Joint Chapter Meeting 3.10.2011

Meeting SponsorJoint Chapter Meeting

3 . 1 0 . 2 0 1 1

Joint Chapter Meeting3.10.2011

Meeting Sponsor

Sedgwick CMS © 2011 Confidential – Do not disclose or distribute. 2Meeting Sponsor

Agenda

• 8:45 – 9:15 Registration & Coffee Service• 9:15 – 9:30 Welcome, Introductions, WA PRIMA’s Treasurer’s Report • 9:30 – 10:30 Hot Topics and Legislative Issues Impacting the Public and Private Sector

– Moderator: Jeff Hollingsworth, Risk Manager Port of Seattle– PRIMA Speaker: Candice Bock, Legislative and Policy Advocate, State and Federal Relations

Association of Washington Cities– RIMS Speaker: Darrell Brown, ARM, Senior Vice President and the National Workers’

Compensation Practice Leader at Sedgwick Claims Management Service, Inc. • 10:30 – 10:45 Break • 10:45 – 12:00 Utilizing Benchmarks, Metrics and Analytics to Manage Risks

– Moderator/Speaker: Keith M. Higdon - Senior Vice President, Sedgwick Claims Management Services, Inc.

– PRIMA Speakers: • Drew Zavatsky, State of Washington Office of Financial Management, Loss Prevention

Program Coordinator • Jeff Hollingsworth, Port of Seattle Risk Manager

• RIMS Speakers: • Keith M. Higdon - Senior Vice President, Sedgwick Claims Management Services, Inc.• Katrina A. Zitnik, Director of Workers’ Compensation, Costco Wholesale

• 12:00 – 1:00 Lunch

Meeting SponsorHot Topics and Legislative Issues

Impacting the Public and Private Sector

C a n d a c e B o c k | D a r r e l l B r o w n

Hot Topics and Legislative Issues Impacting the Public and Private

SectorC a n d a c e B o c k | D a r re l l B ro w n

Meeting Sponsor


Tort Reform Legislation

• SHB 1719 - limiting liability for employers for unauthorized passengers in employer vehicle

• HB 1681 – limiting liability respondent superior

• HB 1679 – limiting liability for offender supervision

• SSB 5605 – limiting liability for governments– Investigation of child abuse or neglect– Offender supervision– Joint and several

Association of Washington Cities

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Personnel Legislation

• SSB 5354/SHB 1445 – expanding presumptive disease designation for police and fire

• HB 1444 – continuing death benefits upon remarriage

• SB 5160/HB 1450 – Increasing the death benefit for public employees

• HB 1487 – Workers Compensation Retro Programs


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Public Records

• SHB 1899 and SSB 5685 – No daily penalty option for Public Records Act violations

• SSB 5098 – Exempts personal information for participants in community programs (e.g., kids in parks & rec)

• SB 5022 -- Clarifies one year statute of limitations

• SB 5693 – Metadata fix. Defines “copy.”

• SSB 5025 – No penalties for inmates unless agency acted in bad faith


Meeting Sponsor


Other Liability Issues

• HB 1559 – limiting liability for design professionals

• SB 5310 – False Claims Act

• SB 5387/HB 1670 – regulation of government risk pools


Meeting Sponsor

Medicare Reporting and 2011 Legislation

D a r r e l l B r o w n

Medicare Reporting and

2011 Legislation Darre l l B rown

Meeting Sponsor


Medicare Reporting- What happens now that reporting has started?

• Claim files

• Queries

• Stability of website

• Working with CMS/COBC

Meeting Sponsor


What we should continue to think

about?

• Workers’ Compensation ORM Clean Up of 2010

• Future Medical States

• Increased MSP Recovery Efforts

• Delayed Liability Reporting

• MARC 2011 Legislation

• Penalties

Meeting Sponsor


2011 Legislative Activity – Other States

• National – HR 623• Illinois – SB 1349• Oklahoma – HB 1286• Kansas – HB 2134• Georgia – SB 7• Maryland – HB 889 / SB 413• Missouri – HB 162• Montana – HB 334, SB 243, HB 71

Meeting SponsorUtilizing Benchmarks, Metrics

and Analytics to Manage RisksKeith Higdon | Jeff Hollingsworth | Katrina Zitnik | Drew

Zavatsky

Utilizing Benchmarks, Metrics and Analytics to Manage RisksKeith Higdon | Jeff Hollingsworth Katrina Zitnik | Drew Zavatsky

Meeting Sponsor


Benchmarking

• Definition of a benchmark - a standard of excellence, achievement, etc., against which similar things must be measured or judged. –www.Dictionary.com (http://dictionary.reference.com/browse/benchmarking)

• Two types of commonly benchmarks– Past performance – GOAL oriented– External data sources such as industry and other peer

definitions – OPPORTUNITY/EXPLANATION oriented

http://dictionary.reference.com/browse/benchmarking

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Benchmarking to Past Performance –

Program Evaluation

Baseline

Monitoring

Impact Assessment

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Benchmarking to External Data Sources – Peer

Comparison• Generally a starting point, NOT an end point• What is the driver?

