Posts Tagged ‘workers compensation’

Workers’ Compensation Performance Measurement: Keep The Bull’s Eye Simple

Wednesday, May 17th, 2017

For the last decade, injury frequency has been trending steadily lower. There are a number of reasons for this: automation, loss of manufacturing jobs, better safety engineering, etc. Injury severity, however, has not followed suit despite technological gains in claim administration and medical management and an ever so slow move to the use of predictive analytics.

This creates challenges for employers, especially of the small and middle market variety, and, to a certain degree, even for a few national, enterprise accounts who find themselves pretty much where they were ten years ago in terms of style and policy with respect to workers’ compensation. One reason for this is the deep rooted legacy mentality and resistance to change of many insurers and Third Party Administrators. In many ways, these organizations remind me of flies circling around a light in a lampshade, mistaking movement for progress.

However, employers still foot the bill and are still in command. Keeping in mind that the workplace is the best place to control workers’ compensation costs, employers still need to build and maintain solid programs to prevent and contain loss. Case in point is Bob Oberosler, Vice President of Loss Prevention for Rite Aid, a national pharmacy chain. At the New Jersey Self Insurers Association’s Annual Meeting a couple of weeks ago, he described his company’s work to craft a forward thinking loss prevention and workers’ compensation management program and communicate it to employees who are far and wide, indeed. But before that could happen, Mr. Oberosler said, he faced an even more daunting task – getting management’s commitment and buy-in to the effort. The good news is this happened and Rite Aid has been enjoying some spectacular results because of it.

This got me thinking. In order to sustain C-Suite commitment, a risk manager, or Loss Prevention VP, such as Bob Oberosler, needs to provide the Leadership team a steady, easily understandable Performance Measurement Results Dashboard. So, what should be the characteristics of such a Dashboard?

Performance measurement should have four characteristics: It should be simple, it should be meaningful, it should be consistent and it should be continuous.

By simple, I mean easily and quickly understood by senior management. Meaningful means that it should sit in senior management’s sweet spot; it should be something that is anticipated and valued by leaders. It should be consistent, because those leaders, once trained to view performance in one way, do not appreciate abrupt course changes. And to be effective over the long term, it has to be a continuous and routine process. The mantra should be: What is consistently well-measured is highly valued.

With this framework in mind, I usually recommend that monthly or quarterly reports to senior management measure two things religiously: Incurred losses per full time equivalent employee (and this should be done by department, division and company) and incurred losses per every hundred dollars of payroll (again, split out by department, division and company). Before any measurement occurs, however, management should settle on targets, which should be a bit of a stretch, but attainable. And target selections should be set against actual performance in the prior three or four years. For instance, if costs per FTE have been in the $200 to $300 range in the last few years, a good target would be a reduction of 30% to 40% in the current year.

Senior managers have finite attention spans. Therefore, workers’ compensation performance measurement should fit on one page, a Scorecard that senior management can assimilate in no more than a few minutes. If the information is pithy enough, that’s as long as it should take, but it should also lead to fruitful discussion about management actions to enhance performance, discussion that comes out of knowledge.

There are many other solid and valuable workers’ compensation metrics, but, in Lynch Ryan’s experience, these two are the ones that senior managers appreciate the most.

All of this assumes, of course, that, as at Rite Aid,  a serious and ongoing safety, workers’ compensation and injury management program is humming along and that all parts of the organization have been trained in how to keep it that way.

WCRI: Day One, Part Two: The 1st Opt-Out Session

Thursday, March 10th, 2016

The afternoon of WCRI’s 2016 Annual Conference was devoted to Opt-Out. The first of two sessions was a Point-Counterpoint exercise. Trey Gillespie of the Property & Casualty Association of America led off. To Mr. Gillespie, with Opt-Out it’s 1910 all over again. He described Opt-Out in Texas and Oklahoma as allowing employers to deliver sub-standard care to injured workers without government oversight. Showing stark contrasts between what is allowed in Opt-Out and required in workers’ compensation, he suggested that employees were at the mercy of employers, which could sometimes be good and sometimes be bad. Opt-Out’s a kind of Employer Personal Responsibility Plan.

