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The Fog and Filthy Air

Thursday, January 20th, 2022

Fair is foul, and foul is fair:
Hover through the fog and filthy air.
Macbeth, by William Shakespeare; Act I, Scene I

The hyperbole was flowing yesterday in the U.S. Senate. The feeble train wreck everyone saw coming finally happened. The John Lewis Voting Rights Advancement Act (VRAA), the Freedom To Vote Act, and the carve out to change filibuster cloture rules all died, each on its own rickety, broken down, separate gallows. Despite impassioned speeches, the end was anticlimactic — something like Macbeth without the murders.

And the nation yawned.

Credible polling data shows the majority of Americans care mightily about one issue: the economy, and more specifically, what inflation is doing to it. Yes, they care about COVID and how schools should deal with it (for the most part they’re hyper-critical), but it’s meat-and-potato time for most. The voting rights battle barely registers. In the latest AP/NORC poll, just 6% volunteered voting laws, voter fraud, or voting issues as the top problem the government should be working on in 2022.

Yet, there they were yesterday. The Democrats. Reaching for arrows from an empty quiver. It was Otto von Bismarck, the man who engineered the unification of Germany in 1870 and served as Chancellor until 1890, who said, “Politics is the art of the possible, the attainable ― the art of the next best.” While Republicans were busy annihilating voting rights legislation (with a little help from a couple of recalcitrant folks from West Virginia and Arizona), at yesterday’s ironically timed presser, President Biden suggested it’s on to the next best. Whatever that may be.

A little pity for Joe Biden is in order. He entered the White House in January of 2021 ready to wage war with one enemy, the COVID pandemic, on two fronts: medical and economic. Our economy, with its supply chain and labor issues, was a catastrophe and getting worse. But, and it’s a big but, were it not for the pandemic that won’t quit, the economy would have been rolling along just fine, and Donald Trump would probably be the guy having dinner most nights in the White House. But Trump’s ineptness allowed Joe Biden to be the one eating in the State Dining Room, and Biden believed if he could eradicate the pandemic he’d rescue the economy from disaster. Seemed like a good plan at the time.

Events have a way of surprising newly elected presidents; think 9/11 for George W. Bush. In Biden’s case, two rude surprises interrupted his agenda, if you don’t count Republicans’ all out dedication to obstructing whatever agenda that was.

In late March, legislators in 19 states controlled by Republicans began passing laws making it harder to vote in Black and Latino communities. The pandemic had caused states to modernize voting policies with things such as drop boxes, extended early voting, liberal mail-in voting rules, etc. This had the effect of increasing turnout in minority areas and led to the election of two Democrats to the Senate from Georgia, giving the Democratic Party what appeared to be control of the Senate. So, under the guise of enhancing voter integrity (after all, the 2020 election was rigged for Joe Biden with millions of fraudulent votes), changes had to be made. Access to easy voting had to be tightened.

In response to Republican efforts to limit the vote, voting rights became a huge issue ― within the D.C. Beltway. It consumed the literati and Democratic elites and distracted the Administration from its main job: eradicating the pandemic and getting the economy moving in the right direction. It sucked Joe Biden into its vortex and, once there, he could not escape. In retrospect, this was a terrible mistake, as Bismarck could have pointed out to him.

The second surprise came later in the year when inflation began to rise. At first, the Administration, as well as most economists and the Federal Reserve, thought the rise was temporary, and would perhaps extend as long as early 2022. However, it soon became apparent that there was one thing the inflation surge was not, and that thing was temporary.

Now, having thrown every bit of political capital he had left into the doomed-from-the-beginning voting rights fight (he doesn’t even mention the Build Back Better Act anymore), President Biden is a bit chastened. Yesterday, he admitted that, despite 36 years in the Senate and eight more playing second fiddle in the White House, being President is different. He admitted that his old friend Mitch McConnell, while still a friend, is focused on one thing and one thing only: making sure his old friend Joe looks bad all the time. With friends like these….

Where does he go from here? Having now proven his colleagues in the Democratic Party are just as capable as Republicans of sticking a knife in his back, he appears to realize winning small victories is preferable to no victories. He said yesterday he’ll no longer try to eat the elephant with one bite, but will cut up his legislative goals into little pieces and try that. Oh, and the Child Tax Credit is gone, as is free tuition at Community colleges. He said he’ll leave Washington more often to speak directly to people around the country. We’ll see how that goes, but I’m not optimistic.

