Change latitudes in person – Meet me at the 2012 National Workers’ Compensation and Disability Conference® & Expo

A change in latitude, as Jimmy Buffett suggests, can sure be a good thing! But don’t let my current preoccupation with tropical climes fool you – the National Workers’ Compensation and Disability Conference is in Las Vegas this year. A great registration discount is available to readers of the WorkCompEdge blog!

I’m excited to announce that I’ll be presenting at the 21st annual National Workers’ Compensation and Disability Conference® & Expo. Billed as “the nation’s leading event for anyone involved in the workers’ comp and disability management industries,” the conference will be held November 7 – 9, 2012, at the Las Vegas Convention Center. The agenda includes four tracks:

• Better Claims Management (featuring a session by yours truly),
• Health and Medical Management,
• Solving Legal and Regulatory Issues, and
• one of the hot topics in workers’ comp these days, Opioid Solutions.

This conference focuses on valuable session takeaways and includes the expertise of presenters and panelists from all aspects of workers’ comp. Check it out – and if you decide to go, don’t miss this discount available to you as a reader of the WorkCompEdge blog: Register for the conference with Promo Code WELLS12 and save $320.00 off the standard rate – that’s only $975 for access to everything the conference has to offer!

To stay in touch with pre-conference buzz, don’t miss the conference subgroup on LinkedIn. (If you’re not already a member of LinkedIn and the parent group, the Work Comp Analysis Group, here’s more info.) Also follow the conference Twitter account, @wcconf, and watch for conversations using the #NWCDconf hashtag.

Change latitudes in cyberspace – Visit the new address for the WorkCompEdge blog

The WorkCompEdge blog is moving to a new location! Just this week, Zywave has unveiled a fresh new Zywave.com site, integrated for insurance professionals and financial advisors to find product information, blogs, articles, and many other resources all in one sleek interface. After today, all new posts to the WorkCompEdge blog will be made only at the new address:

www.zywave.com/resources/workers-compensation/blogs/.

If you forget, no worries, as the old address will forward you to the new one by the end of May.

If you subscribe to the WorkCompEdge blog by email, you’ll still receive updates as usual. If you read the blog via a feed reader, the new feed address is www.zywave.com/category/workers-compensation/feed/

Even if the blog’s latitude is changing, my attitude is the same

I’m always grateful for interaction with my readers, because I always learn from your questions and comments. Keep ‘em coming – by email and through comments here on the blog and in social media! And if you get a summer trip to the beach before I do, save me a chair – we might get around to talking a little workers’ comp as we sip our umbrella drinks and watch the waves.

- Kory Wells, WorkCompEdge Blog Editor

© 2012 Zywave, Inc.  All rights reserved. For reprint permission, contact the blog editor.

Should the construction and contracting industry revisit its use of the experience mod rating (EMR) as criteria for bidding on projects? Ron Cooper, President of the Indiana Compensation Rating Bureau, is encouraging study and discussion of the issue in his state.

This isn’t a problem specific to Indiana. Nationwide, the construction industry has been using the experience mod rating (also known as the mod, e-mod, ex-mod, or EMR) as a qualifier for about 20 years, ICRB President Cooper estimates, because it reflects “third party, objective, and reliable, audited data.” The EMR is commonly used by construction project managers and safety organizations to prequalify contractors for worksite eligibility. Oftentimes the contractor’s mod must be below 1.00, 0.90, or even lower.

But the EMR is designed as a pricing modifier to determine insurance premium, not as a tool to qualify contractors for projects, Cooper says in a white paper published by the ICRB. The paper, now at the center of groundbreaking industry discussions in Indiana, stands to lead the way for national reform in the use of the experience modifier as a qualifier for awarding construction projects.

