Reduce Your Workers’ Comp ExposureReduce Your Workers’ Comp ExposureThrough Cost ContainmentThrough Cost Containment

Insomnia: Major Problem Among PEO CEOs

Do you have a grasp of your exposures?

Do you service your clients as advertised?

Cost Containment: Asleep at the switch?

……and insurers who write them

Challenges to Profitability

• Unmanaged Growth• Unstable and/or unbalanced infrastructure• Class Code Misclassification• Misrepresentation of Payrolls• Invalid Loss History• Credit Risk• Poor Cost Containment – Safety/Injury Management• Increased Expenses – Service, Comp Costs, etc…

• Know your Insurance Carrier UW Guidelines …and follow them

• Develop Criteria for Assessing Every Type of Risk

• Create Risk Assessment Templates for Consistency

• Utilize Qualified Loss Prevention for Onsite Risk Assessment and Ongoing Loss Control Services

A Cure for Insomnia

….A Cure Continued

• House Industry Veterans that have Witnessed “All of the Tricks”

• Solid Field Underwriting – Underwriting of Data, Client Commitment and Client Integrity

• Audits to Track and Manage Growth

• Monitor/Measure Client Performance

• Educate Your Distribution System

Risk Engineer screening of potential Clients. Program Management service based on the ability to improve loss

results of individual client companies Profitability benchmarks based on 3-year developed loss ratios,

frequency and severity Pruning process of poor performers

Risk Management Delivery/Scope Risk Management Delivery/Scope

U/W Screening Criteria

Program Management will perform onsite Risk Assessments as requested by Underwriting, and Program Management will perform onsite Risk Assessments as requested by Underwriting, and will deliver loss prevention services based on classification, frequency and severitywill deliver loss prevention services based on classification, frequency and severity

Recommendations

Conceptual Program Management Service Model

All potential business Program Management Onsite Risk Assessment

Business to be

serviced

Rating I Rating II Rating III

Underwriting Tiers

Desired Classes of BusinessApproved Codes which meet

desired loss experience

Illustrative

Hazard 3 classesMarginal loss historyPre-Approval Required

Marginal Performers or excluded classes

Customized service solutions, based on client needs and requests

On-site risk assessment required

Recommendations

XYZ CarrierPolicy Number: 12345Policy Period: 1-1-04 through 1-1--5Valuation Date: 8-31-04

Client Employer CLMType NCCICode NCCIDescpt TotalIncurredABC PEO Employer A MED 2710 Sawmill 795$ ABC PEO Employer A IND 2710 Sawmill 122,267$ ABC PEO Employer A IND 8810 Clerical Office Employees NOC -$ ABC PEO Employer B IND 8380 Automobile Service or Repair C 274$ ABC PEO Employer B MED 8380 Automobile Service or Repair C 250$ ABC PEO Employer B MED 8380 Automobile Service or Repair C 400$ ABC PEO Employer B MED 8380 Automobile Service or Repair C 250$ ABC PEO Employer B MED 8380 Automobile Service or Repair C 764$ ABC PEO Employer B MED 8380 Automobile Service or Repair C 530$ ABC PEO Employer B MED 8810 Clerical Office Employees NOC 602$ ABC PEO Employer C IND 5183 Plumbing NOC & Drivers 2,922$ ABC PEO Employer C MED 5183 Plumbing NOC & Drivers 392$ ABC PEO Employer C MED 5183 Plumbing NOC & Drivers 1,005$ ABC PEO Employer C IND 8810 Clerical Office Employees NOC 12,043$ ABC PEO Employer D MED 5221 Concrete or Cement Work-Floors 250$ ABC PEO Employer D MED 5221 Concrete or Cement Work-Floors 250$ ABC PEO Employer D MED 5221 Concrete or Cement Work-Floors 372$ ABC PEO Employer D MED 5213 Concrete Construction NOC 555$

Recommendations

Employer Data Total Earned Premium Loss Ratio FrequencyEmployer A Sum of Total Incurred 123062 80,000.00$ 65%