Moreover, there’s another train wreck on the horizon. It’s called the midterms, and it’s arriving in November of this year. If the President thinks things are tough for him now, just wait till then.

Joe Biden has become trapped in the fog and filthy air surrounding and methodically crushing the soul of his Administration.

 

 

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Health Wonks, drug epidemic, ACA mandate, exploding hog farms & more

Thursday, February 16th, 2012

Health Wonk Review – Jason Shafrin has posted the Health Wonk Review: More than Birth Control Pills edition at Healthcare Economist. And there is indeed much more than birth control in this issue: politics, health care reform, the Affordable Care Act, and a grab bag of other timely topics. Check it out!
CDC calls prescription drug problem “epidemic” – The CDC weighs in on the prescription drug abuse problem, calling it “epidemic” and “the fastest growing drug problem in the United States.” Risk & Insurance offers a concise summary. And on the same theme is a story about how New Jersey has implemented a Prescription Drug Monitoring Program. “In unveiling the program last month, state officials related that one patient obtained more than 2,500 doses of oxycodone and methadone in a four-week period. The patient presented what are now believed to be forged prescriptions to three pharmacies on 14 separate occasions, spread out his visits among the pharmacies, and paid sometimes with cash and sometimes by insurance.”
Affordable Care Act: What if… – What if the Supreme Court overturns the mandate? At Managed Care Matters, Joe Paduda looks at what the repeal of the mandate would mean for workers comp.
Marijuana & impairment Roberto Ceniceros recently discussed the issue of marijuana use and impairment. He cites a recent Louisiana appeals-court ruling that upheld benefits for an injured worker who showed positive in a post-injury test for consumption of marijuana and a prescription drug.
Emerging Risks: Exploding Hog Farms – Hog farmers take note: the Minnesota Daily covers reports of a mysterious foam that has caused Midwest swine barns to unexpectedly explode. The foam can build up to heights of four feet on manure pits. “The foam traps gases like methane and when a spark ignites it causes an explosion. About a half dozen barns in the Midwest have exploded since the foam was discovered in 2009. / In mid-September 2011, a barn in Iowa was added to the growing number of barns taken down by the foam. In the explosion, 1,500 pigs were lost, and one worker was injured.”
Contractors in conflict zones – At Risk Management Monitor, Jared Wade discusses contractor deaths in Afghanistan as reported in a recent New York Times article. He notes that, “In 2011, for the first time, there were more civilian contractors working for U.S. companies that died in Afghanistan than there were U.S. soldiers.” He follows up with excerpts and links to a prior Risk Management story on working in the world’s most dangerous locations
Economy & Insurance – Global financial woes will not derail the economy, according to Robert Hartwig, President and Economist at the Insurance Information Institute, who has been a reliable forecaster and source of information on both the overall economy and the impact on the insurance industry. He sees opportunities for insurers beyond waiting for rate increases. Read more in Chad Hemenway’s story at Propertycasualty360: Hartwig: U.S. Insurers Should Look at ‘New Trajectory of Growth’
Aging & Construction Work – The Center for Construction Research and Training analyzed 100,000 workers comp construction industry claims for the
state of Colorado to understand the relationship between the claimant
age and costs by the causes and natures of injuries and illnesses. Consistent with other aging studies, the report says “Older construction workers filed a small percentage of the total workers’ compensation claims; however, when they did file a claim the associated costs were greater.” Review the key findings: The Role of Age on the Cause, Type, Nature and Cost of Construction Injuries (PDF)
News briefs

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NCCI Reports: A Sobering Look at Risk

