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NEWSLETTERS
NEWSLETTERS
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In this issue
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Experience Mod Audit Lowers Mod 17 Points & Returns $33,150 to Grading Contractor
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What to look for in Workers' Comp in a down economy
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Pre-employment testing: Effective tool to reduce absenteeism and Workers' Comp claims and improve productivity
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Experience Mod Audit Lowers Mod 17 Points & Returns $33,150 to Grading Contractor
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Insured
The grading contractor employs 42 people and has annual revenues of approximately $3 million.
Situation
The company had been with the same broker for 21 years. At no time had the broker audited or verified the insured's Experience Modification Factor and has routinely accepted the Mod Worksheet provided by NCCI as accurate and correct. The company's Mod was 1.40.
Assessment
Recognizing that mistakes are common in Experience Mods, Certified WorkComp Advisors (CWCA) performed an audit of the current Mod and found a number of errors that were adversely affecting the Mod. Several high-severity claims were still listed on the Experience Mod worksheet containing the full reserves, even though they had been closed for two years and reserves decreased. In addition, the previous year's policy payroll - which was significantly lower than the audited payroll - was being used to calculate the Mod, further inflating the figures.
Solution
CWCAs did a complete and thorough audit of the Experience Mod correcting all payroll and claims that were inflating the Mod. They sent all new information to NCCI and as a result, the Mod was lowered by 17 points.
Result
By working with the CWCAs, the company saw a drop in the Experience Mod from 1.40 to 1.23 and the company also realized an annual savings of $11,050 with a three year estimated total savings of $33,150.
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What to look for in Workers' Comp in a down economy
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In a recent weblog, Managed Care Matters, Joseph Paduda explores what the recession means for Workers' Comp. He points out that costs tend to increase for two reasons - claims rates increase, as does disability duration.
There's a common belief that injuries spike when workers fear for their jobs. Although it is a good idea to let your agent and carrier know of any downsizing plans so strategies to prevent questionable claims can be developed, research suggests that such abuses may be exaggerated. Although injury rates rose during the recession of the early nineties, they usually decline during down economies.
Whereas some workers may try to go out on Workers' Comp, others do whatever they can to stay in the good graces of their employers. It's quite possible that injury rates will continue their decline during this down economic period, both for factors unrelated to the recession and because production slows and the remaining workforce is more experienced than those laid off.
However, indemnity costs will likely increase at a faster rate than wages, as recessions are marked by flat or declining incomes. "Research (May 2002 bulletin) conducted by Minnesota's Department of Labor and Industry showed that declines in employment appear to have caused modest, temporary increases in Workers' Compensation payments. The data suggests a decline in hours worked in an industry will lead to a nearly proportionate increase in the next month's Workers' Compensation costs in that industry."
Another economic factor that will have an impact on Workers' Compensation costs is the performance of financial markets. Insurers collect premiums up front and pay benefits later. When investment returns are high, insurers can charge employers lower premiums, but reduced investment returns often lead to higher premiums.
Yet, there are other factors that may very well have the largest impact on Workers' Compensation. They include rising drug costs, high medical cost inflation, extended utilization, cost shifting by providers who are pounded by reductions in Medicare and Medicaid reimbursements, higher facility costs and a de-emphasis on loss prevention as employers look for immediate ways to cut costs. Coupled with this, Standard & Poor's Ratings Services said that the ratings on Workers' Compensation insurers could face negative pressure late this year and next as Workers' Compensation rates continue to decline, reducing carriers' margins.
Even in difficult economic times, it benefits employers to stay the course with their injury management program. Hiring properly, quick reporting and monitoring of claims, establishing clinical relationships so that injured employees receive the most appropriate and cost-effective care in accordance with established protocols, training supervisors, offering wellness programs and executing a well managed Return-to-Work program will help control Workers' Compensation costs now and long after the recession is over. |
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Pre-employment testing: Effective tool to reduce absenteeism and Workers' Comp claims and improve productivity
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EEOC issues new fact sheet
A bad hire is one of the most costly mistakes an employer can make. Yet, many employers fail to evaluate thoroughly potential employees before making the decision to hire them.
More employers are utilizing employment testing due in part to post 9-11 security concerns, issues related to workplace violence, safety, and liability as well as the large-scale adoption of online job applications that require efficient ways to screen big applicant pools in a non-subjective way. Yet, others shun their use, believing that there are too many risks involved, particularly increasing their exposure to being sued.
