Posts Tagged ‘data’

State Rankings: Why is Massachusetts at the Top?

Thursday, November 19th, 2009

Recently, in one of his Risk & Insurance columns, our friend and colleague, Peter Rousmaniere, wrote a piece examining workers’ compensation costs and benefits among the various states. There are a few organizations that do this annually. In my opinion, the most scholarly work is done by The National Academy of Social Insurance. However, the Academy, created in 1997 after the Social Security Administration stopped producing annual comprehensive national data and estimates on workers’ compensation benefits and costs, doesn’t really rank states in terms of either costs or benefits; it just lays out a mountain of interesting data .
The most incisive ranking of state benefits and costs is done by three organizations: the Oregon Department of Business & Consumer Services, the actuarial consulting firm, Actuarial & Technical Solutions (ATS) and the National Foundation for Unemployment Compensation and Workers’ Compensation (UWC) headquartered in Washington, DC, which has, since 1984 published annual, and class specific, comparative state data. (We’ve blogged reports from these organizations whenever they’ve been published. Go here and here.
Rousmaniere used reports from Oregon and ATS to construct a sort of consensus ranking of the 50 states. In his ranking, Massachusetts emerged with the lowest costs and the highest benefits. How can that be? It sounds paradoxical. To answer the question, I thought it might be useful to peel the Massachusetts onion a bit, because Massachusetts is the Insider’s home state, and we at Lynch Ryan played an active role in the turnaround.
Why does Massachusetts have low costs?
Throughout the mid-1990s, Massachusetts had some of the highest costs in the nation – annually about $2 billion in premium, compared to $878 million today.
Reform happened in 1992 (after a failure of reform in 1986). Here are some important reform initiatives:
• Indemnity wage replacement was lowered from 66 2/3% of an injured worker’s average weekly wage to 60%. This provides incentive for injured workers to stay out of work no longer than is medically necessary. (A case can certainly be made that this somewhat gratuitous cut in benefits is unfair to injured workers.)
• The state introduced the lowest medical fee schedule in the nation (there is no pharmaceutical fee schedule).
Currently, the fee schedule for physicians is about 100% of Medicare rates, but that just became effective in April, 2009. Prior to that, the rate was about 95% of the Medicare rates of 2004. Hospital rates are even lower. The result is that the medical portion of loss costs in Massachusetts now hovers around 40%, significantly lower than the rest of the nation.
However, physician specialists no longer accept fee schedule rates (as my colleague and fellow blogger, Jon Coppelman, puts it, “Any hand surgeon that accepts the fee schedule of $725 will be doing hand surgery in the back seat of a Buick.”) So, insurers must now negotiate fees with specialists (or with the consulting negotiators representing them – I’m not making this up!). The back and forth negotiating can delay care, frustrate employers and anger injured workers. Over time, we believe that the medical share of loss costs will rise in Massachusetts. It is interesting to note that, despite the low fee schedule, injured workers report satisfaction with their medical treatment.
• In the early 1990s, premium in the Assigned Risk Pool, the Residual Market, was $1.2 billion; today, it’s $117 million, or 11.7% of the entire insured market. A number of initiatives contributed to this decline. Lynch Ryan offered a program recommendation that became one of the most influential: the QLMP, or the Massachusetts Qualified Loss Management Program (We might have designed the program, but we sure didn’t pick the name!)
This program allowed employers in the state’s Assigned Risk Pool to receive intense and in-depth training and education in managing their workers’ compensation and injured employees from consulting firms that “qualified” to provide it. Firms became “qualified” by having their entire Massachusetts book of business analyzed by the Massachusetts Workers’ Compensation Rating & Inspection Bureau. The Bureau designed a special one-year experience modification for each consulting firm’s total book of business, comparing the Mod in the year prior to the consulting firm working with a client to the Mod in the year following the work. Consulting firms were then awarded a credit, graduated from zero to fifteen percent, depending on the decline in the Mod of their books of business in the year following the work. This credit was passed on to any company in the Pool that hired the consultant, and the consultant’s fee would come out of the passed-on credit. This program gave Pool employers a way out, and was later replicated in Missouri and West Virginia.
We think it an elegant program, because each consulting firm had to re-qualify every year. Under Paul Meagher’s steady leadership, The Rating Bureau has done an excellent job managing this program, which continues to this day.
• The state lowered attorney fees: a prudent and necessary move to reduce frictional costs (but the howls of protest still echo in the legislative chambers). They also hired and trained more judges, making the entire system more efficient.
Why does Massachusetts have high benefits?
Central to the reform effort was pegging the maximum temporary total disability (TTD) benefit to the average industrial weekly wage in the state. The maximum benefit is currently $1,094 per week. However, only if an injured worker’s pre-injury weekly wage is $1,823 or more will he or she receive this generous maximum. Thus, while indemnity only covers 60 percent of the average weekly wage, the maximum of $1,094 is substantially higher than what is available in most states.
There were many other reforms, but, to my mind, these have been the most influential. After twenty years, it is clear that the Massachusetts workers comp reforms were well crafted. The legislators, regulators, insurance executives, union representatives and employers who spent long days and nights dissecting the workers’ compensation crises of the early 1990s built a system that has stood the test of time. As I tell clients, “There may be reasons for not doing business in Massachusetts, but workers’ compensation isn’t one of them.”