Monday, May 9th, 2011

NCCI has released two reports that are essential reading for risk managers and anyone else who enjoys the Big – albeit somewhat gloomy – Picture.
The first report is a summary of workers comp performance through 2010: while many indicators are positive or at least neutral, the major concern is overall performance. The combined ratio for insurers (losses plus expense) is creeping steadily upward: 101 percent in 2008, 110 percent in 2009, 115 percent in 2010. In other words, in 2010 carriers spent 15 percent more than they earned through premiums. Even with improved returns on investments, insurers are caught in the zone where many are losing money, especially those whose combined ratios have drifted above the average.
The troubled economy has complicated matters: as payrolls go down, premiums go down with them. Comp premium peaked in 2005 at $47.8B; in 2010, premium totaled $33.8B. To be sure, fewer people are working, but that often results in increased stresses – and risks – for those who still have jobs.
Finally, there is the highly politicized issue of rates for comp insurance. No state wants to be the first raise the rates, as this increases the cost of doing business and makes the state less competitive in attracting new business. So states hold the line or even force reductions, making all businesses – except insurance related – happy.
The Really Big Picture
For those of you who seek perspectives beyond comp, into the broadest possible, world-wide view of risk transfer, Robert Hartwig of the Insurance Information Institute offers slides that are compelling viewing. He examines the dual specters of terrorism and natural catastrophe. Bin Laden’s unlamented death may increase the risk of attack in the coming months, resulting in open-ended exposures for workers comp and property insurance. As for natural disasters, with the spate of earthquakes, tsunamis, and tornadoes, any actuary who is paying attention is having trouble sleeping these days.
Japan’s earthquake, tsunami and nuclear plant meltdown appears to be the most expensive natural disaster in history. The total losses are expected to run between $100-300B, of which only a relatively small portion ($45B) is insured. (Government will bear the brunt.)
Tornadoes tearing through mid-America thus far have avoided major population areas, but the recent event at the St. Louis airport raises the specter of urban disaster.
Who Pays?
When calamity strikes, the impact is greatest on reinsurance, which kicks in when limits are reached in-front line policies. With the unprecedented scale of recent events, the cost of reinsurance must go up, and as it does, the cost of insurance for the consumer (business and personal) goes up with it. We live in risky times and the increasing costs of risk transfer reflect our darkening world.
One final note: Hartwig reveals that the 9/11 attacks added 1.9 percent to the combined ratio for 2001, which totaled a robust 121.7 percent. That’s a sobering thought for this beautiful spring morning. My advice? Slap on some sunscreen and get out for a stroll. There’s no better cure for gloomy data than a walk in the sunshine.

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NCCI suggests a “precarious outlook prevails” for the workers comp market

Monday, April 18th, 2011

The NCCI Annual Issues Report is out and it is available as an online flipbook, you can download each article in PDF, or you can request a hard copy.
Most who work in the industry realize the significance of these reports but for employers, a brief side note is in order. NCCI stands for the National Council on Compensation Insurance, Inc., a rating and data collection bureau specializing in workers’ compensation. because NCCI manages the nation’s largest database of workers compensation insurance information, it is in authoritative position to analyze industry trends and upcoming legislation, to offer insurance rate recommendations, and to provide a variety of services and tools to a variety of constituencies, including state insurance bureaus, insurers, insureds, the media and others with an interest in workers comp.
The Issues Report provides an industry snapshot of where we’ve been, along with some trending and analysis that point to where we are likely heading. While all the articles have merit, for industry financial trending we point you to these three cornerstone documents:

While the property casualty market is generally positive and has performed better than most other sectors during the economic downturn, the same cannot be said for the segment of the market that is workers compensation.
The workers compensation combined ratio continues in an upward direction. This is never good. The combined ratio is a barometer of an insurer’s profitability. It indicates how much an insurer pays out for each dollar it takes in (incurred losses + expenses ÷ earned premium). For most businesses, it’s a problem if you pay out more than you have coming in, but for insurers, investment income on reserves (money held for claims costs) is also a significant component in overall profitability. So an insurer can still realize a profit even if it pays out more in losses than it takes in when investment income is factored in.
Hartwig says that in 2010, the combined ratio is approaching 115. To put this in some historical perspective, the combined ratio at the peak of the crisis in 2001 was 122% percent, and the historic low in recent years was 93% in 2005. In 2009, we saw about 110%, the the worst combined ratio since 2003.
Other significant issues:

  • Investment gains associated with workers compensation have seen some improvements, but are still on the low side.
  • Workers comp written premium eroded significantly as jobs were shed, and although the employment situation is leveling off, it is hardly booming. It’s expected that employment may be fairly flat through 2011.
  • Medical inflation has slowed but medical costs are still on the increase.
  • Uncertainty abounds: about the economy, about the direction of healthcare, about bank & housing market, about financial reform. Plus, there is a broader regulatory environment with OSHA and DOL, and there is policy uncertainty given the volatile political environment.

