Archive for December, 2003

Communication pays dividends

Monday, December 29th, 2003

From Wisconsin, land of many lakes, come three refreshing case histories depicting the many benefits that can accrue when employers heighten communication with employees. The unifying theme? “Aggressively listening to employees pays huge dividends.”

At a local corrugated box plant of the Weyerhaeuser Company, an employee-based safety campaign reduced accidents involving lost work time from 20 in 1999 to none in 2002, and only one in the past year. The company implemented the Triangle of Prevention (TOP) program with members of Paper, Allied-Industrial, Chemical and Energy Workers Union (PACE). This is an excellent example of how unions and management should be sitting on the same side of the table when it comes to worker safety.

The two other examples in the article aren’t directly related to workers comp, but are instructive nonetheless. An employee-based redesign of production process flow reduced in-plant idle inventory to the point where a furniture manufacturer could eliminate a warehouse and save more than $150,000 annually; employee-based innovations at a health network enhanced patient service, improved patient care, added employee benefits, and significantly reduced employee turnover.

We’ve seen the collective power of employee ownership many times in our travels. Are you listening hard enough to your employees? If not, it might be a good time for some New Year’s resolutions.

Business blog added to linklist

Sunday, December 28th, 2003

We’re adding Small Business Trends to our “blogroll” over to the right. It’s a weblog that tracks trends impacting small and midsize businesses. While not specific to insurance, it appears to have varied and interesting content. One recent item of note is a posting on Forrester Research’s top 10 predictions for healthcare in 2004.

When Workers Die

Wednesday, December 24th, 2003

It is well worth the free registration at the New York Times to read the powerful three-part series entitled “When Workers Die.”
These articles raise the issue of an employer’s liability for willful neglect of safety procedures leading to a workplace death. They also make the case that OSHA has woefully failed in its mandate to protect workers by its reluctance to hold employers accountable for preventable deaths. Particularly egregious are the instances where there is little to no accountability for even those employers with serial fatalities. Are workplace deaths regarded as “fate” or “an accident” much in the way that auto deaths from drunken driving were once tolerated before prosecutions became the norm?
Increasingly, states are stepping in to hold employers accountable, most notably in California. Part three of the series examines the impact that one employer prosecution has had in raising safety awareness in the state’s dairy industry.
Part 1: A Trench Caves In; a Young Worker Is Dead. Is It a Crime?
Part 2: U.S. Rarely Seeks Charges for Deaths in Workplace
Part 3: California Leads in Making Employer Pay for Job Deaths
Access all three parts and related links.

Other related resources
OSHA: Trenching and Excavation
OSHA: Confined Spaces

Everything you ever wanted to know about captives…

Wednesday, December 17th, 2003

As the property and casualty insurance industry continues to consolidate, more and more large employers are considering alternative risk financing arrangements for their workers’ compensation programs. One of the increasingly popular alternatives is forming a captive. For many, there’s a lot of mystery around exactly what a captive is or isn’t. provides an excellent round up of articles, white papers, and presentations on captive basics culled from a variety of authoritative industry sources.

Around the end of the year when the bulk of the policy renewals are up for review, there is a tendency to think of workers’ comp solely in terms of the financial arrangements that surround it. Yet fundamentally, workers comp is not a financial issue but a human event and a management issue. Manage the event — or better yet — prevent it entirely, and the dollars will follow. It should go without saying that employers who don’t have their workers’ comp experience rigorously under control shouldn’t even think of alternative arrangements.

HIPAA Blog added to sidebar

Tuesday, December 16th, 2003

Workers’ compensation, insurance, workplace health & safety and HR weblogs are far and few between so we were delighted to chance upon the HIPAA Blog. This is a weblog that bills itself as “a discussion of medical privacy issues buried in politcal arcana.” Besides frequent news updates, it has an impressive list of links to HIPAA-related resources. (for the unitinitated, HIPAA stands for Health Insurance Portability and Accountability Act of 1996.)

Lifting guidelines and RTW

Monday, December 15th, 2003

The Ohio Bureau of Workers Comp and Ohio State University have teamed up on a research project that studies back injuries and reinjuries that can occur when people return to work. As an offshoot of the research, they developed an interactive lifting resource with guidelines intended to help employers and physicians in developing realistic transitional work programs. Considering that back injuries cause more time away from work than anything besides the common cold, it’s a resource worth checking out.

Workers’ Comp and the Station Nightclub

Thursday, December 11th, 2003

This is a cautionary tale for America’s small employers.

One hundred people died in the Station Nightclub fire, one of the worst tragedies in American history.