“We’ve always tried to be proactive,” says Cooper, who began his career at NCCI and has been with the Indiana bureau since 1995. In the past year he’s proven that with this issue, meeting with construction industry representatives in Indiana to talk about the flaws of using the EMR as a qualifying metric. Some of those flaws, as discussed in the paper, include:

• The EMR includes reserves on open claims which change from year to year.
• The EMR experience period is one to four years old, thus, it may not reflect current conditions of a contractor in terms of safety.
• Using the EMR as a qualifying metric encourages employers to not report injuries and pay claims out of their own pockets, a practice which is not cost effective and may be illegal.
• Contractors with no losses can realize an increase in their EMRs simply because of statewide drop in claim frequency (that must be recognized in annual updates of rates and rating values)

If the paper’s executive summary doesn’t raise your eyebrows, the case studies will. The paper shows how one employer’s mod increased from 0.89 to 0.94 over the course of 5 consecutive years despite the business having no losses in any of those experience periods.  Other anecdotal data includes quotes like these from Indiana businesses:

• “…because of one claim, I stand to lose a substantial amount of revenue. In this economy this could be the end of my small business,” says one sub-contractor whose mod changed from 0.83 to 1.07 as the result of one claim.
• “…older workers take longer to heal, and the claims costs are higher…my EMR could be higher than my competitor and disqualify me from bidding simply due to the age of my workforce…that reason seems discriminatory to me.”
• “The insurance company is still going after the third party that caused [a work-related auto accident]. But in the meantime, the cost of the claim shows up on my experience. That puts my EMR over 1.00 and now I don’t qualify to bid on jobs.”

Cooper’s meetings with industry representatives have been at events like the Beyond Safety Conference and Expo, where the audience included contractors and project owners representing large corporations. He has also been in talks with groups such as the Metro Indianapolis Coalition for Construction Safety (MICCS) and the Indiana Construction Association.  These organizations have been “very receptive” to a call for change, Cooper says.

“If a company isn’t certified with MICCS, it’s tougher to get a job in the Indianapolis area,” Cooper says. MICCS prequalifies contractors at various levels, including “Qualfied,” which among other criteria requires a mod of 1.00 or less, and “Certified,” which requires a mod of 0.90 or less. In light of the data Cooper has shared, the organization has increased their sensitivity to and understanding of appeals related to the mod and is looking at revising criteria, perhaps by also taking into account the employer size. (Editor’s note: My own related suggestion is that, if these organizations are going to continue to consider a company’s mod, they should also know its lowest possible mod, or loss-free rating, since it may be mathematically impossible for smaller companies to achieve the same minimum mod that large companies can.)

A quick search of the Internet reveals construction companies touting their “impressive” EMRs from 0.90 down to 0.53, depending on the company. The truth is, the company with a 0.90 may already be at its best possible EMR, and next year that best possible value will probably change. As the paper concludes, “’Safe’ contractors may be unfairly disqualified from bidding on construction jobs.”

“There’s a definite opportunity to revise how the construction industry uses the EMR,” says Cooper. The paper suggests OSHA reports or NIOSH recordable and lost time incident rates might provide some alternatives.

While 2013 changes to the split point and maximum mod formula will generally lead to a decrease in loss-free ratings, those same changes – for certain risk profiles – may lead to increases in the mod that are beyond the employer’s control. Comments here on the WorkCompEdge blog have suggested that some state bureaus are reticent to approve the 2013 changes specifically because of concerns from the construction industry.

Connecticut is one example. “I have been monitoring the split point issue very closely,” says James D’Errico, Manager of Audit Administration with Peoples United Insurance Agency in Hartford, Connecticut. “To date, Connecticut has not committed to the revision. The Connecticut Insurance Department is concerned with the potential impact on contractors with debit mods, coupled with our poor economy, and the fact that in some cases, contractors cannot bid on construction projects with a mod over 1.00.”

My research shows this isn’t the first time that concerns about the construction industry’s use of the EMR have surfaced, but the excellent arguments in the ICRB white paper, coupled with the most significant refinements to experience rating in two decades, may create a perfect storm of opportunity for change.

What are your thoughts and experience about the use of the mod to qualify contractors?

- Kory Wells, WorkCompEdge Blog Editor

© 2012 Zywave, Inc.  All rights reserved. For reprint permission, contact the blog editor.

Related reading

Indiana Compensation Rating Bureau white paper:

• EMR as Qualifier to Bid on Construction Projects (pdf)

For more about the loss-free rating, read:

• How Low Can You Go? Attaining a Perfect Score for Your Mod

• Loss-free Rating: New Footnote on California Worksheet Is an Important Concept for All States

• Stunning Workers’ Comp Survey Results Mean Opportunity for Agents and Brokers

For more about the 2013 split point change, read:

• News Regarding the 2013 Split Point Change (from NCCI and Independent Bureau States)

As a work comp agent, you undoubtedly have an intuitive feel for how business size and industry are factors affecting your clients and prospects in the economic recovery. But also consider the hard data and how it can guide your own business strategy.

