Archive for December, 2004

A Note at Year’s End

Friday, December 31st, 2004

There is an image from this past week that has troubled my sleep: a huge wave, some 20 feet high, barrels toward a coastline. People stand in the shallow waters of the shore, paralyzed by what they see coming. The tsunami roars across the beach and a way of life comes to an end.
Those of us involved in insurance-related businesses are well versed in the intricacies of risk transfer. Businesses purchase insurance because they have to and because they do not want to shoulder the entire burden of their losses. But nowhere in our schemes, in the careful calculations of our actuaries, is there room for the scale of the catastrophe that took place this past week. Over 100,000 people are gone and many more are at risk. Entire communities have disappeared into the murky waters. Nature’s awesome indifference has swept away everything, from indigenous populations to the tourists escaping the cold winds of North America and Europe. All have disappeared in a fierce rush of water that receded almost as quickly as it appeared.
I was scheduled to write about experience rating, the mechanism that aligns a company’s workers compensation losses with its costs. And I will do this, but at this point it can certainly wait until next year. For the moment, as we all pause to look back on the year that is ending and look forward to the one that is beginning, I want to express the hope that mankind will truly come together in a generous and non-partisan manner to ease the burdens of the survivors and begin a rebuilding project of unprecedented scale.
Best wishes to all our readers for a peaceful and prosperous New Year!

Snow shoveling: Heavy Lifting!

Tuesday, December 28th, 2004

I was all set to do our second blog on experience rating, when a snow storm interrupted my plans. As I was shoveling to clear a path out of my driveway, I envisioned doing a brief blog on the hazards of shoveling: it can be heavy lifting, especially if the snow is wet or has been compacted by the action of large snow plows. Indeed, yesterday’s blog has a very useful link to the AARP website with lots of good information on shoveling.
I tried to be careful, bending my knees and minimizing the twisting. But shoveling involves the hazardous combination of lifting and twisting. In a hurry to get to the office, I worked too fast and I lifted too much. So guess what? I couldn’t finish the job. Something gave way in my lower back and I had to retreat to the house for Ibuprofen and a heat pack.
Later that morning, once I finally dragged myself ever-so-slowly into the office, I joked with a claims adjuster who works nearby that I planned to go into the copy room, lift a box and claim a work-related injury. She laughed and said, “Denied.”
Here are a couple of thoughts for employers who have to keep parking lots and sidewalks clear during the winter:
1. Ideally, hire professionals (with their own liability insurance) to do the work.
2. If snow continues to fall, be vigilant in keeping walkways clear (and make sure any melting snow inside is cleaned up immediately).
3. If you ask an employee to shovel, make sure he or she is in good shape and has a good shovel to work with. Watch them shovel: make sure they are using good lifting technique.
4. If your employees do physically demanding work, observe them carefully at the beginning of the shift, to make sure they have not been injured before they got to work (as I was).
In the next few months, there will be thousands of weather-related claims filed in the northern states for work-related injuries. Many will involve slips and falls on ice, auto accidents and lifting injuries from shoveling. I would advise everyone to slow down and stay alert. It would have worked for me, I’m sure.

Winterize your workplace for safety

Monday, December 27th, 2004

After a harrowing drive home in a snowstorm last night, I was reminded about the importance of “winterizing” both at home and at work. For employers, snow and ice management require preplanning. Slips, falls and back strains are among some of the more common hazards; injuries from snow-removal equipment, falls from roofs, and hypothermia/frostbite are other common injuries that can befall your workers in the winter. Here are some general winter safety tips:

  • Remove snow from all walkways in and around the building. Use salt and sand.
  • Watch for thawing and refreezing conditions. Second and third applications of sand or salt may be needed on walkways.
  • Put mats and rugs inside entryways – wet floors from snow tracked indoors can be a hazard.
  • Train employees in the use of snow removal equipment. Ensure that safety policies strictly forbid any disablement of snowblower safety mechanisms.
  • Make sure that snow removal from roofs and gutters is done safety.
  • If you hire private contractors to remove snow or ice, check to ensure insurance coverages.
  • Make sure staff who are working outside are dressed properly to withstand the cold.
  • Encourage employees who drive to and from work to carry winter emergency kits in their cars, including blankets, gloves, socks, shovels, water, snacks, and a flashlight.
  • Here are some additonal resources.
    Shovel snow safely
    FEMA Winter preparedness safety tips
    FEMA winter driving
    Hypothermia: a cold weather hazard
    CCOHS: Working in the cold
    Safety during snow removal
    WCB issues caution over removal of snow from roofs

The Basics of Experience Rating, Part One: What drives costs up the most?