The Best Health Care in the World – Part Four: Do the Statistics Tell the Whole Truth?

Wednesday, March 19th, 2008

We have seen that America spends more on health care than other developed democracies around the world for outcomes that, on the whole, are no better than those achieved by the average OECD country. Our health care “system” perpetuates ever-increasing spending without delivering results to justify the expense. Moreover, because of our country’s isolation, both geographically and culturally, few Americans actually know about or appreciate this disparity. In the words of that eminent philosopher, Pogo, “We have met the enemy, and he is us.”
But not all the news is gloom and doom. We lead the world in medical technological innovation, and we have chosen to target this expensive technology at some very thorny problems. Further, statistics don’t always tell the whole or true story. Sometimes, one needs to lift up the rug and check what’s lying underneath.
Take infant mortality, for example.
The best place to find infant mortality data is (drum roll): the US Central Intelligence Agency, which tracks the rate of infant deaths in 241 countries around the world in its World Facts Book.
Currently, the CIA shows Angola, with 184 deaths per 1,000 births, as having the highest infant mortality rate (IMR) in the world, 241st out of 241. That is, more than 18% of Angola’s infants die shortly after birth. In fact, with the exception of Afghanistan, the 24 countries with the world’s highest infant mortality rates are all in Africa. It has long been known that IMR directly correlates with a nation’s per capita GDP.
At the other end of the scale, Singapore, a high-GDP country, ranks first, with the world’s lowest infant mortality rate – 2.3 deaths per 1,000 births, followed by Sweden, Japan, Hong Kong, Iceland and France.
And where in this mix is the United States you may ask. Well, with a rate of 6.37, we rank number 41 in the world.
Or do we? It all depends on how one treats the numbers, because not everyone defines infant mortality the same way. The most common definition is: the number of deaths of infants, one year or younger, per 1,000 live births. The question is – what is a live birth? The World Health Organization (WHO) defines a live birth as “any born human being who demonstrates independent signs of life, including breathing, voluntary muscle movement, or heartbeat.” However, the United States counts all births as live if they show any sign of life, regardless of prematurity or size. This includes what many other countries report as stillbirths. And the US is far more aggressive and advanced in attacking and treating significant neonatal complications. Visit any major teaching hospital’s neonatal ICU and you’ll see what I mean. The inference is that the US’s actual comparative infant mortality rate may actually be lower, perhaps much lower, than is statistically reported.
But those neonatal ICUs cost a lot of money. It’s an investment the US has chosen to make, unlike most other countries, and it is symptomatic of why we spend so much more than the rest of the world on health care.
Of course, if you spend a few minutes talking with a mother and father who have just brought a young child home, healthy and smiling, after six months, of so, in one of those expensive, neonatal ICUs, you might be excused for thinking, as they surely do, that the cost is worth every penny.
Prior entries in this series:
Part Three: What Do We Get for the Money?
Part Two – What does it cost?
Part One: The best Health Care Plan in America