Earlier this month, NCCI released its 2011 Workers Compensation Issues Report, a 12 part, 50 page document that addresses a wide range of topics affecting the industry today.

The report is available in its entirety in two formats:

• pdf download (one file per report part)
• or a “virtual book” format which has some really cool features – but which I found awkward to use, primarily because of challenges with the zoom function, which I tried in two browsers. However, this may have just been pilot error!

The report is extensive, covering overall market topics such as economic conditions and recovery, legislative impacts, and claims studies. So how does it relate to those of you who are selling and servicing work comp accounts?

First of all, the report says that while the P&C industry is generally starting to look more favorable, the signals specifically regarding workers compensation are mixed. I’ve no doubt most of you can easily confirm that! While the report may support much of what you intuitively know, I think it does provide some hard data that I’ve translated into some key questions to ask yourself as you look for opportunities with your own book of business.

Are your clients and contacts still in business?

Yes, this sounds like a big “duh” question, but I ask it because of this trend included in the NCCI report: After business bankruptcies tripled between 2006 and 2009, the rate of bankruptcies appears to be have dropped significantly in 2010 (based on 3rd quarter data). Of course when a business goes bankrupt, that’s an entire book of business that’s lost – not just to another broker, but to the entire industry.  While the bankruptcy rate might be viewed as news that’s more not-negative than truly positive, here’s another hopeful statistic: While the job creation rate is slow, it is currently a positive trend, nationally, which leads me to the question:

Are your clients and prospects beginning to hire again?

Some states are still worse off than others, but overall, payrolls are recovering. The rate of business startups is at a 15 year high. Admittedly, many of these startups are coming from otherwise jobless entrepreneurs who may not be hiring employees and needing workers comp insurance soon.

I think all of these factors combined suggest that it’s time for agents to be touching base with former clients and contacts and keeping an eye on this part of the recovery picture. It also wouldn’t be a bad idea to think about specific markets that may be experiencing a higher rate of entrepreneurship or recovery, as suggested in this CNN article.

For more on payroll trends and other factors concerning the recovery, read the NCCI issues article The Road to Recovery: The Workers Compensation Insurance Industry in the Aftermath of the Great Recession by Robert P. Hartwig, PhD, CPCU.

We all know it can be hard to get psyched for a conversation you think may be negative. But your outreach to those who have been most affected by the recession will pay off in the long run. With that in mind:

Are you especially checking in with your smaller clients and prospects? 

It’s no secret that the recession has been harder on small businesses than large ones, with small businesses laying off proportionately more employees. Since small businesses, which have fewer self-insurance options, actually buy more full-coverage workers compensation policies, this has also produced a premium decline NCCI estimates at 4-6% over the last two years. (Precarious Market Outlook Prevails by Stephen J. Klingel, CPCU)

Are you especially keeping tabs on clients and prospects in manufacturing or contracting?

More than 40% of workers comp premiums come from manufacturing and contracting, although these sectors employ only about 20% of all workers. Particularly hard-hit by the recession, these industries alone account for a 4%–6% decline in workers compensation premiums, NCCI estimates.  (Precarious Market Outlook Prevails by Stephen J. Klingel)

“Strong rebound” unlikely

Unfortunately, as Klingel says,  a “strong rebound” in workers comp is unlikely. I think that means you’re going to work as hard as ever for new and renewing business, but there are indicators that the balance of 2011 and 2012 will bring a steady, if slow, increase in opportunities.

Are these helpful ideas? How are you looking to sustain and grow your work comp business in today’s economic climate?

As always, we love to see your comments here on the blog, or you’re welcome to email me personally at kory.wells@zywave.com.

- Kory Wells, WorkCompEdge Blog Editor

© 2011 Zywave, Inc.  All rights reserved. For reprint permission, contact the blog editor.

The U.S. workers comp system turns 100 this year. We join industry leaders in examining work comp trends for the future, especially in experience rating.

It was significant to see how the same issues came up repeatedly with the majority of these eight writers examining future trends in workers comp. These themes included:

The tangle of the economy, growing healthcare costs, and healthcare reform.