The pressure is on and the challenge for insurers is clear: the only way to make money under current conditions is through rigorous underwriting and tight expense control. Employers with marginal records may have limited options come renewal time. It’s always a good idea for employers to control losses, but never as important as in a tight underwriting climate.
Hartwig offers some positives about the employment scenario:

” Last year’s stubbornly high unemployment gives the misimpression that no progress has been made in reducing joblessness. In reality, as shown in Exhibit 2, private sector jobs were created every month in 2010, for a total of 1.3 million net new jobs. While job creation so far is at a pace too slow to bring down the overall jobless rate, it remains an extraordinary reversal from the hemorrhaging of jobs and associated payrolls in the two prior years. At the height of the crisis in early 2009, private employers were shedding more than 700,000 jobs per month. Private employers eliminated a staggering 4.7 million jobs in 2009 and 3.8 million in 2007. The unemployment rate remains high today in part because workers, sensing improving labor market conditions, are streaming back into the labor force.”

And on payrolls, the basis for premium:

“… The latest data indicates that aggregate wage and salary disbursements have recouped about half of what was lost during the recession. It is quite likely that those losses will be fully recouped by the second half of 2011.”

He also offers some perspective on other factors beyond payroll that are eroding written premium:

“The economy will clearly exert a major influence on workers compensation insurers’ growth opportunities in 2011 and beyond.Exhibit 3 suggests that other factors are playing an important, if not dominant, role when it comes to explaining the precipitous 29% drop in premium written over the past several years. Workers compensation premium began to fall in early 2006, long before the start of the Great Recession in December 2007. Aggressive pricing, along with the increased popularity of large deductible programs, captives, and self-insurance alternatives have all taken their toll, as have a surge in return premium. The loss of exposure due to the economy was actually one of the more recent contributors to the fall. On net, pricing is likely responsible for about half the decline.”

All in all, the NCCI reports reflect negatives that many of us have been seeing or living through, and while the patient is still in guarded condition, there are reasons for cautious optimism.
And don’t skip the other articles in the Issues Report just because we did not address them here – there is always good information in these reports!

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Cavalcade of Risk & workers comp news briefs

Wednesday, January 12th, 2011

It’s Cavalcade of Risk week and issue #122 is hosted by our friend David Williams at Health Business Blog – check it out!
Industry pulse – Good news. Robert Hartwig of the Insurance Information Institute takes the pulse of the property casualty industry and sees signs of life: Insurance Industry On The Mend. “Mr. Hartwig said in comparison to all of 2009, the industry’s 2010 third-quarter results are close to all of the prior years. While the industry is not back to where it was prior to the economic downturn in 2007 when it reported property and casualty net income of $62.5 billion, it is performing significantly better than the worst of the downturn in 2008 when p&c income came in at slightly more than $3 billion.”
That’s good news, but it’s not time to break out the champagne yet. A.M. Best forecasts downward rating pressure for the commercial market and two new reports indicate that reinsurance prices should remain soft in 2011.
Physician dispensed drugs – If you are an employer or an insurer and this topic isn’t yet on your radar, it needs to be. Joe Paduda posts about recent NCCI report on physician-dispensed drugs in workers comp, a significant growth area that NCCI says is putting upward pressure on WC costs. California took steps to regulate the practice a few years ago after learning that repackaged costs were two to twelve times higher than the fee schedule.
Labor – The New York Times reports that cash-strapped states are looking to curb labor unions. Expect a flurry of legislative initiatives to limit the power of labor unions representing government employees. While both parties are wrestling with ways to keep state budgets in line, the article notes:
“But in some cases — mostly in states with Republican governors and Republican statehouse majorities — officials are seeking more far-reaching, structural changes that would weaken the bargaining power and political influence of unions, including private sector ones.”
Prevention works – A concerted campaign to reduce textile service worker injuries is working, according to the recently released annual TRSA Textile Services Industry Safety Report. Recordable injuries and illnesses dropped by 17 percent from 2008 to the 2009, and have dropped by 50% since 2005. Sandy Smith reports on SafeTRSA, an industry-wide safety initiative to improve worker safety through awareness, education and training.
Breast cancer & comp – At Comp Time, Roberto Ceniceros discusses City of Las Vegas v. Lawson. The Nevada Supreme Court ruled that a firefighter is entitled to a presumption that her breast cancer arose from her on-the-job exposure to benzene. His post also discusses male breast cancer.
Dramatic Australia flood footage – Office workers catch footage of a modest creek turning into a raging torrent sweeping cars away. More news and dramatic videos of the cataclysmic Australian flooding is available on MSNBC. At least 16 people are reported dead and more than 90 missing in what has been likened to an inland tsunami. Brisbane is under siege. You can follow breaking news on Twitter at #Brisbane.