Your Government at Work – Worker injury research you can actually use

Monday, November 19th, 2007

A cornerstone of Lynch Ryan’s work for more than twenty years, a long-held mantra, has been that employees who work for good employers — employers who care for their workers and show it by the way they treat them — report all work injuries when they happen, get expeditious treatment and return to work faster. Moreover, their injuries cost significantly less than those of employees who work for less caring employers. A major driver for low workers’ compensation costs is the quality of the relationship between employer and employee.
We’ve seen this in our consulting work time and again, but it’s nice to have independent research confirm the mantra.
In the mid-1960s, the Department of Labor’s Employment and Training Administration (at that time called the Office of Manpower, Automation, and Training ) wanted to understand specific issues pertaining to the U.S. labor market, such as retirement, the return of housewives to the labor force, and the school-to-work transition. To do that it began conducting longitudinal studies, studies that look at a random group of like people to see how they develop over time. The Office began four such studies following groups of young men, older men, young women and, no, not “older” women, but rather “mature” women. The studies were originally targeted for five years, but, because they were yielding a mountain of data, they were extended until 1983, allowing other agencies to piggy-back along to glean even more information about how these first baby-boomers and World War II veterans were maturing in post-war America.
Because of the success of these studies, the Bureau of Labor Statistics decided to conduct an even more ambitious project, and in 1979 it launched the “National Longitudinal Survey of Youth 1979,” (NLSY79)
NLSY79 randomly selected and interviewed a cohort of 12,686 young Americans, 14 to 22 years old, all born between January 1,1957 and December 31, 1965, and it has been interviewing them regularly ever since, for nearly three decades now. As of 2004, there were 7661 people still in the survey group. These people have provided profound and relevant data about the aging of the last of the eighty million American baby-boomers.
What does this have to do with workers’ compensation? Actually, quite a lot.
Until I read Joe Paduda’s recent blog post, I was unaware that any researchers had ever mined the NLSY79 data for workers’ compensation insights. Thanks to Joe I have been enlightened. Thank you, Joseph.
In 2005, Darius Lakdawalla, Robert Reville and Seth Seabury of the Rand Institute for Civil Justice published “How Does Health Insurance Affect Workers’ Compensation Filing” (this is a Working Paper, meaning it has not been formally peer-reviewed). Using NLSY79 data, they confirmed Biddle and Roberts 2003 Michigan study (purchase required), which found that only about 55% of workers sustaining lost time injuries ever file claims for benefits, as well as an Oregon state-sponsored study of the 2002 Oregon Population Survey suggesting that 54% of workers reporting workplace injuries filed claims. They also found that unionized workers were more likely to file claims following work injuries.
Moreover, the Rand researchers found that workers without health insurance are about 15% less likely to file a claim than injured workers with health coverage.
A still more surprising finding may be that workers at companies that merely offer health insurance benefits are 50% more likely to file a claim after suffering a work injury than workers at companies that do not offer health insurance benefits.
However – and here is the major finding for me – lost time, as well as the cost of lost time for these workers who file more claims is about 20% less than for the workers who are not offered health insurance.
Finally, other types of fringe benefits – like paid vacation days – also seem to be associated with higher filing rates. For example, when both health insurance offers and paid vacations are present in the same employer, both variables are significant (at the 95% confidence level) and both have coefficients around .10 for claim filing.
What does this tell us? Well, for me it reinforces our mantra. These employees may report more injuries, but, as the NLSY79 data show, they return to work faster and their injuries cost significantly less than do the injuries of employees who work for employers who do not provide these benefits. Quod est demonstrandum.
The Rand study is compelling and instructive, but you do have to know a few things about statistical research to get the most out of it. Nonetheless, it should provide fuel for further workers’ compensation research using the NLSY79 treasure chest of demographic data. This stuff is too good to sit on a shelf gathering dust.

Managers’ tool kit: new healthcare, socioeconomic, and interactive resources

Monday, February 7th, 2005

It’s been awhile since we’ve added new resources to the toolbar on the right. We hope to create a one-stop shop of valuable workers compensation, HR, medical, and health & safety resources for industry practitioners, as well as for workers. Here are some recent finds:
Since 1997, Pam Pohly’s management guide for healthcare executives has been seeking and posting a broad array of healthcare resources, including legislative and compliance updates, professional association directories, employment search services, practice management tools, healthcare news and more. The site contains hundreds of links, including toolkits for health administrators, physician executives, HR managers and nursing managers. The glossary of managed care terms is a handy tool for workers comp managers, and the calendar of health observances is good reference for safety and wellness programs.
EconData.Net has thousands of links to socioeconomic data sources, arranged by subject and provider, pointers to the Web’s premiere data collections, and a list of the ten sites they judge as being the best sites for finding regional economic data. Need to find population or demographic data or trends? Employment statistics? Labor force by occupation? Wage trends? You’ll find resources at this deep site.
Interactive Tools
The Liberty Mutual incidence calculator allows you to determine your own incident rates and compare your rates to other companies in your SIC group.
American Express has an interactive hiring tool that helps you to think through the skills and characteristics you need to create a job description, and lets you generate a worksheet to use in your interviewing process, and provides questions that may be helpful in interviews.
If you are an employer in Michigan, you can use an online calculator to estimate your workers’ compensation costs. This analytic tool uses ” … your work force data to provide you with a general case study looking at your potential costs. Your actual results in the “open market” will vary depending on a number of factors.”

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.