Trends in these areas relate to the increase of medical costs as compared to indemnity costs, the corresponding decrease in claims frequency, and how workers comp may eventually be impacted by health care reform or other reforms at the federal and/or state levels:

General healthcare costs are growing as a share of U.S. GDP, and in workers’ compensation, there has been a gradual shift in the balance of medical/indemnity costs towards medical…Are we starting to see a bottoming of the reductions in claim frequency? Stephen J. Klingel, NCCI Holdings, in A Changing Workforce Among Many Challenges

Clearly, understanding medical loss components and their respective trends are going to play an increasingly important role in our industry. Reserves established on prior development models will ultimately prove inadequate in most cases. – Mike Britt, Accident Fund Insurance Co. of America, in Medical Losses, Top Line Growth Top Challenges

The changing nature of our work and workforce

Several writers pointed out the trend toward more service jobs and automation and away from construction and manufacturing jobs. The aging work force and the obesity epidemic also made the list of trends for many of the writers:

The workforce is getting older and less physically fit. Many Baby Boomers can’t afford to retire and will stay in the workplace longer. This is not such a big issue for clerical employees, but will be a problem for those who are engaged with physical labor. Obesity, diabetes, and high blood pressure are on the increase which complicates and extends injury recovery. – Frank Pennachio, The WorkComp Advisory Group, in Safer Workplaces, But Older Workforce

Improved technology

This, of course, is a category that very much interests me:

The industry needs to develop new strategies for identifying cost drivers, controlling medical costs, and understanding the impacts and implications of trends. To develop these strategies, insurers should tap into new ways of collecting data, such as using transactional reporting and data reporting standards, and new technologies, such as predictive analytics. – Arthur Cadorine, ISO, in Demographics, Healthcare Reform, Economy and Data Will Help Define Future

Corporate silos that have separated risk management from benefits management are breaking down. Agencies that offer a broad range of skills and integrated knowledge will be able to compete. – Preston Diamond, Institute of WorkComp Professionals, in For Agencies: Not Business as Usual

We believe there are substantial benefits waiting for the company that digs into its data, gains a better understanding of its customers and their environment, and takes the innovative action necessary to capitalize on those opportunities. Mike Britt, Accident Fund Insurance Co. of America, in Medical Losses, Top Line Growth Top Challenges

How do these trends relate to experience rating analysis?

To me, these trends are very much about the data and how it can be used in mod analysis – which, with the right data, can be a step beyond claims analysis.  Here are a few ideas and question I have. I’d love for you to respond through a blog comment or by emailing me at kory.wells@zywave.com with your ideas.

• It will become more important than ever to include demographic data with basic loss information in a mod analysis. Of course, all that’s needed to calculate a mod, in terms of claims, is to know the loss date, the loss amount, and if it’s a type 6 medical-only loss (for the majority of states). But the power of mod analysis comes from associating each loss with its demographic data. I hope you realize that in ModMaster, if you load “optional” information into the large loss page, you can produce numerous reports which “slice and dice” the data to show how certain demographics have affected the mod. This can help the employer see, for example, that “operating equipment” and “failure to follow procedure” are contributing the most to the mod points – and therefore premium. Or that “hand injuries” are a particular problem in their organization, which may point to an ergonomic issue that needs improvement. How often do you load “optional” information into the large loss page of ModMaster? What are the challenges to you doing so?

• New demographic data associated with the claimant’s medical profile needs to be included in mod analysis data. The trends above seem to indicate an option to input and report on data such as age and weight (which I talked about in Is It Time to Report Height and Weight on Workers Comp Claims) – into ModMaster. This certainly gets into the integrated knowledge and better sharing of data mentioned by the writers above. It also points to the integration of analytics to action, such as the opportunity for certain claimants to be flagged for specific wellness programs to help assure the best possible outcomes. I see this working something like an enhanced version of the WorkCompEdge Proposal Report in ModMaster. That report has been a big hit – even with users who don’t use WorkCompEdge – because it doesn’t just say “here are your problem areas.” It goes further and says “here are the things you need to do to address those problem areas.”

• Loss reserves will become a more important component of mod analysis. If, as Mike Britt suggests, reserves are going to start proving inadequate, this could mean that reserves will more often be adjusted upward year to year for a the three years that a loss is in the mod. Or, it could mean that a backlash effect causes reserves to spike. Currently you can enter paid and reserve components on large losses in ModMaster (to do so, you must enable ERM-6 reporting in the System Administration area.) Honestly, though, we don’t do much with reserves on reporting. Do we need to enhance this area so that you can see trends in reserving that may improve dialog with employers and claims adjusters?