Wednesday, December 22nd, 2004

Back in September, we promised to provide a strategic look at experience rating, the calculation unique to workers’ compensation insurance that aligns every insured’s premium with that company’s historic losses. For a basic primer on experience rating, we recommend going to the source: The National Council on Compensation Insurance website provides a well-written document (PDF) that will walk you through the fundamentals of experience rating.
When we train employers on experience rating, we focus on employer strategies: what can you do to minimize the future cost of insurance? How can you translate a basic understanding of experience rating into a reduction in future premiums? Keep in mind that in experience rating, size matters. Large insureds with large premiums are expected to have more losses than smaller insureds. Indeed, because their margin of error is smaller, companies with premiums in the $10,000 to $50,000 range can easily find themselves in a lot of trouble with just a few injuries.
The Rating Period
In workers’ compensation, your past history follows you along like a faithful dog. In fact, losses that occurred 5 years ago still impact what you are paying today for insurance. The rating period for your 2005 policy (the policy which begins any time during the 2005 calendar year) includes all the losses from 2001, 2002 and 2003. On the other hand, losses prior to 2001 are gone forever: they cannot impact your experience rating, even if the reserves are increased substantially.
Primary Losses Are the Most Expensive
Every time you report a claim to your insurance company, a reserve is set for the claim. The reserve projects the total indemnity payments (lost wages), medical bills and expenses for this particular claim. The first $5,000 of each claim is considered “primary.” Any amount of reserve above $5,000 is considered “excess” loss. Any reserves above a state-specific ceiling (ranging from $100,000 in most states to as high as $175,000 in Massachusetts) is “unratable”; that is, it does not count at all in the calculation of your experience rating.
So what does this mean? Experience rating places more emphasis on the frequency of injuries than on the severity. An employer with one large loss ($100,000) will pay less for future insurance than an employer with 10 smaller lost time claims of $5,000 each – a total of $50,000 in losses — because the full $50,000 is “primary loss” in the premium calculation for the second employer, while there is only $5,000 in primary losses for the first employer. Experience rating cushions the blow of the large loss, but hammers employers with frequent losses.
Small Employer, Big Trouble
Here’s where a lot of smaller employers get caught: if you have a frequency problem (a lot of relatively small injuries involving at least some lost time) and just one big loss, the primary losses add up in a hurry. You quickly exceed the “expected” level of primary losses. As a result, your experience rating pushes up into the “debit” zone. You start paying a lot more for insurance.
If you find yourself in this position, with an experience modification well above 1.0, you need to learn more about the intricacies of the rating process itself. There are opportunities for minimizing the impact of your losses. All of which will be the subject of additional blogs over the next month.
NOTE: States vary in their application of experience rating procedures. Check with your local authority if you have specific questions.

Weblog roundup: news from fellow bloggers

Monday, December 20th, 2004

Lots of interesting news from our blog friends this weekend…we’ll just rely on short pointers.
CA doctor, attorneys find widespread denial of care for workers “A physician and an attorneys’ group said Thursday that efforts to overhaul California’s workers’ compensation system have led to widespread denials of care for employees who suffer job-related injuries.”
The folks at HealthLawProf Blog point to the Kaiser Family Foundation’s bimonthly report on public opinions on health care. The current report finds that health care costs top the list of Americans’ concerns and outpace concerns about quality and access of care.
Douglas Eisenhart at HR Blog posts about a UMass-Harvard study that says many area workers are misclassified. “Misclassifications enable employers to avoid payroll taxes and such mandated employee benefits as unemployment and workers’ compensation insurance … The study revealed misclassification is prevalent in a variety of business sectors. For example, 17 percent of all audited employers in transportation and utilities misclassified workers. In addition, 16.1 percent of the firms in education and health services, 14.3 percent of those in information services, 13.5 percent of the employers in professional and business services, and 11.4 percent of those in construction misclassified workers.”
Workplace injuries and illnesses in 2003. This is part 3 in a scontinuing series of reports from BLS. Thanks to LaborProf blog for the pointer.
Joe Paduda at Managed Care Matters reports on the workers compensation liability implications of the Celebrex and Vioxx fiascoes.
Ronald Ryan responds to a query about Michigan benefits available for a work-related death.
It’s nice to see that Judge Robert Vonda has retuned to the blogging scene.
Companies that ban guns put on defensive “Employers have long banned guns from the workplace as part of a violence-prevention strategy, but those policies are being tested as states pass laws making it easier for residents to carry concealed guns � in some cases, crafting legislation that strikes down employers’ attempts to keep guns off company property.”
Thanks to rawblogXport for the pointer.
Michael Fitzgibbon, our neighbor in the North conistently who runs a fine blog, reports on shift work and overtime as a health and safety issue.
Confined Space runs through The Weekly Toll which should be required reading every Monday for all of us who work in the insurance industry so we remember what this business is really all about.

Study reports black workers compensated less for back injuries

Friday, December 17th, 2004

A Saint Louis University study that appears in the December issue of Pain reports that black Americans who suffer work-related back injuries are compensated less for their injuries than white people in similar situations.
“The implications of these differences are sobering. Even though patients have equal access to health care through the worker’s compensation system, there are substantial differences in the treatment costs that they incur,” principal investigator Raymond C. Tait, a professor of psychiatry, said in a prepared statement.
He and his colleagues studied 1,472 lower back injury worker’s compensation cases in Missouri. They found that money spent on medical care for blacks was about a third (an average of $4,000 less) of that spent on whites and that total disability settlements for blacks were about half ($3,000 lower) than the amounts given to whites.”