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Workers Comp and the Economic Recovery: What’s Ahead

Tuesday, April 13th, 2010

Just how much of a toll has the poor economy taken on the workers comp system? Robert Hartwig looks back and looks ahead in his article for this year’s NCCI Issues Report, The Great Recession and Workers Compensation: Assessing the Damage and the Road to Recovery (PDF). He notes that while the property casualty industry fared better than many industries – not a single property casualty insurer folded due to the economy vs the 170 banks that did – the industry still took some serious body blows. And of the damage to the industry, the workers comp line was hardest hit. With 7.1 million job losses, declining payrolls, and a continuing soft market, net written premium fell by a whopping $8.5 billion in 2008, with another steep decline anticipate for 2009.
With such a grim backdrop, what’s in the cards for recovery? Hartwig notes that recovery will be largely contingent on job and wage growth over the next several years, and on that front, he is not overly optimistic. If job growth proceeds at a pace consistent with that of the most recent expansion suggests a painfully long recovery period, job losses won’t be recouped until late 2016. That doesn’t leave insurers a lot of room to move:

With a limited ability to grow exposures and greatly diminished investment earnings across all lines of insurance, especially especially longer-tailed lines such as workers compensation, the focus — at least for the first half of the 2010s — must be on underwriting profitability. Generating consistent underwriting profits is the only way to earn risk-appropriate rates of return in the current slow growth, low investment yield environment.

What’s in the card for employers? Look for the potential of price hardening and greater selectivity on the part of insurers. Tight underwriting means that options may be limited for employers with poor experience. While it’s always important to control losses, this environment ups the ante. In particular, employers need to be taking steps to control losses as hiring ramps up: new and untrained workers experience more injuries than veteran employees. A recent article in Industry Week suggests that employers should make safety part of the hiring process: Hiring for Safety: Risk Takers Need Not Apply. In addition, employers should put a heavy emphasis on safety training for all new hires.

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It’s Cavalcade of Risk week; that and other news briefs

Wednesday, October 7th, 2009

Feeling risky? Cavalcade of Risk #89 is posted at David Williams’ Health Business Blog. David is a master of the brief synopsis making it a very user-friendly compilation to browse.
Other news briefs
Fire Prevention – We’re right in the middle of Fire Prevention Week, a good time to communicate with your employees about fire safety at work as well as at home.
Economy and workers comp – At Comp Time, Roberto Ceniceros looks at the issue of how continuing job losses could hammer comp. He notes that, “Comp researchers have referred to recessions and the accompanying fear of job loss as having a ‘disciplining effect’ on workers, which leads to fewer claims filed. But that effect may only last so long.” And for another perspective on where we are headed, at Managed Care Matters, Joe Paduda reports from the AmComp conference, predicting that workers comp results are going to get worse – he points to medical costs as the culprit. And for more on this topic, see How the Great Recession is Changing the American Workplace, an article in Insurance Journal by Jay Reeves and Christopher Leonard. The authors look at effects that are likely to be long lasting.
Hawaii – In 2010, workers comp rates in Hawaii are expected to decline for the fifth consecutive year. Insurance Commissioner J.P. Schmidt says, “This is the largest workers’ compensation insurance rate decline of any state in the nation, except possibly those states that have enacted major statutory reforms.”
Traumatic brain injuries – Military medicine practiced in response to war injuries has always been a proving ground for medical advances and the Iraq war has been true to form. The L.A. Times features an excellent article on what we are learning from the battlefield about treating traumatic brain injuries. Many of the symptoms of PTSD can mimic the symptoms of traumatic brain injury, which can be better identified with new diagnostic imaging technologies.
Friction reducing devices – On the MEMIC Safety Blog, Lauren Caulfield talks about friction reducing devices aka “slider sheets” as a way to reduce injuries in healthcare settings when repositioning and turning patients.
Followup on UCLA lab death – ChemJobber has some recent updates in the case of Sheri Sangi, a UCLA lab worker who died in a fire while working. We’ve talked about this case last June in Death in the lab: why aren’t university labs safer? and More on the UCLA lab death of Sheri Sangji
Legal matters – In the Wall Street Journal, Cari Tuna talks about the rise in employer retaliation claims, which were up by 23% in 2008, according to the Equal Employment Opportunity Commission. The article quotes one employment law attorney who puts retaliation as the No. 1 risk for employers today. Jeffrey Hirsch at Workplace Prof Blog says part of the reason is something akin to the principle it’s not the crime, it’s the cover up.
Every picture tells a story – We’ve previously pointed to the Naval Safety Center’s Photo of the Week. hair-raising photos of unsafe work practices. The Safety Duck Quacks also has a collection of photos of unsafe work situations.
Quick links
Mortality calculators
Lessons learned on e-mail – When it comes to messages, some traces can linger
So You Think Your E-Mail Is Really Deleted?
Owner-Operator truckers back texting while driving ban
World statistics updated in real time