Finally, as the comments by Preston Diamond and Mike Britt indicate, the future is in going both deep and wide with the data. If you’ll forgive the shameless self-promotion, I can’t resist pointing out that Zywave’s acquisition of Specific Software is combining their very strong benefits background and technology infrastructure with our work comp expertise to, in time, produce exactly that capability. But your ideas and feedback will be, as always, important to us providing both innovative and practical solutions. Let us hear from you!

- Kory Wells, WorkCompEdge Blog Editor

© 2011 Zywave, Inc.  All rights reserved. For reprint permission, contact the blog editor.

If you're a professional involved in any aspect of workers comp, you need to know about the Work Comp Analysis Group on LinkedIn. It's outstanding for its peer-to-peer discussions.

Today I want to give you a more specific reason to join LinkedIn, and that’s the Work Comp Analysis Group, a great, free resource available only to LinkedIn members (join the Work Comp Analysis Group now if you already belong to LinkedIn). With over 6,800 members, this group is the largest online discussion community dealing exclusively with workers compensation issues. But it’s not just the number of members that make this group stand out: it’s the quality of the discussions.  Topics with activity in the past month have included:

• Are you responsible for work comp loss prevention? If so – and you only had one loss prevention action available – what would that one action be? (currently 27 comments)
• Can someone give examples of “measurable” outcomes for work comp case management, and how to measure them? (currently 51 comments)
• Is it time to stop the spine fusion juggernaut? If so, how? (currently 10 comments)
• What are some ways to save on workers comp insurance? (currently 35 comments)
• Experience with telecommute comp claims? (currently 19 comments)
• Carve-outs in workers compensation:  I am looking for information on construction industry carve-outs and collectively bargained workers comp from anyone with personal experience. Has it been successful? Pros/cons? (currently 5 comments)
• New opinion disallows attorney fees on MSA portion of WC buyout. How will this affect settlements? (a new discussion today, currently 1 comment)

As this sampling indicates, the scope of topics includes safety, medical and legal issues, and more, such as news items related to workers comp at both the state and national level. Subgroups for Canada, Australia, and the National Workers’ Compensation and Disability Conference & Expo are also available.

Any group member can start a discussion by simply typing a question or by linking to an article of interest. While any other group member can reply, posts that are essentially an advertisement for a product or service are against the group’s no-spam policy, and it’s rare that I see this policy violated.  (I confess: occasionally I think it’s quite legitimate for me to chime in on a conversation in which our products, ModMaster and WorkCompEdge, should be mentioned, but I do so quite carefully, as I so value my membership in the group.) Group members can control how often they receive email notifications of new and updated discussions; a once-daily summary is recommended and quick to scan for items that may interest you.

The group also has a companion site of resources at workcompanalysisgroup.com, but its exceptional offering is the intelligent exchange of information between workers comp professionals. Congratulations to Mark Walls of Safety National for starting and nurturing this great resource.

So if you haven’t yet, join LinkedIn today (a basic membership is free, I remind you). Then, when you’re signed in, join the Work Comp Analysis Group. Members must be approved, but if you’re a client of ours and you’d like an invitation that bypasses the approval process, just send me an email at korywells@specificsoftware.com.  The group is now soliciting ideas for the THE TOP 50 (or more) BEST WORKERS’ COMPENSATION COST CONTAINMENT TIPS. I know our readers have ideas they can share!

- Kory Wells, WorkCompEdge Blog Editor

© 2010 Zywave, Inc.  All rights reserved. For reprint permission, contact the blog editor.

Zywave has acquired Specific Software Solutions, makers of ModMaster software

You can read the official press release on Zywave’s corporate news page (pdf format) or on the Specific Software site.

If you’re not familiar with Zywave, get to know more about the company at zywave.com, on Twitter, on Facebook, and on LinkedIn.

On a personal note, I’m pleased to report that Zywave is welcoming all former Specific Software employees into its family, and we’ll still be operating out of the Nashville area. Since Zywave is based in Milwaukee, my transition priorities include acclimating the staff to my Southern accent and expressions and introducing everyone I can to the finer points of sweet iced tea, the fuel of choice for at least a few of us here in the Nashville office.  I’m sure the staff in Milwaukee will have some recommendations for us, too – perhaps starting with our acquisition of some real winter coats for our trips to the home office.

