Posts Tagged ‘Peter Rousmaniere’

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.”

New Cavalcade of Risk; other news briefs

Thursday, July 30th, 2009

Nancy Germond is hosting this week’s Cavalcade of Risk at her blog, Insurance Copywriter. She should get hazardous duty pay – she tells us that it is 113 degrees by noon on any given day in Phoenix – yikes. Nancy’s post covers topics as diverse as damaged guitars, dog health, and – of course – the health care debate. By the way, you can find more risk-related articles authored by Nancy at AllBusiness.
Other news notes
As we noted previously, Roberto Ceniceros has been attending the Disability Management Employer Coalition annual meeting and has been posting about the meeting on his blog. We found one item that he wrote about in Business Insurance of particular interest: his report that Harley Davidson is using functional assessments to reduce workers comp and disability claims among new hires and in its return-to-work programs. Hanover, Md.-based BTE Technologies Inc. provides the electronic functional assessment testing system and accompanying software and evaluates worksites to perform physical-demand analyses. The “…system evaluates attributes such as range of motion, dexterity, grip strength, lifting ability and tolerance of certain positions. Employees are measured by pushing against a column, lifting weights and other efforts matched to specific job requirements that are recorded electronically.” The company estimates savings of nearly $260,000 in workers comp claims costs by preventing new hire injuries alone, which doesn’t encompass the other benefits and savings from the disability and RTW components.
In Risk and Insurance, Peter Rousmaniere launches a three-part series on health issues facing veterans as they return to the workplace. His first post tells the story of one Sgt. Stephen Kinney of New Hampshire, ho was the victim of an IED explosion on the outskirts of Camp Anaconda in Iraq. Among injuries, Kinney sustained brain injuries and post-traumatic stress disorder (PTSD) that left him unable to resume his prior job as mail carrier.
NIOSH Science Blog posts about safe and health green jobs and tells us that, with its partners, NIOSH has launched a Going Green: Safe and Healthy Jobs initiative. The note that as America moves towards energy efficiency and more environmentally-friendly practices, it is likely that there will be changes to traditional jobs and the creation of new kinds of occupations. The purpose of the initiative is to eliminate hazards in the green jobs through planning, organization, and engineering – a concept known at NIOSH as Prevention through Design (PtD).
Supporting Safer Healthcare posts that U.S. News & Word report has issued its 2009 list of best hospitals.
The Ohio Department of Insurance has a new web address – update your bookmarks accordingly: www.insurance.ohio.gov/ (Please note – we had previously said that it was the Ohio Bureau of Workers Comp that had a new web address but we were wrong – that stays the same: www.ohiobwc.com – sorry for any confusion!)

News roundup: RTW, Ambulatory Care, Rhode Island shake-up, and more

Wednesday, April 19th, 2006

Today’s must-read list: Give disabled workers every reason to remain part of your work force – an article discussing a report by the American College of Occupational and Environmental Medicine (ACOEM) on the Stay at Work/Return to Work process. The report discusses the psychological, emotional, and economic impact of disability on the individual. Read the full report: Preventing Needless Disability by Helping People to Stay Employed (PDF).
Peter Rousmaniere’s column in Risk & Insurance this month – How to Avoid Getting Scalped – a look at Ambulatory Surgical Centers and their lack of transparency in billing practices. It’s worth a read.
Rhode Island – Looks like Ohio may have some company in terms of workers comp scandals. Business Insurance reports that Governor Carcieri is calling for the termination of Beacon Mutual Insurance Company’s CEO Joseph Solomon after a recent report detailed questionable practices and preferential pricing. Insurance Journal reports that Solomon and the VP of underwriting have both been suspended without pay, at least until a meeting scheduled for today. This is a big shakeup for an organization that writes about 90% of the state’s workers comp policies. Beacon Mutual was created by the state in 1991 as a nonprofit independent corporation.
Scaffolding – In Boston, work has resumed at the site of the recent scaffolding collapse. The state is considering proposals that would assign scaffolding inspections to the Department of Public Safety, as is the case with cranes at construction sites. This political football will no doubt be tossed around for awhile. Meanwhile, a new scaffolding collapse in Milton Keynes , UK has dominated the headlines this week … another worker killed. The BBC depicts the collapses in pictures. (via rawblogXport).
Employee Mutiny – You know things are bad when your work force quits en masse, leaving only a note on the door. Hospital Impact discusses this event, and raises other issues of employee morale and work force motivation in an interesting post that we found via Rita at MSSPNexus.

Worker outcomes: are some workers being marginalized?

Wednesday, January 28th, 2004

Peter Rousmaniere has a column entitled A Voice of the Worker in Risk & Insurance that is well worth reading. He reports on the Workers Compensation Research Institute’s (WCRI) study, Outcomes for Injured Workers. The research encompassed 3,000 claimants in California, Massachusetts, Pennsylvania, and Texas. It’s one of the first studies from the worker perspective, assessing recovery, return to work, and access to and satisfaction with health care.

There is much in the study that provides a springboard for further study – why are workers more satisfied and why are outcomes better in MA and PA than in CA and TX? Satisfaction and recovery, it appears, do not align with the highest expenditures, for example.

Rousmaniere discusses one disturbing aspect of the study that points to a worker population that is being marginalized:

“Many injured workers never succeed in returning to the wage levels they had achieved before their accidents. The data suggest that the vast majority with less than an eighth grade education do not get close to where they were pre-injury. They account for much of the injured workforce in states like California and Texas, maybe due to the large Hispanic workforces there.”

He suggests that, given these circumstances, the most attractive option for these workers might be joining the cash sub-economy or to seeking some form of permanent disability awards.
Rousmaniere suggests that

” … the workers’ comp system can respond only so much on behalf of this worker group. The California system’s tableau of generous legal and medical benefits for claimants is a mirage. The concept of voc rehab has largely failed as a major solution. What may help are better incentives for the employer to retain the worker from day one of the injury and through, if and when a permanent award is made.”

We must ask ourselves if, in these instances, we are fostering a permanently disabled class. Clearly, the most successful outcomes occur when incentives are aligned – worker and employer. Both must have an investment in and commitment to the benefits of recovery and return to work.