TO LEARN MORE ON THIS SUBJECT:

Register for the full on-demand course:

• HOW TO DETERMINE WHICH WORKERS’ COMP INSURANCE STRUCTURE IS RIGHT FOR YOU

Registration – How to Decide Which Insurance Structure is Right For You

How does a company maximize the return on investment of implementing work comp management best practices?

Hello, my name is Michael stack and I’m the CEO of AMAX and the short answer to that question of ‘how does this company maximize their ROI’ is to start with the right insurance structure, whether that be guaranteed cost, or a retro or a captive, high deductible program or self-insurance policy. But the question is how does a company then determine what is the right insurance structure for them? So often I see this done in the marketplace so incorrectly and only a small percentage of the time is this actually done right. Most of the time it’s just sort of done Willy Nilly and you’re just guessing or the insurance broker says, Hey, I’ve got this really awesome retro policy with this XYZ carrier and I think you’re perfect for that.

The Right Insurance Structure for the Right Employer

Or, Hey, I’ve got this really awesome captive because I know captives really well and I specialize in captives and I think everyone should be in a captive and you should be going to captive to. In short, what often happens is that if an insurance broker is a hammer, everyone looks like a nail and if that hammer is a captive program or if that hammer is a high deductible program or if that hammer is a retro program or even if the hammer is a guaranteed cost program, where all you know is guaranteed costs, every single company you look at looks like they should fit into that program, which is not the right way to do it at all. You need to raise yourself up and have a higher level of professionalism in the marketplace to analyze an employer’s needs or if you’re an employer yourself to analyze your own needs and be able to ask the right questions to your insurance broker and risk advisor team.

So I want to talk about today is these four cornerstones of risk financing, what they look like and how you start to go about making this decision because when we’re talking about maximizing the return on investment, why are we implementing from a senior management standpoint, why are we doing all this work with return to work? Why are we working and our injury response systems? Why are we working on building out our medical networks and building this adjuster team and building out this partnership with all our whole risk financing, our risk management team? Why are we doing all that stuff? Of course, it’s to impact those injured workers, but particularly from a senior manager standpoint, it’s all about that bottom line and that’s what’s going to fuel, if you hit that bottom line right, then you’ll really be able to fuel that injured worker being able to really take care of them as well.

4 Cornerstones of Risk Financing

Let’s talk about these four cornerstones and what they are, and again, this is how you’re going to go about really starting to make an analyze this decision. I’m going to write these out here first.

These four cornerstones are:

• Risk tolerance
• WC Management Best
• Predictability of your risk
• Financial Impact

So these are the four cornerstones and I’m just going to run through these again very quickly cause this is all about changing the mindset and if you can get out of this video to change your mindset of how you examine this from being a specialist in retro programs where everyone looks like they fit into a retro program, to now being a professional in the marketplace to now determine via these four cornerstones and asking these questions and having this perspective and how you look at this to change up that, how that looks like for you.

Determining Risk Tolerance

Okay, so risk tolerance, how comfortable is an organization with this variability of risk? Are they really risk-averse and they want to be very conservative, they want to be very predictable. We’re going to write a guarantee cost check and we’re going to know that in our budget and that’s going to be solid and we can predict that out and we’re in great shape or can they handle a little bit more variability as far as what’s going to happen with their losses? That’s sort of question number one. What helps you then be more comfortable taking on more risk is these two things right here. These two things are going to help you be more comfortable in taking on more risk. One is if you know, whoops, I wrote best twice there. If you know you’re doing really well in your return to work program, you know you’re doing really well in your injury prevention program, you’ve really cranked that up, you’ve dialed everybody in, you’ve gone through the supervisor training, your supervisors know how to respond to injuries appropriately.

You’ve built out your claims handling team with your adjusters and you’re just cooking with gas. You can take on a lot more risk because you know you that you’ve reduced it on your own side. Same thing with this predictability of risk number. This is a big, big factor in this decision-making process. If you’ve ever going retro or high deductible or kept over self-insured, you start to look at this law of large numbers to say, well, how likely are we to now incur these losses? How likely based on actuarial data, big numbers based on this predictability of losses, how comfortable are we in this section? You’re going to get some help. You’re going to get some help from an actuary most likely to help you have this predictability of risk and the more comfortably without that, the more risk you can take on. So big two pieces here.

And then, of course, the financial impact is understanding that financial impact, both tax implications from your different structures and then that risk-reward feature as well as the more risk that you take on. Obviously, the more reward and organization it’s going to take.

Change Perspective of Risk Financing Decision Making

This is a very complex topic as you start to unfold it. And as you start to dig deeper into this. But again, the point of this video today is to change your perspective on how you look at this, to raise up your level of professionalism. To say that this decision is it about the market. This decision is about what’s best for the client, and if you are the client, if you are the employer client to now have these four things, your risk tolerance, how well you’re doing it, management of work comp, the predictability of risks, and then the financial impact on your organization.