Count of CLMType 3 0.3750Employer B Sum of Total Incurred 3070 4,000.00$ 3%

Count of CLMType 7 17.5000Employer C Sum of Total Incurred 16361 48,000.00$ 39%

Count of CLMType 4 0.8333Employer D Sum of Total Incurred 1426.6 56,000.00$ 46%

Count of CLMType 4 0.7143Total Sum of Total Incurred 143919 188,000.00$ 153%Total Count of CLMType 18

Frequency Goal = 0.75

Frequency =Total Number of Claims

(Earned Premium/$10,000)

Recommendations

Count of CLMTypeEmployer CLMType Total Lost Time %Employer A IND 2 67%

MED 1Employer A Total 3Employer B IND 1 14%

MED 6Employer B Total 7Employer C IND 2 50%

MED 2Employer C Total 4Employer D MED 4Employer D Total 4Grand Total 18

Goal =

Total Number of IND ClaimsTotal Number of Claims

Severity =

Less than 18%

Service will be based on ability to improve loss results of individual customer Service will be based on ability to improve loss results of individual customer groups as measured by frequency and severitygroups as measured by frequency and severity

Conceptual Program Management Service Model

Recommendations

High Frequency

Low Severity High Severity

Low Frequency

Quadrant III – Medium Service

Quadrant IV – High Service

Quadrant I – Maintenance

Quadrant II – Low Service

Employer D

Employer B

Employer A

Employer C

High Frequency High Severity Class CodesHigh Frequency High Severity Class Codes

Service will be based on ability to improve loss results of individual customer Service will be based on ability to improve loss results of individual customer groups as measured by frequency and severitygroups as measured by frequency and severity

Conceptual Program Management Service Model

Recommendations

• On-site Risk Assessment• 2 visits (Risk Assessment could

be combined)• Class examples: Auto repair,

services and parking; Restaurants

• On-site Risk Assessment• 3 visits (Risk Assessment could

be combined)• Class examples: Construction;

Healthcare; Manufacturing; Transportation; Social Services

• On-site Risk Assessment• 1 visit (Risk Assessment could be

Combined.• Class examples: Apparel and

accessory stores, Business services; Miscellaneous retail; Printing; Trade

• No On-site Risk Assessment required

• Service by request• Phone-support

High Frequency

Low Severity High Severity

Low Frequency

Quadrant III – Medium Service

Quadrant IV – High Service

Quadrant I – Maintenance

Quadrant II – Low Service

Accident Cause Freq Severity % CostForeign body in eye 14 $2,097.98 2.6%Chemical Irritation 4 $1,150.00 1.5%Burn 2 $1,928.74 2.5%Exposure/temperature extreme 1 $307.75 0.0%Caught Between - Machine or Equipment 1 $11,310.00 14.9%Cuts - knife, power tool, sharp object 6 $7,229.61 9.4%Slips/Falls - different levels, ladders/scaffold 10 $17,823.58 23.4%Motor Vehicle Collisons 3 $250.00 0.0%Strains - jumping, carrying/lifting, pushing/pulling, overexertion 9 $8,513.70 11.2%Struck by objects 16 $20,771.53 27.3%Rubbed/abraded 2 $500.00 0.1%Animal/Insect bites 3 $2,796.37 3.7%Miscellaneous 3 $1,468.01 2.0%TOTALS 74 $76,146.87

Performance Results

Frequency Types

19%

5%

3%1%

1%8%

14%4%12%

22%

3% 4% 4%

Foreign body in eyeChemical Irritation

Burn

Exposure/temperature extremeCaught Between - Machine or EquipmentCuts - knife, power tool, sharp object

Slips/Falls - different levels, ladders/scaffoldMotor Vehicle Accidents

Strains - jumping, carrying/lifting, pushing/pulling, overexertionStruck by objects

Rubbed/abradedAnimal/Insect bitesMiscellaneous

Risk Assessment – A Continuous Process

Client Qualification Guidelines• Risk Assessment• Pricing

Loss Control• Site Surveys• Risk Mgmt

Consultation

Key Measures• Claims Reviews• Underwriting Logs• Monthly

Performance Reviews

Claims Management• Integrated Case & Claims

Management

Client

The Risk Assessment Process

The Business DecisionThe Business Decision

Determination of business purging Is my exposure greater than originally anticipated? Can the client afford to implement corrective action Will needed risk engineering erode profitability Was the risk properly classified. Will the event cause a price increase

