Workplace safety isn’t an academic exercise as Jordan Barab at Confined Space reminds us with his grim tally of last week’s workplace deaths. It’s a terrible list, yet an important reminder in light of yesterday’s post touting a decline in frequency. If you are an employer, ask yourself this – are you doing everything within your power to ensure that none of your employees will make this list?
Archive for January, 2004
The Weekly Toll
Tuesday, January 13th, 2004NCCI report: frequency trending down; severity trending up
Monday, January 12th, 2004Last week, NCCI reported on a recent study on workers’ compensation claim frequency and, as they reported last year, frequency continues to decline. They cite several potential reasons for this – employer safety initiatives, increased use of robotics and power assisted processes, and ergonomics, to name a few. Here is a breakdown by size of claim – note that the highest decreases are in the smaller claims, and the decreases in high-dollar claims are significantly less pronounced:
- For claims less than $2,000, a decline of approximately 35%
- For claims between $2,000 and $10,000, a decline of 18%
- For claims between $10,000 and $50,000, a decline of 8%
- For claims more than $50,000, a decline of 8%
The severity decrease is the good news. The flip side of the coin is that medical and indemnity costs are galloping full steam ahead in the wrong direction. Not so good at all.
In the early and mid-’90s following reforms, indemnity was relatively stable. But according to NCCI actuary Tony DiDinato, “The last seven years have seen the trend turn upward once again, with workers compensation indemnity claims increasing an average of 7.4% annually since 1996. In 2001 and 2002, respectively, claim costs rose 7.3% and 6.0%.”
DiDinato goes on to characterize medical claim cost trends are alarming, “with double-digit increases the last two years.” He attributes this to increased utilization and prescription drug costs.
Cleary, employers are making progress in workplace safety (although we would advocate that any injuries are too many injuries) but it would appear that they must do a much better job of managing injuries from the point they occur right on to an employee’s successful return to work. Perhaps the “buyer’s market” of the late 1990s lulled some employers into forgetting how vital this is?
It brings to mind an old Bob Dylan lyric: “And here I sit so patiently, waiting to find out what price you have to pay to get out of going through all these things twice.”
And The Beat Goes On
Thursday, January 8th, 2004The workers’ compensation goings on in California are proving that Gov. Arnold Schwarzenegger can flex his muscles in the legislature just as well as on the big screen.
He wants “real reform” on his desk by March 1 — or else.
“Modest reform is not enough,” the Republican governor said during his State of the State Address earlier this week. “If all I get is modest reform, I am prepared to take my workers’ comp solution to the people. It will be on the November ballot.”
California, the state which, if it were a country, would have the fifth leading gross national product in the world, also has workers’ comp costs that, at $29 billion, are more than twice as high as anywhere else in the country. The Governor has proposed a plan that, he says, will reduce costs by $11 billion. Understandably, the plan is as full of controversy as the Governor, himself.
Now, with his “I will take it to the people” stance, he has upped the ante considerably.
While Gov. Schwarzenegger’s plan seems, from our vantage point, to have a number of elements employers will find reasonable, it fails to address one of the major problems in the current system. That is, as Stanley Zax, president of Zenith National Insurance Co. in Woodland Hills said, the plan fails to address a provision in the state’s Labor Code that requires disputes to be “liberally construed” in favor of the worker.
We’ve seen a lot of states go through workers’ compensation crises over the last 20 years. They’ve all attacked the problem in one way or another, but in every case, the ones who’ve emerged with significantly better systems have done so by building coalitions among the vested interests who have been persuaded to compromise for the good of all.
What seems to be going on here is this: After a steady, inexorable slide into a kind of workers’ compensation black hole, California now has a kind of Governor who thinks he can yank the system back to where it belongs by the sheer force of his personality.
Maybe he can. Maybe he’s just bigger than life enough to do it, but we wouldn’t bet on it.
Measuring Success 2
Tuesday, January 6th, 2004As I’ve said previously, a company that wants to have low workers’ compensation costs has to have effective ways to measure the performance of its safety and injury management efforts. In December, I wrote about the Cost of Losses per Full Time Equivalent Employees (FTE). Today, it’s time to talk about the Severity Rate.
In nearly all cases, time away from work drives the cost of losses more than any other determinant. This is why modified duty plays such a vital role in controlling costs. Therefore, the severity rate, which measures lost time, becomes the single best non-economic indicator of the overall effectiveness of a company’s workers’ compensation program. So, what is it, and how do we calculate it?
The severity rate is the number of days away from work due to workplace injury or illness per 100 full time employees (FTEs) per year. It sounds daunting, but the Department of Labor has made it easy to get and use this data.
For more than thirty years the Occupational Safety and Health Administration (OSHA) has required most companies to maintain what is called the “OSHA Log.” On this report, every workplace injury and illness is recorded along with the resulting time away from full duty, as well as time spent on restricted duty.
Every year, each company required to keep the OSHA Log sends a copy of it to the DOL, which includes it within a national database maintained by its Bureau of Labor Statistics. The BLS collates data from each Standard Industrial Classification (SIC Code) and publishes an annual national average rate of time away from work, or “severity rate,” for each SIC Code.
To calculate your severity rate, divide the total number of days lost due to occupational injury or illness by the total number of hours worked by all employees. Following this, compare your severity rate with the average for your SIC, published annually by the BLS. Remember, the average for your SIC is nothing more than the middle of the bell curve; it is neither good nor bad. You should set for your company a goal of maintaining a severity rate that is 50% less than your industry’s average.
More on the prescription drug saga
Tuesday, January 6th, 2004The story continues to unfold as the FDA says “nix” to states and cities seeking to import prescription drugs from Canada to get relief from onerous pricing here in the U.S. No states are actually importing drugs yet, but many say they will fight the FDA ruling. The cities of Springfield, MA and Montgomery, AL are both currently running programs to purchase drugs, and saving quite a bit of money by doing so.
The ruling was a response to Illinois Gov. Rod Blagojevich’s request for a waiver to allow the state to purchase drugs from Canada for state workers and retirees. He estimates that the state could realize a savings on the order of $91 million a year.
The FDA frames this as a consumer safety issue saying that “imported drugs could be tainted, old or fake,” but to many these protestations seem disingenuous. The pharmaceutical industry no doubt fears that this could open the door to drug pricing controls here in the U.S., and it would seem likely that the administration is going to want to keep the deep pockets in this industry happy pre-election.
See our prior discussion of this issue and a study pointing to the alarmingly high prescription drug costs in workers’ comp.
You say it’s your birthday?
Tuesday, January 6th, 2004…and those spankings from co-workers left you feeling a little bruised? Generally spanking, birthday spanking rituals in the workplace are not a good idea.
Well you’ll get no relief from the tort system, at least not in Minnesota where the Appeals Court invoked exclusive remedy as the only potential avenue of relief. It will be interesting to see if this passes the compensability test. Usually horseplay isn’t compensable, but it can often hinge on whether the employer has a policy discouraging any horseplay, or whether they actually condone or even participate in any tomfoolery. If the company president was among the paddlers, it may prove to be an expensive birthday party indeed.
