from those in other insurance lines. The typical such policy has the client paying a claim up to the deductible amount, at which point the insurer takes over the claims payments. In workers’ compensation, the insurer generally pays the entire claim and is then reimbursed by the employer for the agreed upon deductible amount. In a typical large deductible workers’ compensation policy with a $2 million claim and a $100,000 deductible, the insurer would pay the entire claim and then seek reimbursement of $100,000 from the employer.

 

The laws and rules covering these policies differ among jurisdictions and are often somewhat vague. For example, there is no standard as to what constitutes a ‘large’ or ‘mega’ deductible amount. Some jurisdictions define large deductibles as $100,000 or more and mega deductibles as at least $750,000. Nevada, however, requires any deductible over $25,000 to be reported to the state. Some companies set the mega deductible amount at $10 million. Mega deductible policies generally involve more underwriting and regulatory oversight than large deductible policies.

 

When used successfully, employers can see premium reductions, tax savings, increased efforts toward safety to prevent claims, and incentives to care for and get injured workers back to work quickly.

 

 

Potential problems

 

Problems can arise when employers do not understand the risks involved, experience unexpected revenue shortfalls, or overestimate their company’s financial strength, especially for the long term. Because of the long tail nature of workers’ compensation claims, reimbursement may extend for years. Companies that cannot pay run into trouble.

 

Often the policies involve ‘side agreements’ that make them even more complicated and, sometimes, misunderstood by the employer. There are a variety of reasons and requirements in these. Some, for example, basically eliminate the operation of experience modification factors. Others may substitute a unified overall rate for the typical classification system. Some include language about the premium charges that effectively contradict the actual policy terms. Some may actually change the provisions of the policy without being endorsed onto the policy, leading to conflicts.

 

Still other problems may arise when employers are mistakenly led to believe they are responsible for paying the claims in order to get lower up-front costs and avoid experience modifications for claims within the deductible limits. That may result in errors in claims handling – even unintentionally.

 

Large deductible policies are not regulated to the extent of self-insurance; however, some employers may use them as such, whether knowingly or unknowingly. Employers that view large deductible policies as a form of self-insurance may mistakenly believe they should or can manage their companies’ own claims. They run the risk of violating state laws regarding such things as choice of healthcare provider or retaliation for making a claim. That can lead to delayed care and more harm to the injured worker, disputes with the insurer, claims handling abuses, civil penalties, and ultimately significantly higher costs.

 

In one case for example, a small company contracted with a professional employer organization for its human resource services. The PEO purchased a workers’ compensation policy with a $1 million deductible – which lowered its premium and the costs billed to the company. The problem arose when a worker filed a claim and, despite assurances that all was fine, the PEO went out of business and the insurer was declared insolvent. The company turned to the Minnesota guarantee fund for payment. However, due to statute language, the company was ultimately found liable for the $1 million deductible.

 

Additional problems can occur if employers fail to accurately report all claims in a timely manner. Delayed reporting may leave the insurer under reserved, leading to its insolvency. Failing to report claims may result in enforcement by a state regulatory agency, leading to civil penalties for each violation.

 

 

What to do

 

Employers either considering or just starting to use a large deductible policy have a much better chance of reaping the benefits by following a few simple steps.

 

  1. Read the fine print. Make sure you truly understand your obligations and those of the insurer.
  2. Check side agreements. Understand all details about any side agreement.
  3. Know your financials. Make sure your company has the financial ability to reimburse the insurer when payment is due. Past claims history and your company’s overall financial strength should be scrutinized before considering a large deductible policy.
  4. Report injuries. Report them accurately and timely. Delayed, under-reporting and non-reporting of injuries can cause myriad problems for the insurer and employer. As mentioned above, the potential for under-reserving by the insurer could have grave consequences. Noncompliance with state reporting requirements can lead to fines against the employer and insurer.
  5. Don’t circumvent policy language. If the policy calls for the insurer to pay the losses, as most of these do, adhere to it. Not doing so can lead to claims handling abuses and extra costs.

 

 

Conclusion

 

Large employers that are well capitalized may be prime candidates for large or mega deductible policies, which can substantially reduce costs. However, it’s important to make sure your company has the financial ability and wherewithal to strictly adhere to such a policy in order to see the benefits.

 

 

For additional information on workers’ compensation cost containment best practices, register as a guest for our next live stream training.

 

Author Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is 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/

Live Stream WC Training: http://workerscompclub.com/livestreamtraining

 

©2017 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.

Buyer Beware – 5 Things To Know About Lowest Work Comp Bidder

Resist the temptation to sacrifice great service for cheap workers comp insurance. It is certainly good business to watch the bottom line, but you must find a balance between cost and great service. Everyone watches the bottom line – that is just good business. Of course, a “low bid” does not necessarily mean getting bad claim service, and going with the most expensive carrier will not guarantee great service.

 

 

Employers do not want to sacrifice service for cost so here are five tips to be mindful of when dealing with the lowest bidder.

 

 

1-The lowest bidder may have the least amount of staff

 

Less staff equals less cost. Less cost means the bidder can offer a lower premium and still make a profit on the claim ratio — premium collected vs claim expense paid out.