Bill Minick, of PartnerSource, followed with a presentation in favor of “Options to Workers’ Compensation.” Minick has been the loudest proponent and most significant advocate for Opt-Out. He and Opt-Out were the subject of a Propublica investigative journalism story late last year. He described Opt-out as a substantial improvement on a failed system and painted a picture of employers being able to provide better care for injured workers at less cost, because regulatory and bureaucratic requirements have been stripped out. Essentially, Minick claims that the workers’ compensation system makes employers go from Massachusetts to Rhode Island by way of Alex Swedlow’s California. He’d rather just drive the 30 miles down Route 95.

My basic problem with Opt-Out, wherever it is, is that some employers with resources and good intentions welcome the chance to design their own injury benefit plans that will provide benefits at least as good as traditional workers’ compensation at significantly less cost. This, in itself, is a good thing. Some large employers in Texas, such as Costco, seem to have done that. Trouble is, not every employer is Costco. As I wrote when I evaluated Opt-Out in 2014, I’m concerned about Kenny’s Citgo, down the street and around the corner, where Kenny and his five hourly workers labor without the benefits of a mandated workers’ compensation plan, because Kenny has Opted-Out. There are more Kenny’s than Costcos.

Workers Comp Insider: 5 years and counting!

Tuesday, September 9th, 2008

Yay us! This month is our 5th year blogging anniversary so we were pleased to be named to Lexus-Nexus Top 25 Blogs for Workers Compensation — and to see a few of our esteemed colleagues on the list, too. We have to laugh because when we started, we weren’t sure we would find enough to post about to make it to year 2, let alone year 5. And back then, the business blogging landscape was pretty thin indeed, so we’d never have foreseen such a robust community emerging for such a niche topic.
You are reading post #934. In the 1680 days we’ve been keeping track, we’ve had 900,000 visits from 600,000 unique visitors. We generally have about 18 to 20 thousand visitors a month, and as would be expected, about 85% of our visitors come from the U.S., but Canada, the UK, and Australia also make a good showing. We’ve had visitors from about 200 countries, including some that challenged our geographic awareness: Kiribati? Burkina Faso? (sidetrack: how many countries can you name in 5 minutes?)
In honor of the event, we thought we’d dish up our top 15 all-time greatest hits. These posts reflect the most searched for topics, as well as the ones that you, our readers, have clicked on the most:

NCCI 2005 Issues Report – a look back, a look ahead

Wednesday, April 6th, 2005

Every spring, NCCI publishes a series of reports that paint a portrait of the workers compensation industry’s health. These include an annual “Issues Report,” followed later by a “State of the Line” report. For those of us who work in the industry, these reports offer a quick look of where we’ve been and provide a cookie trail for where we are likely headed. They are mandatory reading for industry insiders, but they are not just for insurance wonks. If there’s one drum we continually like to beat here at Workers Comp Insider, it’s that the more employers understand about the insurance industry, the better prepared they can be to weather any market vagaries.
The 2005 Issues Report has been released, and in his Annual Snapshot (PDF), executive director Stephen Klingel paints a good news/bad news scenario of a market in transition. Some of his observations include:
Insurer reserve deficiencies were reduced by approximately $5 billion dollars. Although improved, reserve deficiencies are still a problem. In workers comp, losses have the famous “long tail” – that is, they play out over years. Insurers set aside reserves for the estimated cost of the claim. If they don’t set aside adequate reserves, when it’s time to pay the piper, insurer insolvencies occur and havoc ensues. Insurer insolvencies still loom as a potential problem.
Medical costs – particularly prescription drug costs – are still galloping away. Wage replacement was always the largest share of lost time claim cost, but now medical costs represent 55% of the cost, on average. In some states – AL, AZ, IN, KY, TX, and WI – the cost approaches 70%.
Frequency continues to decline. That’s good news. It means that employers are doing a better job in the area of safety. NCCI reports “significant declines occurred in fatal, permanent total, and permanent partial claim frequency.” But on the flip side of the coin, severity is increasing. That means that the medical costs and/or the duration of claims are rising. Not so good.
Terrorism Risk Insurance Act (TRIA) uncertainty looms. The uncertainty about whether Congress will extend TRIA casts a pall over the industry. The clock is ticking, it is due to expire at the end of the year. TRIA provides a federal backstop or safety net for insurers in the event of any catastrophic events. Because workers comp is mandatory coverage, it is a line of insurance that is particularly exposed – insurers can’t exclude terrorism coverage when issuing policies.
The residual market is stabilizing. The residual market is sometimes called the assigned risk pool, or more familiarly, “the pool” or “the market of last resort,” while the rest of the market is known as the voluntary market. If you are an employer, you might get thrown in the pool for any of a number of reasons: your loss experience may be terrible or you may simply be in a high-risk industry. For one reason or another, no one wants to write your policy. NCCI reports that the residual market now represents about 13% of the total premiums, up from about 10.7% in 2003. However, the rate of growth for the residual market appears to be appears to be slowing.
NCCI

