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NEWSLETTERS
NEWSLETTERS
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561-683-8383
October 2007 |
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In this issue
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Case Study: Implementation of comprehensive Workers' Comp program saves manufacturing company $3,000 on one claim
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How to combat escalating Workers' Comp costs after an injury occurs
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Sixteen warning signals that your insurance company may have overcharged you on your Workers' Compensation Premium Audit
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Case Study: Implementation of comprehensive Workers' Comp program saves manufacturing company $3,000 on one claim
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Insured
The insured is a wood products manufacturing company that employs more than 40 people divided into three work classes - sash/door/assembly millwork, sales people and clerical. The company works one shift, has a very stable workforce and consistently produces a high quality product.
Situation
Although the company has a highly competent management team, claims were being left up to the insurance company to manage and close. Open claims were found that resulted in a higher Experience Mod and higher premiums. One claim in particular had no activity for over a year and was adding seven points to the Mod. The insurance company also failed to explain the importance of a transitional duty program.
Assessment
Certified Work Comp Advisors (CWCAs) reviewed the loss runs prior to the employer's renewal. They found open claims with no activity that could be closed prior to the renewal. The company was sending the injured worker home to recuperate versus returning to work on a transitional duty job.
Solution
The CWCAs put a risk management plan together that included, among other components, detailed procedures for returning an injured employee to work. They also aided the client in proper follow up procedures with the insurance companies to get claims closed.
Result
Because the plan showed the promise of significantly decreased claim costs, the wood products company became more attractive to other insurance companies. By being more insurable, it was able to secure more services and better pricing.
On one claim alone, the insured saved more than $3,000 as a result of the improved management.
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How to combat escalating Workers' Comp costs after an injury occurs
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According to the National Council on Compensation Insurance (NCCI) claims frequency continues to decline in all major industry groups and almost all occupations. Businesses have done an excellent job at creating safer work places and providing more and better job training.
While prevention and training have been successfully integrated into loss control, claims management is often viewed as an administrative rather then loss control function. Fewer than 10% of work-related injuries should require employees to take more than three days off work for medical reasons (ManagedComp Survey), yet, nationally 24% of workplace injuries result in lost time longer than three days. Sixty to eighty percent of lost time is avoidable.
This means that businesses have a significant opportunity to reduce their costs by integrating claims management into their loss control program. As noted in the previous article, "Why costs escalate unexpectedly in low risk Workers' Compensation claims," the longer it takes to resolve a claim, the higher the final costs will be. Therefore, the focus should be on reducing the duration of lost time.
A study in the September 2007 issue of Journal of Occupational and Environmental Medicine, "The Impact of Early Workplace-Based Return-to-Work Strategies on Work Absence Duration: A 6-Month Longitudinal Study Following an Occupational Musculoskeletal Injury," found that work accommodation offered by employers and advice from health care providers on re-injury prevention are the most significant determinants of shorter work absence durations.
It is often a small percentage of the claims that dramatically affect overall losses. The majority of these are not catastrophic injuries, but are claims that have gone astray and can be managed more effectively. Here are eight steps towards successful claims management that couple employer intervention with proper medical treatment and oversight:
1. Train and designate an employee to coordinate the effort
A common, but erroneous perception is that claims management is strictly providing information to the insurance company. It is far more than sharing information; employers need to be proactive and intervene to improve outcomes.
2. Promptly report all injuries
All claims should be reported within 24 hours; in fact, the goal should be within 60 minutes of the accident. By getting the wheels in motion quickly, costs are significantly reduced and employees return to work faster. (Hartford Study)
3. Develop trust with employees
While employers may not always be in a position to influence the choice of care, employees who trust their employers are more likely to look to their employer for support and guidance. Ninety percentage of all employees injured in 2006 had no previous job injury record. To the injured employee, a minor injury can seem like a major occurrence because the process is unknown. An empathic response from the employer that includes clear information about the steps the injured employee needs to take goes a long way in reducing the duration of a claim.
4. Have a relationship with the treating physician
Regularly, employers will work through the insurance adjuster and have very little contact with the treating physician. Yet, the employer has the most knowledge about the situation and the context in which the employee is working. The employer's knowledge is much richer than either the doctor's or the adjuster's, yet the doctor is making care decisions without it. When there is communication and dialogue, outcomes improve.
5. Work with an occupational physician or clinic that follows Evidenced-Based Treatment Guidelines
Not all physicians are trained in the return-to-work process nor do they recognize the importance of minimizing time away from work and the powerful impact of the "disability attitude" that can set in with injured employees when claims are not treated properly. Physicians trained in Evidenced-Based Treatment Guidelines determine the expected disability duration for each injury and apply the proper treatment protocols. They provide detailed recommendations for transitional work and resumption of job activity.
6. Communicate estimated time of return to work to injured employee
While communication between the physician and employer is critical to successful claims management, equally important is communication with the injured employee. Utilizing the Evidence-Based Treatment Guidelines, employers and physicians can establish expectations of the timetable for return to work with the injured employee. If this is not met, it should trigger immediate assessment of the situation.