Some of the tools available to employers include skill testing, character assessment, and fit-for-duty exams. The legal risks associated with these hiring activities, while they do exist, are minimal compared to the risk of hiring the wrong person. Moreover, assessments, when used properly, can help reduce exposure to charges of discrimination or privacy breach because they add objectivity to the selection process.
Both skill testing and personality assessment tools are subject to uniform guidelines. The Equal Employment Opportunity Commission's (EEOC) Uniform Guidelines on Employee Selection Procedures provide a framework to help ensure that a test used as part of the hiring process will be employed in a non-discriminatory manner.
The EEOC has issued an extensive fact sheet on the application of federal anti-discrimination laws to employer tests and other selection procedures to screen applicants for hire and employees for promotion. The technical assistance document is available on the agency's web site at www.eeoc.gov/policy/docs/factemployment_procedures.html.
The fact sheet describes common types of employer administered tests and selection procedures used in the 21st century workplace, including cognitive tests, personality tests, medical examinations, credit checks, and criminal background checks. The document also sets forth "best practices" for employers to follow when using employment tests and other screening devices, and cites recent EEOC enforcement actions.
An area of particular relevance to Workers' Compensation is pre-employment physicals. If a company requires "fit-for-duty exams" to avoid hiring a Workers' Comp claim, they should be structured so that they comply with privacy laws and the American with Disabilities Act (ADA). Employers are limited in the scope of allowable inquiries before making a conditional job offer. Our strategic partner, HR That Works!, notes that the ADA allows prehire inquires on an application into the ability to perform a particular job (e.g., Can you lift this 30-pound mail sack with or without accommodation?) but prohibits pre-offer inquiries about a generalized disability (e.g. Have you ever been injured when lifting?).
However, after making a conditional job offer an employer can ask about the employee's Workers' Compensation history, sick leave usage, medical challenges, etc. as well as require a medical examination, provided that all candidates who receive a conditional job offer in the same category are required to take the same examination and/or respond to the same inquiries. If the employer chooses not to hire someone based on their medical history, the decision must be directly related to their inability to perform the job up to a certain standard or because in doing so, they may harm themselves or others. Employers with more than 15 employees are required to consider job accommodations. It is recommended that medical inquires be done by a physician and that the physician maintain the underlying records.
Another objection sometimes heard about pre-employment testing is that it doesn't work. A study by PreVisor, Inc. of 29 organizations, including several Fortune 1000 employers from the retail, telecommunications, health care and financial services industries found that the use of tests have enabled employers to "accurately correlate candidate assessment scores with performance on the job, creating measurable and sustainable improvements to business results." One result is reduced turnover. For example, in a warehousing and distribution role, 43% of associates who scored high on a customized job-fit measure remained on the job after 90 days, whereas only 23% of those who scored low on the assessment were retained.
When managed properly, integrating pre-employment testing into your hiring process can decrease turnover, improve productivity as well as reduce the likelihood of employment practices lawsuits.
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Four compelling reasons to tighten up hiring practices for temporary or contingent workers
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Temporary employees, whether hired through a temp agency or directly by the company, help ease the pressures of economic uncertainty because they are flexible and easily scalable. Since the workers are generally considered short-term, many employers do not perform the same due diligence in the hiring process as they do when hiring full-time employees or they assume that the temp agency has done their homework.
Yet, even if the person will be engaged only for a short period, the company is exposed. Here are four compelling reasons to tighten up your practices when hiring temporary workers:
1. Temporary workers are at higher risk of occupational injuries and illnesses. A recent study in the Journal of the American Medical Association, "Contingent Workers and Contingent Health" found that 19% of day laborers reported work-related injuries, compared to less than 5% of workers in all private industries. Researchers speculated that the unpredictability of job schedules could contribute to poor eating and exercise habits and that contingent workers are likely to have lower incomes and fewer benefits.
2. According to Todd Owens, general manager of screening services at Intelius, Inc., industry statistics show that temporary workers are more than 50% more likely than full-time workers to have a felony or drug-related record.
3. Staffing agency standards for screening its placements may not be aligned with those the company uses for its regular workforce. Proper screening and background checks slow down the placement process and drive up costs.
4. If something goes wrong and a member of the public or a co-worker is hurt, it's not uncommon for the plaintiff's lawyer to sue both the staffing agency and the employer.
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