Airport baggage screening: a high hazard job

Thursday, March 10th, 2005

USA Today recently ran a feature on airport baggage screeners and the extraordinarily high rate of injuries that they suffer in the course of their work. Approximately one out of every four workers reports an injury and one out of 8 workers has an injury that requires lost time. Yikes – this makes bag screening one of the nation’s most hazardous jobs.
Injured workers at the Transportation Security Administration (TSA), more than two-thirds of whom are screeners, missed nearly a quarter-million days of work last year. The lost job time has contributed to a staffing shortage that has strained checkpoint security and lengthened lines at airports.
TSA employees injured on the job missed work in 2004 at five times the rate of the rest of the federal workforce. They were injured four times as often as construction-industry workers and seven times as often as miners.

Most of the injuries are soft tissue strains and sprains resulting from lifting and carrying heavy bags. Since most of the screening machines and checkpoints were added after 9/11 and squeezed in wherever they would fit, few screening stations were designed with an eye to ergonomics. OSHA has issued numerous hazard citations to airports across the country.
Adding to these problems, the TSA staffed up quickly and in most instances, strength tests were not part of the application process, and training – at least from a safety standpoint – was minimal. In a snowballing problem, the more staff injuries and absences there are, the more overworked remaining employees are. According to the article, the staff attrition rate last year was 22%.
This is distressing both for the workers involved and also for airline travelers. Although authorities say that security is not being compromised, it is hard to see how injured, overworked, and poorly trained workers can deliver the best results.
Related:
OSHA Ergonomics eTool on Baggage Handling
Safe Lifting
Safe lifting tecchniques
Lifting Safety: Tips to Help Prevent Back Injuries

The long tail of insolvencies: Colorado, New York employers face potential assessments

Tuesday, March 8th, 2005

Some employers in Colorado and New York are learning that the so-called long tail of workers comp has more than one meaning. In the wake of a multitude of insurer insolvencies in recent years, many state guaranty funds are buckling under the burden, and turning to employers to help pick up the pieces.
Like many other states, Colorado has been suffering the ill effects of insurer insolvencies. In recent years, at least 14 insurers have gone out of business. The 1971 demise of Reliance is the most prominent and most notorious example. The Colorado Insurance Guaranty Association has been paying claims for injured workers of the insolvent insurers, but the Association now faces more than $40 million in unfunded liabilities. To shore up the troubled fund and continue paying claimants, the Association has taken to a new tactic: billing 26 of Colorado’s larger employers more than $2 million.
… recently, employers have been surprised by letters announcing, in some cases, that they owe the association hundreds of thousands of dollars for claims that were paid. The association has had the power to recover money from large employers for more than 10 years, experts say, but few policyholders knew about it.
It has only been recently — within the last 18 months — the association has sought payment.