Those are the four cornerstones of now you how you start to go about making this right decision to maximize that return on investment and get, my name is Michael stack and the CEO of AMAXX, and remember your work today in workers’ compensation can have a dramatic impact, as we’ve talked about here on your company’s bottom line, but it will have a dramatic impact on someone’s life. So be great.

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

Contact: mstack@reduceyourworkerscomp.com.

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

©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.

Imagine 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 Assigned 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.

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.

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 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.

As any employer with locations in more than one state knows, the workers compensation policy is written specifically for the states where the employer has physical facilities.  On the Information Page, that comes with each new policy or policy renewal, is Item 3.A (for most insurance carriers) which designates the states where the workers’ compensation policy is applicable.  Workers’ compensation coverage does not apply to claims filed in other states.

Work Comp Statues Specify When Coverage Applies Out of State

While the insurance carriers attempt to limit their exposure to claims occurring where they may not have claims offices, or knowledge of the workers’ compensation statutes, the states take a much broader approach. The work comp statutes of most states specify when and how their work comp act applies out of state.  Normally, the state statute will indicate that if the contract to hire was negotiated within their state, their work comp laws apply regardless where the injury occurs.

Most state work comp statutes will have extraterritorial provisions that state if the principal place of employment is within their jurisdictional boundaries, a work comp injury occurring outside of the state boundaries is still covered by the state law.  The work comp statutes also normally specify that any work related injury occurring within their borders is subject to their workers’ compensation statutes, even for employers and employees whose place of business is not within their state line boundaries.

Problems Occur When Claim Filed Where Employer Does Not Have Coverage

When the employee is injured in another state where the employer does not normally do business, the extraterritorial provisions of the state work comp act work great, as long as the employee elects to utilize the benefits of the home state workers’ compensation act.  The problems occur when the employee elects to file the claim in a state where the employer does not have a physical location and the employer does not have workers’ compensation coverage.

The usual reason an employee files for benefits in a state other than the home state is the amount of temporary total disability (TTD) benefits that will be paid.  Consider the highly successful salesman from Georgia earning $1,500 per week.  If he is injured in Iowa with its high maximum weekly TTD rate, he will receive $1,000 per week while he is unable to work, if he elects Iowa for work comp benefits.  If he elects Georgia benefits, the TTD rate is capped at $500 per week.

This creates a coverage issue for the employer.  When the work comp policy is purchased, the employer should have the insurance agent or broker specify in Item 3.C of the Information Page the other states for which coverage is requested.  Some agents will approach this by listing every state and territory except North Dakota, Ohio, Washington, Wyoming, Puerto Rico and the US Virgin Islands (the four monopolistic states and two monopolistic territories where the state/territorial governments provide the work comp coverage).  This can result in an accidental oversight where the agent leaves out a state.

Insert Language Into Item 3C to Prevent Problems.

A better approach is to insert the following on the Information Page in Item 3.C:  “All states and US territories except North Dakota, Ohio, Washington, Wyoming, Puerto Rico and the U.S. Virgin Islands and those states listed in Item 3.A of the Information Page.”  While this is the best approach to out of state coverage, some insurers, especially single state insurers or small regional insurers, will object to providing work comp coverage in other states where they are not licensed to do business.

Most employers think of their workers’ compensation policy and their workers’ compensation coverage as one and the same.  Actually, the work comp policy is divided into several sections with Part 1 being the actual work comp coverage.  Part 2 is employer’s liability insurance which covers injuries to employees when work comp coverage does not apply.   Part 3 is Other States Insurance.  With this coverage, workers compensation and employers liability insurance is provided for incidental exposure in states not listed in Item 3.A of the Information Page.

It should be noted that Other States Insurance covers only incidental exposures.  When the employer starts to have employees in a state on a regular basis, the states needs to be included in those listed in Item 3.A of the Information Page. If your business has employees who occasionally travel out of state, it is a good idea to routinely review your coverage with your insurance agent to confirm that your policy provides for incidental out of state exposures.

Author Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. He is an expert in employer communication systems and helps employers reduce their workers comp costs by 20% to 50%. He resides in the Boston area and works as a Qualified Loss Management Program provider working with high experience modification factor companies in the Massachusetts State Risk Pool.  He is co-author of the #1 selling book on cost containment, Your Ultimate Guide To Mastering Workers Comp Costs www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

©2015 Amaxx LLC. All rights reserved under International Copyright Law.

SALES TO PAY FOR ACCIDENTS CALCULATOR:  http://reduceyourworkerscomp.com/sales-to-pay-for-accidents-calculator/

MODIFIED DUTY CALCULATOR:   http://reduceyourworkerscomp.com/transitional-duty-cost-calculators/

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

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