As always, we encourage our clients to let us know any questions.

- Kory Wells, WorkCompEdge Blog Editor

by Kory Wells, WorkCompEdge Blog Editor

We’re grateful that several hundred of our readers and clients took the time to participate in our recent survey “How Do You Stay Informed and Connected?” We’re still compiling the results, but for today, I want to focus on one trend that was glaringly evident: professionals in the insurance industry (which made up 98% of our respondents) are not taking advantage of social media sites like LinkedIn and Twitter. Now, admittedly, Twitter is still pretty new, so it may be understandable that more folks in the insurance industry haven’t yet experimented with it. But LinkedIn? A whopping 85% of our respondents say they’re not using LinkedIn. While we understand that social media may not be for everyone, at least exploring the possibilities – particularly if you are in business-to-business (b2b) sales or service – should be an objective for every business, period. So let’s talk more about LinkedIn today.

Well, yes, a lot of us probably do. But as with other social media, LinkedIn is not about being a substitute for relationships. LinkedIn is about nurturing existing relationships and helping you find new business relationships. It lets you visually see who among your contacts may themselves know a prospect you’ve been wanting to meet. It’s also about helping other people find you!

Here’s one member’s comment from a LinkedIn blog entry

I also was a bit skeptical of LinkedIn at first. When I found out the ways to really use it, however, I discovered that it’s a great way to not only find and get introduced to people through your network for business opportunities, etc., but also a way for the people you DO know to recommend your services which can be viewed by the public.

Every time I meet with a new client or come back from a networking function, I tell them about LinkedIn via email with a brief layman’s overview of what it can do, then follow with an invite to connect. I have received more recommendations this way and also been introduced to several new people who I wouldn’t have gotten the privilege of knowing, had I not been using this service.

Not enough time

If you spend time nurturing relationships through phone calls, emails, lunches, business mixers, centers of influence, and other methods, you really should consider adding LinkedIn to the mix. LinkedIn is not something you have to nurse every day. Yes, you will have to spend a little time building your profile. If you’re not the most tech-savvy person, hopefully someone in your office is, and can help you get started. As an almost immediate benefit, creating a profile will help you and your company get a little more love from the search engines. You can also join groups that discuss topics of interest to you. For all this activity, you can receive a summary on the frequency you choose. I get emails from LinkedIn once a week, and usually check in only once or twice a week. It really doesn’t take that long to scan status updates and group activity to see if there’s anything I want to respond to.

Haven’t seen my clients or prospects using it

First of all, LinkedIn has over 43 million members, so have you really looked for those clients and prospects – and the people you know who can lead you to them? If someone you’d like to connect with truly isn’t on LinkedIn and you have their email address, you can invite them to join – and thereby establish yourself as a leader in the relationship. You can send them a personal message with the invitation, and they’ll immediately see your profile, which helps communicate the professional you are. Obviously, if you have their email address, you can email them directly, but in our own experience here at Specific Software, this is simply a little bit different way to approach people, and it’s often successful.

Security issues or no access from work

I know that some of you work in large corporations that have tight control for different software/network security reasons. I don’t have the expertise to argue for or against such policies. Doing business in the virtual world certainly has its risks. However, if the decision to prohibit access is more of a cultural decision in your corporation, I’d certainly question that. I can understand Facebook and MySpace being off limits in some work environments, but LinkedIn? No way.

Summary

I hope this is enough to pique your interest and give LinkedIn a try – and not for just one day. You need to keep revisiting it for several weeks to get the feel and benefits of it. You can start by connecting with me (Kory Wells) at http://www.linkedin.com/pub/kory-g-wells/3/975/787

Also, here are some other resources that may be helpful for you to get even more ideas and details about using LinkedIn:

Business Week: Why Social Media Is Worth Small Business Owners’ Time

Search Engine Guide: Why LinkedIn is the One Social Network I Couldn’t Work Without

Social Media Guru: Why LinkedIn?

I’ll give you a few weeks to digest this and experiment for yourself. Then it will be time to talk about Twitter!