 

 

Fewer adjusters to handle more claims are good claims adjuster’s biggest enemy — high pending claim count. Get to know your claim adjusters and see what their pending caseload looks like. The higher the caseload, the more likely something will fall through the cracks. You do not want it to be your claims.

 

 

2-All the adjusters may be in one location

 

You want an adjuster who will be on top of all local aspects of your claims. Adjusters in your local jurisdiction know about local doctors, judges, attorneys, vendors, etc. They know the good from the bad. Adjusters in other states may not be as privy to this information, and that can prolong a claim or affect the compensability. If you do business in California, and your adjuster is in Florida, the adjuster can miss local information crucial to the claim.

 

 

3-The lowest bidder may want any premium possible

 

Some carriers need premium dollars so badly; they underbid their competition just to collect premiums. They gamble on not paying off on a severe workers comp claim under their coverage. You might get decent service, but the stereotype is that the lowest bidder from the smallest carrier usually results in mediocre service to the employer. Make them prove this wrong.

 

 

4-Does low bidder have a poor reputation?

 

Ask these questions of your peers, broker and others you trust:

 

  1. How does this carrier stack up against their competition?
  2. Are they known for denying every case or settling every case?
  3. Do they have poor communication?
  4. Do other employers avoid this carrier at all costs?
  5. Are they familiar to local judges pre-conditioned on how to decide the case?
  6. Does the carrier pair underbidding premiums with poor adjusting?
  7. Does the plaintiff’s attorney know your carrier settles and does not push cases to trial? If so, that means anyone coming into their law office with a disputed workers comp claim will ask for the moon – benefiting the claimant and the attorney, but not you, the employer.

 

 

5-Make sure your broker provides broad spectrum of pricing

 

At renewal of your workers comp insurance policy, ask for a spectrum of premium costs from cheapest to most expensive, from a variety of carriers. Agents affiliated with only a few carriers (or only one) limit an employer’s choices. If you only get two choices, and you choose the cheapest, you may be missing another carrier perhaps slightly more expensive, but with a better reputation for service.

 

Do your homework. Look around, do some research, ask people in the business. Most carriers have established a reputation. Find out how they do business. You want to be represented by the best of the best. You do not cut corners in your business and you do not want a carrier cutting corners at your expense.

 

 

Summary:

 

Even if a carrier has a lower price than their competition it does not necessarily mean you will get poor claims service; but, history shows a good reputation is not always on the side of the lowest bidder when it comes to handling claims. Do your research. Ask questions. Make sure the carrier you select will work diligently on your behalf. You have enough to worry about as an employer; do not make your insurance needs another item on the list.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is 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 of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

 

 

©2016 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.

 

Waivers of Statutory Immunity Impact on Workers Compensation

When used properly, transferring risk for workers compensation exposure and losses can be an excellent tool for cost control. One such tool is known as Waiver of Statutory Immunity.

 

A Waiver of Statutory Immunity is: the abandonment, relinquishment, rejection, renunciation, surrender, release, cancelation, or loss (by implied conduct) of any known statutory or contractual legal right.  There are dozens of legal phrases outlining the various types of waiver and additional definitions.

 

While most waivers of immunity are in the construction industry, any employer using Sub- Contractors, Professional Employee Contractors, Leased Employee Vendors, Volunteers, Individual Specialists, or Temporary Help Agencies can face similar exposures.  The purpose is these entities take over exposures from the entity using their services.

 

Governments generally have almost full Statutory Immunity for negligence by either constitutional or legislative act.  Yet, if the loss is egregious enough, has major impact, or is not properly asserted, this immunity can be lost.

 

Hold Harmless and indemnification contracts (with or without Statutory Waiver) not properly written and designed to meet normal public practices, can held null and void by the courts, and/or workers compensation judicial ruling.

 

For purposes of this discussion two descriptions will apply.  Indemnitee: is the person or organization wanting to transfer risk.  Indemnitor: is the person or organization assuming or taking the risk.

 

 

Example of Exposure:

 

Company A (the Indemnitee) hires company B (the Indemnitor) to perform some computer adjustments.  The work is done on A’s premises.  A and B entered into contract with a standard hold harmless and indemnification agreement.  B also furnishes insurance endorsements naming A as an also insured.

 

Company B’s employee is injured and alleges A to have been negligent and cause of the injury.   B’s employee is paid compensation benefits by B’s insurance carrier.

 

B’s employee then sues A for negligence.

 

A, relying on the hold harmless clause and endorsements for liability coverage turns the lawsuit over to B for defense and disposition.

 

A is astounded when B’s liability carrier uses employer immunity as defense since B’s workers’ compensation carrier paid benefits.  Because the hold harmless and indemnity clause did not have a Waiver of Statutory Immunity, A is left without defense or coverage under B’s liability policy.

 

A may be denied coverage under its insurance policies.  A’s carriers may assert that A made its own assumption of risk.

 

The situation can be progressively worse depending on the number and type of insurance carriers, and parties involved, but most of these cases are resolved without lengthy litigation.  Records show that Indemnitees generally lose the most in exposure and cost.