This comes as an unwelcome surprise to the employers who are being assessed. Employers are already contributing to the guaranty fund by way of a 2% surcharge on their premium.
This is a scenario that may soon be playing out in New York as well in the form of increased employer assessments. We recently posted an item about the dire straights of the Workers’ Compensation Security Fund. The Fund was scheduled for complete exhaustion as of the end of February leaving 7.500 injured workers in the lurch, but a deus ex machina in the form of an unexpected sum of cash from another state fund and from the liquidators of Home Insurance Co. bought a few weeks.
Among the proposals to shore up the Fund:
A doubling of assessments on some employers is part of the Pataki administration’s recommended solution to the impending bankruptcy of the Workers’ Compensation Security Fund, along with borrowing $50 million from another state insurance fund. Both are subject to approval by the state Legislature.
Colorado and New York aren’t alone, simply the two states that are in the headlines this week. Obviously these short-term fixes are band-aids at best, and injured workers and employers alike deserve more security and more protection from our industry.
For those of you interested in a more in-depth treatment of the issue of insurer insolvencies, here are two policy-orientated papers of note:
Managing the Cost of Property-Casualty Insurer Insolvencies in the U.S. (PDF) from the Center for Risk Management and Insurance Research, Georgia State University, December 2002. Note that one of the authors of this report is a fellow blogger, Martin Grace of RiskProf.
Managing Insurer Insolvency 2003 (PDF) prepared for the Foundation for Agency Management Excellence by Stewart Economics, Inc., September 2003.

SEC reserve inquiry of Interstate Bakeries intensifies

Tuesday, February 1st, 2005

Roberto Ceniceros of Business Insurance reports that the SEC intensified its probe of Interstate Bakeries, moving from an informal to a formal investigation of its workers comp reserves. The company employs more than 30,000 workers and is the nation’s largest wholesale baker. Think Twinkies, Hostess, Drakes, and Wonderbread.
According to Columbus Business First, the inquiry began last July when the Kansas City-based company said it might have incorrectly accounted for reserves. More recently, the company filed for Chapter 11 and ousted executive staff:
“Interstate Bakeries in December removed its treasurer and senior vice president of finance after identifying a “material weakness” that allowed the $40 million workers’ comp charge to go unreported for two quarters.
According to unaudited financials the company recently released, the $40 million charge accounted for most of the company’s swing from a $27.5 million profit in fiscal year 2003 to a $25.8 million loss in fiscal year 2004.”

$40 million is a lot of cupcakes. Reserves have been the demise of more than one company, let’s hope this large employer will be able to weather the challenge. We recently discussed reserve problems in the context of a Kentucky self-insurance group (SIG) that was grossly under-reserved, and also discussed what happens to workers comp claims when an insurer defaults. This bears watching.

Free safety educational materials

Monday, January 17th, 2005

Some state workers compensation authorities have very robust educational materials and information on their websites, and from time to time, we will point to tools or resources that we find. Several states have state funds – that is, the state provides insurance to employers, either exclusively or on a competitive basis. One might expect a certain level of depth to the educational materials provided by state funds. Here are a few we’ve found:
Utah Workers Compensation Fund Safety Topics. More than 60 safety topics, many in both English and Spanish, are available in PDFs.
Ohio Bureau of Workers Compensation Safety Publications. More than 40 guides and manuals are available in PDFs.
Washington State Department of Labor and Industries has a variety of posters and safety guides available in PDFs. The site also offers some employee and employer training guides, including PowerPoint presentations.
Lousiana Workers Compensation Commission Safety Articles. More than 60 archived articles on various safety topics are available online.
A note of caution: workers compensation laws vary state to state, and while many of these materials are general in nature, certain materials may be state-specific.