Layoffs have become an unfortunate reality of everyday life in America. While historically layoffs are often due to legitimate competitive practices (and in some cases corporate heartlessness), I don’t have to tell you that almost all layoffs in the past 18 months have been due to the severe economic downturn. For this article, let’s take a further look at work comp claim issues associated with layoff situations:

Don’t just do the paperwork: employers mustover communicate in layoff situations. These are human beings whose lives have just been turned upside down. The surviving employees will give the employer the benefit of the doubt and their commitment to the employer if the employer tells them the truth and treats the employees who are leaving with fairness and compassion.

It is a documented fact that an impending or even threatened layoff increases workers compensation claims…especially in a tight job market. Individuals faced with a reduction in their income, temporary unemployment benefits and the likelihood of unaffordable health insurance may look to workers compensation as a way to ensure their income is sustained in the face of a layoff or termination. Even the rumor of layoffs and company reorganizations is enough to scare some employees into filing a work comp claim. But note: simply because an employee files a claim after his or her employment ends does not necessarily mean that the claim is fraudulent. Some employees, previously worried that filing a claim would affect their job security, go ahead and file once they are terminated. Whether the injuries are real or imagined, the fact is, workers compensation claims increase during and after a layoff.

Employers can’t completely stop illegitimate claims from being filed, but there are steps they can take to prepare for defending against such claims – and thereby minimizing costs. The following techniques, a list I’ve tweaked from an article by the Louisiana Workers Compensation Corporation to include my own experience, can avoid or minimize claims cost following downsizing, terminations or layoffs.

1. Communicate with Your Insurance Carrier

Let your insurance carrier know about any downsizing plans your company has. The carrier should be more than willing to strategize with you on ways to thwart any fraudulent claims. Report any suspicions you have about a claim, along with all the reasons for your suspicions, to your workers compensation carrier. The earlier you voice concerns, the better the opportunity to investigate, gather medical evidence and discuss strategy on defensible positions.

2. Focus on the Things You Can Control

The workers compensation system was designed to protect the employee and the laws favor the employee. However, measures can be taken to minimize cost and limit the life of the claim. Often this is the goal – reducing cost and the life of the claim – which can be frustrating to employers. The reality of workers compensation claims is that they are not won by hitting a home run. Rarely is there one isolated piece of information that “knocks it out of the park” and provides an ironclad denial. Claims are won through a series of singles. Documentation of anecdotal evidence (the employee was fine on the last day of employment; no one saw the individual get hurt; the employee was observed using the body part he or she is alleging is not functional etc.) and objective evidence (the independent medical exam’s x-ray or MRI shows no injury) builds your defensible positions and gets you to home base (which is usually a negotiated settlement). The value of the claim will be substantially less with well documented information. The claims take patience and persistence to resolve as bringing the employee back to work (the most common resolution to workers compensation claims) is not an option in a layoff situation. The lack of this option complicates the claims handling. The efforts and costs expended to defend suspect claims is difficult but worth the aggravation as it far outweighs suffering the enormous cost of a permanent long term workers compensation claim.

3. Revisit Your Accident Reporting Policies

Require all employees to report accidents immediately, no matter how minor.

4. Recommit to Thorough Accident Investigations

Accidents in times of company turmoil can be especially upsetting, but this is not time to get lax on your procedures. Investigate accidents immediately after they’re reported. Separate witnesses from each other and the injured employee to get the whole story – and signed statements. Remove or restrict access to any equipment or other physical evidence involved until it can be examined. Address any other hazards which may have contributed to the accident as soon as possible.

5. Be Vigilant About Your Recordkeeping

Many of the workers compensation claims filed after employment ends are occupational disease in nature. Claims for hearing loss are common after layoffs. Be vigilant about your industrial hygiene recordkeeping, including baseline levels of noise, airborne particles, in-door air quality, chemicals and dust exposures. Also be sure not to neglect equipment condition or housekeeping inspection logs. Make sure records are not destroyed, since employees’ payroll, schedule and accident reports may become evidence in a claim after their employment has ended.

6. Use Wellness Exams and Videocams to Document Employees’ Health

Many employers contract with their workers compensation medical provider to conduct physical examinations to determine an employee’s overall health and fitness status preceding a layoff. Employers may also videotape work areas to document employees performing their usual duties. These tools can help establish an employee’s health and activities at the time employment ends. A cautionary note – information obtained about an employee’s health must not be used as a reason to terminate or lay off the individual. This would violate the Americans with Disabilities Act.