Ensure your infrastructure is scalable Reduce your expenses by focusing risk

management on poor performing risks Know when to cut your losses and purge

unprofitable business Show your carrier proven results

….get some sleep

CONCLUSIONCONCLUSION

Reduce Your Workers’ Compensation Exposure: Part II

Reducing the Overall Length of Disability

Show Me The Money!

Presented by:

Teresa A. Long

Vice President Risk Management

Unisource Administrators, Inc.

Sarasota, Florida

Opportunities

– Missed Medical Appointments

– Transitional Return To Work

• Identifying Opportunities

• Creating Job Descriptions

• Formalize the Process

Goal: Reduce Preventable Disability

Costs

Solutions

Rewards

Missed Medical Appointments

Costs

Additional two to six weeks

of indemnity benefits paid

for every missed appointment

with a specialist.

Establish procedures in your Customer Service Agreement:

• Injured Employee (IE) will call in after every doctor’s appointment to advise of work status and date of next appointment.

• IE must contact us immediately if the possibility of a missed doctor’s appointments exists.

Solutions

Advise the Injured Employee

• The two responsibilities to the company while out on Workers’ Compensation are:– to keep all medical appointments and

– call you after every appointment

• Failure to keep scheduled medical visits may jeopardize your entitlement to continued Workers’ Compensation benefits.

• Create Procedures (backed up with language in the CSA) to:– Advise the IE of their WC responsibilities

• Keep all doctor’s appointments

• Make sure they follow all of the doctor’s instructions

• Call us within one day after every doctor’s appointment.

– Diary each doctor’s appointment (for each IE out of work) for one day before the scheduled appointment

– Call the IE to remind them of appointment

Most Proactive Solution

– Diary for one day after each doctor’s visit and call the IE if they have not called you.

It’s as Important as YOU make it!

• Weekly compensation rate $300

• Missed appointment rescheduled for:– Two weeks $ 600– Four weeks $1,200– Six weeks $1,800

• Times the number of lost time (indemnity) annual claims with missed appointments.

• What’s at risk for you?

Rewards

Does It Really Make a Difference?• Basic Benefits• Calculating Benefits• Take Home vs. Weekly Compensation • Disability Syndrome• What Can Be Done?• Transitional vs. Modified Duty

Return To Work Programs

Indemnity (Lost Time) Benefits

State regulated and defined percent of Average Weekly Wage is used to determine the weekly Compensation Rate for specific state regulated benefits.

Indemnity Benefits

Temporary Total

Temporary Partial

Basic Benefits

Temporary Total

Benefits paid when the physician indicates the

IE is temporarily totally unable to physically

perform his job duties.

Benefits typically paid at 2/3% of average wages.

Temporary Partial

Benefits paid when the physician indicates the IE is temporarily only able to perform partial

duties.

Benefits paid at state-regulated formula.

Temporary Total/Partial

Injured Employee works

40 hours a week at $10 per hour

Average Weekly Wage * $421.15

Weekly Compensation Rate (@ 2/3%) $280.78

* includes overtime

Temporary Total Benefits

Benefits are payable based State defined percentage of the Average Weekly Wages as compared to the post-injury wages.

Florida 80/80 example: AWW: $421.15Entitlement Threshold (80% of $400): $336.92Less Post Injury Wages: $300.00Difference: $ 36.92

X 80%TP Payable Benefits: $ 29.54

Temporary Partial

Do The Math!

Wages for a single person with two exemptions

$10 per hour for 40 hours per week $400

Deductions:

Social Security 24.80

Medicare 5.80

Federal Withholding 38.40

Health Ins. (HMO) 10.89

NET TAKE HOME PAY $320.11

Pre-Injury Wages

What Difference Does It Make?