When incentive-based compensation programs and bonuses backfire

Wednesday, October 6th, 2004

George’s Employment Blawg (which, incidentally, is always a good read) treats the legal downside of incentive-based compensation, pointing us to an article by Chiree McCain of the Birmingham Business Journal entitled Compensation systems also have legal negatives
The article uses examples of bonuses that may inadvertently encourage drivers to short-shrift safety or drive beyond legal limits and bonuses for accident-free days that may impede accident reporting. While the article doesn’t discuss piecework, we’d put that in the category of a compensation system that often leads to safety problems. It certainly wreaked ergonomic havoc in the textile industry, although today, with much of that industry being outsourced offshore, injuries are probably less in evidence here in the U.S.
In most instances, incentives are intended to be a positive force, motivating employees to excellence but they can be a fertile playing ground for the law of unintended consequences, bringing to mind the age-old saw about the road to hell being paved with good intentions. We’ve certainly seen bonuses for accident-free days backfire, particularly because they are often awarded to a group of workers or a manufacturing division so you have the carrot of financial gain AND the stick of peer pressure at play.
The article suggests possible initeneded consequences of incentive-based compensation:
“They’re [the employer] not saying, ‘I’ll give you extra money if you go break the law’ … but the company can face liability for the conduct that is illegal,” he says.
Gittes says employers could face liability for on-duty actions by an employee or an independent contractor because, either way, that person is acting as an agent for the company.
And if a plaintiff can identify a pattern of accidents or illegal behavior, a compensation system that encourages that behavior might raise the stakes from negligence to deliberate disregard and therefore introduce punitive damages into the mix.
“If they were put on notice that their policy was being interpreted by employees in ways that threatened the safety of others and they continued to do it anyway, there could be an issue about punitive damages,” Gittes says.

The downside can be costly. In January, we reported on a $12 million lawsuit based on bad faith for a claims handling practice allegedly involving incentives to claims staff for lowering the cost of claims

9/11 news roundup: health, insurance, and disability-related issues

Saturday, September 11th, 2004

Most Ground Zero Volunteers Still Waiting For Workers’ Comp
From Adjuster.com: “A study of workers’ compensation claims from the cleanup at the World Trade Center site after the Sept. 11 attacks found that about 90 percent of the 10,182 claims for workers’ comp have been resolved. In contrast, less than a third, or 31 percent, of the 588 volunteer claims were resolved as of June 30, 2004, the Government Accountability Office, the investigative arm of Congress, found.
Sept. 11 attacks didn’t bankrupt U.S. insurers: Study
Business Insurance reports on a forthcoming study from Ball State University in Muncie on the effects of 9/11 on the insurance industry that states that the impact on the insurance industry was less than anticipated, partly due to the federal compensation fund. .
Breathing and mental health problems widespread among Ground Zero rescue and recovery workers
Preliminary data from screenings conducted at The Mount Sinai Medical Center show that both upper and lower respiratory problems and mental health difficulties are widespread among rescue and recovery workers who dug through the ruins of the World Trade Center in the days following its destruction in the attack of September 11, 2001.
An analysis of the screenings of 1,138 workers and volunteers who responded to the World Trade Center disaster found that nearly three-quarters of them experienced new or worsened upper respiratory problems at some point while working at Ground Zero. And half of those examined had upper and/or lower respiratory symptoms that persisted up to the time of their examinations, an average of eight months after their WTC efforts ended. In addition, more than half of the Ground Zero workers who were examined had persistent psychological symptoms.
(via Pulse).
9/11 Impact on Marsh & McLennan Cos. Nothing Short of Devastation
Claims Journal features an interview with Marsh & McLennan Companies Chairman and CEO Jeff Greenberg reflecting on the lingering aftermath of the loss of 295 employees in terms of both the human and the business impact.
Additional stories:
Lingering 9/11 anger finds its outlet in courts
Court declines to hear appeal of 9-11 Workers’ Comp benefit case
No answers for kin of Mexican 9/11 victims
WTC rescue workers still ailing, study finds
Terrorism insurance is now common
World Trade Center Health Registry
Cantor Fitzgerald sues al-Qaeda over Sept. 11
The Port Authority of New York and New Jersey to join 9/11 lawsuit against Saudis
The miracle survivors – coping with recovery
Workers Comp and terror: the long shadow