– Industry issue– State issue– Program issue

• What is a peer? Items to consider– Industry classification– Operating divisions– Employee size– Exposure distribution

• Data Sources– Third-party organizations– Third-party administrators/Carriers

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Benchmarking Challenges

• Data challenges– Internal – what, where, and how?– External – what is the correct comparison?

• Point-in-time versus trending

• Variability of averages– Trends– Outliers

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Data Lifecycle

Capture

Storage

AccessAnalysis

Deployment

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Case for Trending

Data Set 1 Shows a Reduction in the Average - Data Set 2 Shows an Increase in the Average

$0

$5,000$10,000

$15,000$20,000

$25,000

Period 1 Period 2 Period 3

Dataset 1Dataset 2

Data Set 1 Shows an Increase in the Average - Data Set 2 is a More Flat Average

$0

$5,000

$10,000

$15,000

$20,000

Period 1 Period 2 Period 3

Dataset 1Dataset 2

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TPA Example

• Database records– Workers’ compensation = 14.6 million– Liability (all lines) = 6.6 million– Disability = 3.0 million

• Economics of 2008– Decline in volumes in some industries and lines– Increases in severity in key areas of others

• Outcome– Validated single client experience– Identified intervention opportunities

• Regional• Client specific

Meeting Sponsor

Meeting Sponsor


Aviation Seaport Real Estate Capital Development

King County Voters Commissioners

CEO

Meeting Sponsor


Shilshole Bay Marina

Fishermen’s Terminal

Grain TerminalSea-Tacoma Airport

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Benchmarking Challenges

• When to Benchmark?• What Metrics To Use?

– Create your own metric and then benchmark?– Use a “standard” benchmark and match data

• How to Collect the Data?– Ask the Right Questions– Insurance Surveys

• Who To Benchmark Against? – Yourself year to year– “Like” organizations

• Validation of Results? • What Do You Do with the Results?

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Cost of Risk Benchmark

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00 Port Cost of Risk (Per $1000 Revenue) Port COR/$1000 Rev

AV - COR (Per Revenue)

Non-AV COR/$1000 Rev

Revenue $250 to $500 - RIMS Survey

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Cost of Risk Deconstruct

Per $1000 Revenue

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

Workers Compensation

Property Program

Liability Program

Risk Management Department

Outside Services

Meeting Sponsor


RIMS Benchmark COR Per $1000 of Revenue

• 2009 All Industry = $10.35 (Reference RIMS)– Under $ 1 Billion Revenues = $14.86– Greater $ 1 Billion Revenues = $5.24– $250 Million to $500 Million = $12.59

• 2009 Government/Non-Profit (Ranked 7th)– $10.64 (Largest Drop in 2009 of 29%)

• Port of Seattle– Total = $12.52 (2009) and $10.18 (2010)– Aviation = $9.44 (2009) and $8.64 (2010)

Meeting Sponsor


Internal Budget Metrics

Key Indicators 2010 YTD 2009 YTDAutomobile Incidents 75 preventable out of 112

total or a 35% increase through December of 2010 (unfavorable)

53 preventable out of 107 total through December of 2009

Incurred Auto Liability Costs $11,110.00 as of 12/31/2010 a 60% favorable decrease

$30,000

Overall Liability Reserves Account 22035

$10.8 million through 12/31/2010 a 150% increase from 2001 (unfavorable)

$4.3 million

Property Insurance $1.262 million (down 1% favorable)

$1.279 million

Liability Insurance $682,000 (up 3% unfavorable)

$665,000

Overall Cost of Risk $10.18 /$1000 revenue as of 12/31/2011 (favorable)

$12.52/$1000 revenue 2009 Port Wide

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Est $-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000 Property Insurance Premium versus Port Insurable Values

Property Non-EQ Insurance PremiumProperty Value x $1000

Year to YearBenchmark

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0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Est