The study also cites prior research by the Institute of Medicine on racial and ethnic disparities in health care. Congress requested this study in 1999, and the final report which was issued in 2002 found that:
” … a consistent body of research demonstrates significant variation in the rates of medical procedures by race, even when insurance status, income, age, and severity of conditions are comparable. This research indicates that U.S. racial and ethnic minorities are less likely to receive even routine medical procedures and experience a lower quality of health services.
The report says a large body of research underscores the existence of disparities. For example, minorities are less likely to be given appropriate cardiac medications or to undergo bypass surgery, and are less likely to receive kidney dialysis or transplants. By contrast, they are more likely to receive certain less-desirable procedures, such as lower limb amputations for diabetes and other conditions.”

This is quite disturbing stuff indeed. The report suggest the need for more evidence-based medical guidelines to help providers and health plans make sound decisions and to ensure equity of care. It also points to the need for more minority providers.
Thanks to Jordan Barab at Confined Space for pointing us to the recent St. Louis study.

Top 10 backbreaking jobs

Thursday, December 16th, 2004

According to the American Chiropractic Association (ACA), back pain is one the most common work-related injuries in the United States, accounting annually for approximately one-quarter of all lost or unproductive workdays. What do ACA members consider to be the most backbreaking jobs? Heavy truck and tractor-trailer drivers top the list, followed by construction workers, landscapers, police officers, farmers, shingle roofers, firefighters/EMTs, delivery drivers, nursing home workers, and auto mechanics.
Off the job activities can also exacerbate back pain. Spine-Health suggests that the holidays can add stress that can worsen chronic back pain. They offer some pointers to those suffering from back pain on how to get through the holiday season.
More information
MedlinePlus: back pain
Mayo Clinic: back pain
Preventing back pain at home and work
Lifting Guidelines and RTW
Study shows active recovery fosters return to work

KY SIG members owe $51 million

Tuesday, December 14th, 2004

Members of a self-insurance group (SIG) in Kentucky are learning a harsh lesson in joint and several liability. More than 4,000 employers who are or were members of AIK Comp, a plan promoted by Associated Industries of Kentucky, face some $51 million in unfunded claims. Apparently, AIK reserves were insufficient to cover claims, and now all current members — and even some former members — are liable for the shortfall.
In workers comp, insurers often refer to the long tail. Essentially, this means that the costs of the claim extend well beyond the actual event or occurrence that the insurance covers. With most types of insurance, if a claim occurs, the payment is made within a short amount of time. With workers comp, payments cover medical costs and wage replacement (also called indemnity payments) over the life of the claim. Insurers estimate the ultimate cost of the claim and set aside reserves, the amount estimated as necessary to pay claims. In recent years, underreserving has been a factor in the demise of some very prominent insurers.
It’s too bad to see such a mismanaged pool because well-run SIGs can be viable and beneficial alternatives for small to mid-size employers that would not qualify for stand-alone self insurance. Recently, an A.M. Best report demonstrated that SIGs and captives often outperform traditional insurance programs:
“The combination of at-risk member capital, as well as joint and several liability, is a strong incentive to control losses, minimize frictional expenses, and detect and control fraud, according to the report. These factors benefit the results, with the five-year average loss and loss-adjustment-expense ratio for rated self-insurance pools at 60.6, vs. 89.3 for captives and 80.8 for A.M. Best’s commercial casualty insurance industry composite.”
Employers need to conduct rigorous due diligence before joining a SIG. As with any self-insurance program, they need to ensure their own house is in order and their loss experience is good – there are no shortcuts for good loss control; employers also need to ensure that the prospective SIG is very cautious in selecting its members, both in terms of member financial solvency and in terms of risk management and loss control requirements. If the entry threshold is low, that should be a serious sign for caution.

Three construction workers die every day in the U.S.

Thursday, December 9th, 2004

The News Tribune of Tacoma, Washington recently featured an excellent – albeit unsettling – article entitled Construction workers

‘Tis the season – alcohol and holiday festivities

Tuesday, December 7th, 2004

HealthLawProf Blog informs us that it is National Drunk and Drugged Driving Prevention Month. That’s a good cue to remind employers that they need to be mindful of their risk exposure when planning holiday parties. Off-premise and extra-curricular activities may pose either workers compensation or liability exposure when employees attend company-sponsored events. Employers should have worker health & safety a foremost consideration in any holiday party planning — not to mention the safety and well-being of fellow travelers on the road.
Many of our favorite blogs have been discussing this topic. For a cautionary and sobering tale, read Carole Matthews post at Inc. Magazine’s weblog about a real life tragedy that occurred at her Dad’s company party. Carole points us to Nine Tips for Office Celebrations from the DOL. Another good resource is the article Top Ten Ways To Hold A Company Party (Without Getting Sued) (pdf) written by attorneys at Fisher & Phillips. (Thanks to Michael at George’s Employment Blawg for the pointer.)
Other resources:
How to avoid disasters at office holiday parties
Keeping your company