7. Have an effective early Return-to-Work program
A key part of the employer's role in an employee's recovery from a job-related related injury is a workplace culture that supports a timely return to meaningful work and respects the restrictions and limitations established by the treating physician. Successful Return-to-Work programs are reported to reduce Workers' Compensation costs by 30% to 60%.
Although a major obstacle for many employers is identifying meaningful and productive work for returning employees, WorkComp Advisors have tools to help identify temporary work assignments that are most relevant to a particular employee's training, experience and physical capabilities.
8 Monitor lost time injuries
Lost time injuries are the most expensive injuries, with costs increasing every day that an injured employee is not able to work. Every injury does not require the same level of intervention; Evidenced-Based Guidelines provide the benchmarks by which to determine if a claim has the potential to spin out of control. Concentrating on the troubled claims will reduce costs and increase profitability.
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Sixteen warning signals that your insurance company may have overcharged you on your Workers' Compensation Premium Audit
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Unlike IRS audits, most businesses consider the Workers' Compensation Premium Audit a routine business requirement that is conducted annually to ensure compliance with state laws. Regularly, a bookkeeper or administrative assistant with little understanding of Workers' Compensation is asked to get the auditor what he or she needs. Invariably, it is assumed that the audit will be done properly and any findings will be correct.
Yet, with over 600 types of classifications, complex rules regarding excluded remuneration, executive payroll, and subcontractors, mistakes are common. It is very easy, and not unusual, for employers to unknowingly leave money on the table.
Auditors have demanding schedules and most do not have the time, or inclination, to educate clients. The process is set up so that all payroll is assigned to the highest rated code, thus ensuring that any mistakes default to the advantage of the insurance company.
How do you know if you have been overcharged? Here are 16 warning signals that should trigger additional scrutiny:
1. You did not get a copy of the auditor's worksheets.
2. The audit was conducted at the accountant's or bookkeeper's office. The term, "audit" often is synonymous with accountant, although many accountants have little, if any knowledge of the laws governing Workers' Compensation.
3. The insurance company changed your basic classification or reallocated payroll.
4. Your Experience Mod increased during the policy period.
5. Charges were made for uninsured subcontractors or owner-operators. A common error is that payroll is charged on the contract price, not actual payroll.
6. The audit included a charge for paid commissions.
7. You received a large additional or return premium (you may be entitled to more).
8. The state implemented a rate change.
9. Credits on last year's policy were removed from your current policy.
10. You are a contractor involved in several types of work, but not all of them are shown on your policy.
11. Your policy was cancelled or rewritten with a different effective date.
12. The wages of an executive officer of the corporation were assigned to high-rated classifications.
13. You are a contractor involved in a wrap-up construction project.
14. Your policy contains a Residual Market or Assigned Risk surcharge.
15. You were awarded contracts under the Davis-Bacon Act.
16. You are not absolutely certain that you didn't overpay your audit.
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Why costs escalate unexpectedly in low risk Workers' Compensation claims
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While Workers' Compensation claims frequency continues to decline, the on-going escalation of medical and indemnity losses illustrates a lack of effective post-injury management. A recent study in the Journal of Occupational and Environmental Medicine, "Determinants of Escalating Costs in Low Risk Workers' Compensation Claims" was undertaken to determine the characteristics of claims that are initially felt to be low-cost but ultimately become costly.
The study utilized data from the Louisiana Workers' Compensation Corporation (LWCC), a private mutual insurance company writing workers' compensation for approximately 33% of the fully insured market in the state of Louisiana.
The vast majority of medical-only and uncomplicated lost time claims are reserved for under $15,000. There is nothing about the nature and the extent of the injuries that would involve costly medical expenses or an extended period of time from injury to full recovery. Unexpected cost escalation of these claims takes place as the claims mature.
During the five-year study period, there were 32,063 claims that fell into the low risk category. Although only 2% (729) became migrated catastrophic claims, they accounted for 32.3% ($154,379,267) of the total claims cost. The median cost of these claims was 250 times the sum initially reserved for them.
There are several findings in the study that can aid in establishing effective claims management programs:
* Attorney involvement and claim duration are the most important factors contributing to unexpected cost escalation in a small number of claims that drastically affect overall losses
* The longer it takes to resolve a claim, the higher the ultimate cost of the claim
* A combination of factors, especially attorney involvement, a failure to resolve a claim within 24 months, low back pain, and older age makes a claim vulnerable to cost escalation
* Costs for settled claims rise slowly for approximately two years then begin to escalate rapidly. The median cost of claims that were closed 361 to 720 days was approximately one-quarter of those closed after 720 days.
* Aggressive medical management should be applied to achieve full recovery as soon as possible and settlement should be considered before the claim has reached 12 to 18 months without resolution.
The study confirms that medical case management, Return-to-Work programs, and vocational rehabilitation are effective in decreasing medical and indemnity costs, partially because they reduce the time that a claim is open.
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