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News roundup: Health Wonk Review, WC recovery, fatalities, joint & several, AIG and web tools

Friday, August 21st, 2009

Things are sure getting ugly out there in the national debate on health policy. Read what the health policy wonks in the blogosphere have to say about all this – a fresh Health Wonk Review is posted over at David Williams Health Business Blog.
The recovery and WC – Joe Paduda offers an excellent analysis of the likely impact of economic recovery on various segments of the workers comp industry in his post The recovery is coming – what does that mean for work comp? He offers a word of caution for employers: as hiring increases, so too will injuries. “The good folks at the NCCI have looked at the impact of economic recoveries on workers comp, finding “Job creation is related to an increase in the proportion of workers who are inexperienced in their current job and, hence, more likely to sustain a workplace injury.”
Work fatalities down, suicides up – The good news: “A total of 5,071 fatal work injuries were recorded in the U.S. in 2008, down about 10 percent from a total of 5,657 fatal work injuries reported for 2007, according to preliminary government figures.” However, some of the drop is attributed to the economy and a decline in the number of hours worked. Researchers also think that numbers may be lagging since budget constraints at reporting agencies may have delayed classifying cases. One of the most troubling parts of the report is that workplace suicides were up 28 percent to a series high of 251 cases in 2008 – “…the highest number ever reported by the fatality census. Suicides among protective service occupations rose from 14 in 2007 to 25 in 2008.” Read more about the report in Insurance Journal’s story, Fatal Work Injuries Dropped 10% in 2008; Down 20% in Construction.
Joint and Several Liability in action – Roberto Ceniceros blogs about the hefty bills that some New York employers are facing after the demise of self-insured trusts (aka SIGs) in his post Self insuring comp claims has its risks. About 1,789 will be footing about $133 million in unfunded workers comp claims – an average of about $74,000 per employer.
AIG wins one – An NCCI suit alleging that AIG has been shortchanging state workers comp pools for 35 years was dismissed by a federal judge yesterday, but the suit was dismissed on a legal technicality, with no ruling on the actual charges.
Web tools – here are a few good web tools we’ve come across in our travels:
Choose the Best Search for Your Information Need – a guide to some specialty search engines
Wordnik – An ongoing project devoted to discovering all the words and everything about them. We’re liking this, and also recommend our long-term favorite word tool, OneLook.
Meeting ticker – log the number of attendees, enter the average hourly rate, and start your engines. You’ll be surprised to learn how much meetings cost!
ParkWhiz – find and reserve parking before you get there. Enter a date, time & address and get nearby parking garages, rate comparisons, and distance from your destination.
Down for everyone of just me? – enter the address of a website to see if the site is having a widespread problem or if the problem with the page is on your end. It’s surprisingly useful!