Routine Wages

40 Hours per Week

At $10 per Hour

NET TAKE HOME

$320.11

WC Temporary Total

AWW: $421.15

TAX FREE

WEEKLY COMP. RATE

$280.78

Net Take Home Pay: $320.11

WC Temp. Total: $80.78

Difference $39.33

Gas @ $2 per day $10.00

$29.33

Lunch @ $5 per day $20.00

$ 9.33

Child Care ?????

The Math

Disability Syndrome

How long does it take the injured employee

to realize he can make more money by staying home

on workers’ compensation than he can by working?

About 30 – 60 days!

You’ve got about 4 – 8 weeks to get them

back to any type of duty to avoid the

Disability Syndrome.

What Can Be Done?

Transitional vs. Modified Duty

Modified Duty

Same employer - Same job - Modified functions

Transitional Duty

Same employer - Different job – Different functions

• If the treating physician does not support transitional/modified duty programs, it won’t happen!

• Provide the physician with a letter stating your ability to provide transitional/modified duty as soon as the physician believes it to be medically appropriate.

• Provide the physician two two job descriptions:– Normal Job– Transitional Job

Physician Selection

Job Descriptions

• Do Two! Normal and Transitional position(s)

• Use ADA guidelines

• Use Physical Capacity Evaluation when appropriate

• A picture is still worth a million words

• Make them legal

• Communicate, communicate, communicate– Physician

– Supervision

– Injured Employee

What Jobs?

• Simply Ask Them!

• Get Creative

• Use your network of experts

Simply Ask Them!!

• As a PEO create a contest for the employees to identify one modified and one transitional duty position.– Must be reasonable positions

– Offer ‘incentive’ award for good suggestions

– Offer bigger award to five best suggestions

• Provide examples of the expected result.

• Create and use a payroll stuffer to notify all employees.

• Legitimize the results by having a certified vocational expert review the positions and create job descriptions and physical capacity requirements.

• Marketing • MSDS Catalogue• Rental Car driver• Inventory• Sorter• Training• Fleet Safety: Tire Pressure/Seat Belt Checker

Get Creative

Claim Representative

Claim Supervisor and/or Manager

Risk Managers

RIMS (if member) website

If you don’t have a network, get started on one!

Use Your Network

What Difference Does It Make?

1. Higher Claim Losses

2. Higher Litigation• Costs 40% more

3. Experience Modification Factor • for three years

Injury Indemnity Costs W/ Transitional Duty

Indemnity Costs W/O Transitional Duty

Herniated Disk

(Surgical)

$6,324

Average length of

Disability = 12 weeks

$54,808

Could be awarded up to 2 years of benefits

Back Strain or Sprain $1,016

Average length of disability = 2 weeks

$6,324

Average length of disability = 12 weeks

Carpel Tunnel Syndrome (no surgery)

$0

IE can RTW immediately to non-repetitive work

$6,324.

Average length of disability = 12 weeks

Carpel Tunnel Syndrome (with surgery)

$2,108

Disabled for 4 weeks

$13,702

Up to 26 weeks of disability plus impairment rating

Rewards – Cost Reductions

1

$94,775.00

.76

$71,730.00

.89

$84,350.00

.13$12,619.00

0

20000

40000

60000

80000

100000

AverageMod

MinimumMod

Current ModControllableMod

Experience Modification

Modifier Premium

1

$94,775.00

.76

$71,730.00

.78

$73,925.00

.02$2,194.00

0

20000

4000060000

80000100000

AverageMod

MinimumMod

Current Mod ControllableMod

Experience Modification

Modifier Premium

Indemnity Cost without Transitional Duty - $54,808

Indemnity Cost with Transitional Duty - $6,324

A Difference of 11 Mod Points or $10,425

Example Classification – 5645, rate $37.41 per $100 payroll Total Employees - 6Total Payroll - $250,000 Manual Premium - $94,775

Impact on Experience Modification Factor

You have the ability to immediately reduce your indemnity costs1. Develop procedures to exert more control

over medical appointments especially with specialists.

2. Identify transitional and modified positions.• Make them ‘legal’• Formalize the process

3. Consistent application of procedures

Summary