 

There are numerous situations where Statutory Immunity is lost.  A few are:

 

  1. Violation of Public Practice.
  2. Late Reporting.
  3. Failure to properly assert.
  4. Vague or Cross interpretation of contract wording.
  5. Missing litigation time tables.
  6. Judicial or Administrative Ruling
  7. Indemnitor fails to Waive Immunity in proper written format.

 

 

Manuscript Policy

 

Standard insurance policies are seldom written to extend coverage for Waivers of Immunity, and State Insurance Departments may not have premium structures for the coverage.   Few carriers recognize waivers without specific endorsement, therefore, a manuscript policy may be necessary.

 

A Manuscript Policy is written to conform to tailored needs of the insured, or joint venture.  Policies can grant coverage for almost every legal operation.   Premiums may be negotiable, and shared among the various entities.  The policy generally defines every entity exposures and limits, and will define how the insured is to comply with the policy provisions. The policy is generally written for a single use and will expire or be cancelled when the use is completed.  An extending endorsement may be added to allow for injuries or claims incurred but not reported.

 

Most agents, brokers, and underwriters are not experienced enough to write a manuscript policy, therefore, a manuscript policy is usually prepared by the home office insurance carrier department. The same will apply to endorsements accepting Waivers of Immunity.

 

Manuscript policies are seldom offered to smaller organizations as premiums are generally expensive or have high retention limits.  Such retentions may be spread across all participants, therefore, it will be crucial that all participants are fiscally sound enough to absorb their share of retentions.

 

 

Summary:

 

Obtaining a Waiver of Immunity from another is a good way to transfer and protect against workers’ compensation claims and subrogation challenges by non-employees, or independent contractor relationships.  However, they must be prepared by properly experience lawyers, in conjunction with all entities and insurance carriers.

 

 

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is 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 of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

 

 

©2016 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.

 

A Statutory Employer Becomes Actual Employer By Law

A statutory Employer is an entity that becomes an actual employer by Law or Rule.  These laws and rules are designed to protect an employee against not being covered for workers compensation benefits due to a lack of insurance or fuzzy employer-employee arrangements.

 

The most common situation is in the construction industry.  Wide spread use of subcontractors, independent craftsmen, and joint-venture contracts can leave gaps in benefit protection for injured employees.

 

Most general contractors and property owners in construction are quite familiar with their exposures for becoming a Statutory Employer. They normally protect themselves by using hold harmless and indemnification agreement contracts.   They often require that they be named as an also insured by endorsements to workers compensation, general liability, and property insurance policies.

 

 

Other Exposures for Statutory Employment:

 

A few other situations that can lead to statutory employment and require the payment of workers compensation benefits are:

 

  • Using individuals who may not qualify for workers compensation by statute. (Single Proprietors, Senior Corporate Officers, Domestics, and Juveniles are a few examples)

 

  • Over control, long term use, or direction of temporary or leased employees.

 

  • Improper job classifications and poor job descriptions.

 

  • Poor contract wording or intent with the contracted entity.

 

  • Failure to document insurance and request being a named insured on insurance policies.

 

  • Definitions of employers by government agencies such as the IRS
    • The IRS defines statutory employees for social security and Medicare taxes.
    • These employment functions include drivers, insurance sales, traveling sales, and work done at private residences. While these requirements may not create a workers compensation statutory exposure, they might be used by a claimant in a litigation situation.  (See IRS Publication Employer’s Supplemental Tax Guide 15-A for full details and compliances.  Have an attorney review if your organization for any of these situations.)

 

 

  • Voluntary persons

 

  • Part-time persons

 

  • Situations where the work function being done by the non-employee is primary to the employer’s business.

 

  • Challenges to the enforceability of hold harmless and indemnification clauses based on language, vagueness, or public policy.

 

 

Protections and Precautions:

 

Before embarking on the use of sub-contractors, independent technical s, temporary and part-time employees, volunteers, as well as leased employees plan carefully.  A few items to consider are:

 

  1. Weigh the pros and cons of using this type of entity to accomplish the task needing to be done.
  2. Consider the education, qualification and experience levels needed.
  3. Research local employment laws, rules and regulations that may impact their use.
  4. Review recent legal decisions that have come down that might have destroyed or mitigated prior defenses.
  5. Review agencies or government entities that might be defining statutory employment.
  6. Research contracts and facts where the courts have sustained defenses in statutory employment challenges.
  7. Use an attorney specializing in developing contracts, and protections for non-employees.
  8. Insist that all entities being hired have all their insurance policies endorsed naming the hiring organizations as also insureds. Insist on adequate limit amounts of coverage and defense costs.  (Some claims made policies add defense cost or reduce them from the coverage limit.)  Insist on reinsurance coverages when primary carrier limits are not sufficient to meet catastrophic losses.  It is also a good idea to have an endorsement extending the policy for claims made or not reported during actual work contract time.

 

Summary:

 

There are numerous areas when use of non- employees can make an organization a statutory employer.

While defenses are being attacked and diminished, good planning, tight contracts and proper insurance endorsements can still protect against losses and statutory employment claims.

 

 

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is 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 of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

 

 

©2016 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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