Liability Insurance Premium Versus Port Indicators

Liability Insurance Cost Passengers Sea-Tac TEUs Seaport Revenue x 100

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10.4

14.2

12.2

12.8

9.89.3

7.96.6

7.9

6.6 6.5

6.6 7.15.97.4 7.1 6.7 6.3 6.1 5.7 5.3 5.0 4.8 4.6 4.4 4.2 3.9

0

10

20

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 07 08 09

Safety Evaluation Process

Port Commission Resolution 3213Zero (0) Accident Goals 1996

Spirit & Wellness

1st Safety Leader Kickoff

SafetyLeaders Team

National Average

Injury Rates 1996 - 2009

Meeting Sponsor


Benchmarking Takeaways

• Know your data, your sources, and validate.• Know your peers at PRIMA, RIMS, etc• Know where to pull data from your company• Be very careful with insurance surveys• Use indicators to tie metrics that matter to your

Sr./Executive Management team• Change your metrics to reflect your operations

Meeting Sponsor

Meeting Sponsor


Company Profile

• 3rd Largest Retailer in US• 7th Largest Retailer in World• $139M avg. sales/Warehouse• 425 Locations with 110K EE in US• 33M Households with 61M Members• $79 Billion in Sales

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WC Program Overview

• Self insured in all states• 9 Corporate Staff• Part of HR – report to

AVP of benefits• About 8,500 claims/year

– 35% in CA = $12k/claim– 65% in AOS = $10K/claim

• Ultimate Costs = about $90M/year

• Partners– SCMS is TPA– Bunch is medical

management and bill review

– Aetna is PBM– Pre Care for onsite PT in

WA, OR, NY, NJ, and IL– WorkCare for II Line– Kaiser is in MPN in CA

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Benchmarking – Past Performance

Goal Oriented

• Challenges:– Consistency & Predictability– Manage each policy year to hit the loss pick

• About $265M in outstanding reserves– Understand the costs by state

• 36 states to choose from– Determine appropriate program design

• Ideas/Suppliers/Solutions• Practical for location

– Measure results • ROI

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Past Performance

• Goal/Results Oriented– Ultimate Loss Cost by policy year

• Quarterly analysis– Set each policy year budget

• Determine focus years– State specific loss rates

• Determine focus states– Reports

• Track paid/incurred• Track payments by pay code by state

– Know status at the end of each 4 week period

Meeting Sponsor


Actual vs. Predicted

As of FY11 P5

FY09 Predicted Actual Difference

Incurred 25,150,204 25,407,666 257,462

Paid 14,392,267 13,583,801 (808,466)

California

AOSFY09 Predicted Actual Difference

Incurred 38,748,693 39,387,717 994,024

Paid 30,245,783 29,387,059 (858,724)

Meeting Sponsor


State Specific Loss Rates

As of FY10 P12

NY 4.71 MI .86

NJ 4.66 UT 1.12

WA 3.75 VA 1.26

IL 3.58 MD 1.30HI 3.31 FL 1.72

3 Year Average

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BenchmarkingExternal Data

Sources• Opportunity/Explanation Oriented

• Networking with peers

• Comparative Studies– AON – compares ultimate outcomes

• SCMS or Bunch BOB– Average costs– Similar employers/exposures

• WCRI– State System Studies

Meeting Sponsor

Meeting Sponsor


Washington State Risk Management

Two major initiatives:1. Administer the State Insurance Liability Fund (self-

insurance)2. Administer the State Loss Prevention Program

Major Risk: No sovereign immunity!

Meeting Sponsor


Washington State Risk Management – the impact of liability

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 $-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

Incident Types for Tort Indemnity Payouts by Fiscal Year - Total Payouts

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Available data:1. Tort claims database

(payouts)2. Loss prevention review law

(serious incidents)

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Loss Prevention Drill-down

050

100150200250

Types of Deaths Re-ported, FY 2008-2009

0200400600800

1000

Types of Injuries Re-ported, FY 2008-2009

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Loss Prevention Lessons Applied

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 $-

$10,000,000.00

$20,000,000.00

$30,000,000.00

$40,000,000.00

$50,000,000.00

$60,000,000.00

Tort Indemnity Payouts by Fiscal Year

Vulnerable Children and Adults Highway Fatalities and InjuriesParolees and inmates FY Total Payout

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The Real Answer

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 20080.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

% of Total Indemnity Payout by Category

Vulnerable Children and Adults Highway Fatalities and InjuriesParolees and inmates All Other Payouts

Meeting Sponsor

Thank You | Questions?

Joint Chapter Meeting3.10.2011

Documents

Joint Chapter Meeting 3.10.2011