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When the Bond is Broken: Workers Comp and Lay Offs

Monday, April 13th, 2009

Last week Julie Ferguson blogged the interface between workers comp and recessions. For the most part, the news is good: during tough economic times, the frequency of injuries goes down, as workers hunker down and do their jobs as well and as safely as possible. But there is a big downside to downsizing: lay offs raise the specter of injuries – legitimate or otherwise – that are no longer under the employer’s control.
The most effective tools for managing comp losses are in the hands of the employer: by responding to injured workers in a supportive manner, by securing the best available medical care and by speeding recovery through the prudent use of temporary modified duty, employers are able to keep employees positive and productive throughout the recovery process, all the while holding losses to a minimum.
But after lay offs, the employer tool box is virtually empty. There is no trust – most often, there is no relationship – between employer and former employee. The employer cannot manage the recovery process. The bond between employer and employee – whether it formerly was strong or weak – disappears altogether. Laid-off employees often feel anger toward their former employers and could care less about driving up the cost of insurance. In the context of considerable vulnerability and resentment, employees have to find their own path through the disability maze.
Who Manages, Who Cares?
After a lay off, injured employees are on their own. Where once there were (at least theoretically) two supporting pillars – the employer and the insurer – now there is only one. And where the insurer once relied upon the employer to maintain open lines of communication with the employee during recovery, the communication has been severed. The goal cannot be to return the employee to the prior job, as that job no longer exists. The modified goal is securing a release for full duty from the treating doctor, at which time benefits can be terminated.
After lay offs, employers have relatively little leverage in the recovery process. The burden falls almost exclusively on the (usually overworked) claims adjuster. And there is little incentive for the adjuster to aggressively manage the claims of laid off workers. These claims tend to fall through the cracks in the system, resulting in higher than necessary costs.
So here is a little advice to employers who find themselves laying off workers with (real or alleged) work-related injuries:
1. Aggressively manage any injuries reported at or near the time of lay offs. [For details, contact LynchRyan.]
2. Use the leverage of ongoing benefits to keep lines of communication with laid-off workers open.
3. Once laid off employees report injuries, keep in close contact with the claims adjuster. While you cannot offer return-to-work options, you can actively strategize open claims and ensure that the adjuster keeps these claims on the radar screen. This continued collaboration goes a long way toward reducing the ultimate cost of a claim.
Lay offs are traumatic for everyone, employers and employees alike. The bond of trust – such as it is – has been irretrievably broken. But even with the employer tool box stripped bare, there are still opportunities to keep losses at a reasonable level. The key is quite simple: even though workers are no longer employees, management must continue managing. That might sound like a “duh,” but all too often in the world of business, out of sight means out of mind.

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Workers comp and safety in a recession

Thursday, April 9th, 2009

Recessions tend to place downward pressure on workers’ compensation frequency, according to NCCI economists who made a recent presentation to the Casualty Actuarial Society. That makes sense. Reduced payrolls means fewer claims. Plus, with potential layoffs looming, some employees may be reluctant to report injuries – which might be part of the reason why there can be an uptick in claim reports after a layoff. The folks at NCCI note that economic expansions are times when frequency spikes – more injuries occur as payrolls climb and new, less experienced employees are added to the work force.
But despite a drop in frequency, safety experts would caution that an economic downturn requires greater vigilance, not less. In a white paper entitled Leading Safety in a Downturn, staff at BST point out that like many other operational areas, safety budgets are often cut and staff are forced to maintain the same standards with fewer resources at their disposal. They also suggest that in a downturn, there is a more complex cultural risk posed by changes in the business: “Even if it is not intended, an organization responding to economic conditions can experience a climate shift that puts a higher focus on production than safety. These shifts are “loud” to the employees who will take away from these experiences long-lasting memories of how they were treated and what they perceive the organization to truly value.”
The authors suggest that a downturn can be a defining moment in a company’s culture, and note that “how you do the hard stuff matters.” They offer five critical actions that business leaders should take to be transformational leaders and to ensure continued safety excellence during a downturn.
More on recessions and workers comp
We’ve talked about workers’ comp and recessions before, specifically, the impact on claims. We cull out this quote from a California study of prior recessions:

“In a six-state study, researchers noted that “…recessions increase back-end cost drivers (i.e., increase the cost per claim) to a greater extent than they increase front-end cost drivers (i.e., increase the number of claims). They state that recessions are ‘characterized by increased use of the system, longer duration claims, and more frequent and larger lump-sum settlements.'”

In a prior post, Down the Rabbit Hole: The Economic Crisis and Workers Comp, my colleague Jon also talked about some other aspects of the current economic scenario that are playing out in workers’ comp. These include the impact of the economy on the illegal immigrant work force, the fact that older workers may be forced to work longer since retirement funds have been destroyed, and the downward pressure that poor investment returns are putting on insurers.

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