Yesterday, the brothers, Jeffrey A. Derderian and Michael A. Derderian, who owned the Station Nightclub in West Warwick, Rhode Island, and Daniel M. Biechele, the tour manager for the band, Great White, were each charged with 200 counts of involuntary manslaughter, two for each death. Each count carries a possible penalty of up to 30 years in prison.

The Derderians have owned the club since the year 2000. Overwhelmed by the enormity of the catastrophe, lost in the proverbial shuffle, actually, is the fact that in all that time they never purchased a workers’ compensation insurance policy, a statutory requirement.

There were 16 Station Night Club employees working the night of the fire. Four of them died. If there had been workers’ compensation insurance, the families of the dead employees would have been eligible for a meager $5,000 burial benefit. A surviving spouse would have been eligible to receive two-thirds of the deceased’s average weekly wage until death or remarriage.

Absent the insurance, the state stepped in and paid the benefits from a special fund created for such an event and funded by all employers in the state, all employers who purchase workers’ compensation, that is. The state then fined the brothers a little more than $1 million.

Asked why the Derderians never had the insurance, their attorney, Jeff Pine said, “Sometimes these things happen. A lot of businesses and other entities don’t have it.”

I find it interesting that right after the fine was announced, workers’ compensation applications in Rhode Island increased dramatically. Fancy that.

We’ll have a lot more on this in subsequent postings. Stay tuned.

Measuring success

Thursday, December 4th, 2003

I’ve always thought that a company that is serious about controlling workers’ compensation costs and losses must be serious about measuring its performance, or else how will success be known?

The problem with traditional measurement protocols is that they take years to develop in order that conclusions can be drawn with any level of actuarial certainty. The four-year development of experience modification is the standard measure. Loss data for a given year does not enter the mod calculation until eighteen months following the close of the policy year, and the modification, itself, reflects three years experience. This fails to give management a timely opportunity to reverse unfavorable trends. If you are an employer, you need something better and quicker.

There are more user-friendly methods that employers can use to keep abreast of the status of their programs at any given time. We recommend tracking the data continuously and posting results monthly.

Over the next five weeks, I’ll post some of the methods we’ve found to be most effective at Lynch Ryan. If you’re an employer, perhaps you’ll find them useful as you search for ways to track the performance of your own injury management program. Feel free to post any comments – we’d like to hear what you think.

This first posting in the series will focus on Cost of Losses per Full Time Equivalent Employees (FTE).

The single best economic indicator of the effectiveness of a workers’ compensation cost control program is Cost of Losses per FTE. It provides an economically sound snapshot of program success at any given time. Oftentimes, employers have little control over whether workers’ compensation statutory premium rates rise or fall. Yet, individual employers can control whether their own losses rise or fall. Tracking the cost of losses per FTE is the best way to measure the status of the overall cost control effort.
To determine the cost of losses per FTE, first factor out the variability of part-time and overtime work by dividing the total number of hours worked by all employees in a one year period by 2080 (a 40-hour workweek times 52 weeks) to arrive at the number of full time equivalent employees. Then, divide the total cost of losses during the same one year period by the total FTE count.

Regardless of industry or geographical location, your annual Cost of Losses Per FTE should not exceed $100.

You can track the Cost of Losses Per FTE on a quarterly or monthly basis by substituting 520 or 173 for 2,080, respectively.

California Keeps Digging

Wednesday, December 3rd, 2003

Question: What is the first rule of “holes?” Answer: When you’re in one, stop digging.

Members of the public who have been following this column know that we, here at LynchRyan, have been absolutely fascinated with the workers’ compensation goings on in California, the state that, if it were a country, would have the world’s fifth leading gross national product.

While the eyes of the nation have been riveted on the political codswallop coming out of the “golden state,” California’s employer community is now paying workers’ compensation at the rate of 6.3% of payroll, more than three times the national average.

In the waning days of the Davis Administration, Senate President Pro Tem John Burton, D-San Francisco, maneuvered California’s legislature to approve a series of reforms aimed at reversing the runaway costs, which have climbed $20 billion in the last four years to reach $29 billion in 2003.

Davis signed the legislation and Insurance Commissioner John Garamendi estimated savings of $5 billion in 2004. But during his “campaign,” then-candidate, Arnold Schwarzenegger, called the legislation, “bogus bills.” As we all know, Schwarzenegger was elected and promised, during his inauguration speech, to cut workers’ compensation costs by $11 billion. And now “the game’s afoot.”

Last week, a state Senate committee voted to overturn the reforms. “If they think it’s a ‘bogus bill,’ if they think they can do so much better, they should have the opportunity,” Senator Burton said. “Let them sit in the endless meetings, let their constituents be all over them.” The legislature is now convening new committee hearings with the purpose of crafting new reforms.

Essentially, California is back at square one. We will continue to watch the fur fly.