7. Ask Employees to Confirm They Haven’t Had Unreported Accidents

As part of an employee’s exit interview, have the employee sign a form stating whether they have been involved in any unreported accidents on the job. This is an important document that can help defend any claims arising after employment ends.

8. Invest in Employee Assistance Programs

Terminations can easily and understandably thrust employees into an antagonistic frame of mind that can lead to fraudulent claims, but this can be mitigated if the employer communicates caring in the exit interview – and provides some real programs to support those sentiments. Consider job fairs, resume counseling, placement services, on-site therapy, and other services that demonstrate your concern for your terminated employees’ welfare.

9. Consider Stepping Up Security Measures

As we all know from unfortunate events reported in the media, workplace violence is a real concern following layoffs or terminations. Any employee hurt on the job through violence of another current or prior employee will result in a workers compensation claim. Examine the level of security you can provide for remaining workers. Use exit interviews to assess an employee’s attitude and tendency towards violence, and take all threats seriously. Employees probably should not have unescorted access to work areas following a layoff or termination.

10. Watch for Potential Fraud Indicators

Familiarize yourself with the warning signs of fraud developed by the National Insurance Crime Bureau:

• the employee is disgruntled after being fired or laid off
• the employee has been told his or her employment is about to end
• the employee is having financial difficulties
• the accident is not witnessed
• the injury involves subjective complaints of pain with no ability to obtain objective medical evidence

Your claims adjuster is undoubtedly familiar with these, but, as noted in our first point, your awareness and good communications will facilitate optimal claims handling.

Conclusion

Although none of these tips may actually prevent an employee from making a workers compensation claim after leaving an employer, they can assist in defending against such claims. The more evidence to present to the judge that there was no mention of any accident until after employment ended or was announced to end, the stronger the defense will be.

Employee reductions can pose a significant challenge for employers and often a devastating turn of events for employees. It is important for employers to have a layoff strategy broken down into goals and an action plan for the company. The layoff can be so overwhelming an employer may forget the overall company’s vision and strategy. Each employer should ask the question; “How do we not just survive but thrive after a layoff? How do we inspire our remaining employees to achieve amazing things… to continue their focus and innovation and not be paralyzed by these troubled and uncertain times?” First, every employer must over communicate in these situations. The employer should reiterate the vision and strategy of the company and the action taken (layoffs), although painful for everyone, accomplishes the mission.

Next, keep in mind; these are human beings whose lives have just been turned upside down. The surviving employees will give the employer the benefit of the doubt and their commitment to the employer if the employer tells them the truth and treats the employees who are leaving with fairness and compassion.

In America, we have a Uniform Plumbing Code to protect the health of the nation (not to mention the sanity of plumbers and builders) and a Uniform Commercial Code enacted in all 50 states for a standard method of dealing with business law questions involving commerce. Unfortunately, no such code exists for our nation’s employers and employees for the purposes of work comp.

Knowing how the pieces fit together is especially challenging in work comp due to the lack of a national standard.

As states passed work comp laws starting in the early 1900s, each state established its unique work comp system. This resulted in a mishmash of laws, benefits, compensability and eligibility from state to state. There are many different, non-uniform work comp laws in the United States (state, territorial and federal). The state and territorial laws, which exist in every state, Puerto Rico and the U. S. Virgin Islands, are especially non-uniform in terms of which kinds of employments are covered, dollar amounts of wage benefits payable for different kinds and degrees of disability.

The complexity of our varied work comp system presents challenges for employers in three key areas:

• Establishing proper coverage in jurisdictions in which the employer has operations or other jurisdictions the employer has employees working, living or traveling in
• Understanding what jurisdiction benefits the employee can collect
• Determining what rates (premiums) will apply. (This subject mirrors in its complexity the coverage and benefit structures of the various state and federal laws. We will briefly discuss pricing and only as it relates to extraterritorial issues).

The hodgepodge evolution of work comp laws has resulted in uneven or nonexistent uniformity across state jurisdictions, which creates challenges for employers when confronting extraterritorial issues, including questions of coverage, benefits and pricing.

Work comp coverage in various jurisdictions may depend on where workers reside, employer operations sites, licensing, and the willingness or reluctance of carriers to accept “broad” language in the work comp policy.

On the Information Page of a work comp policy, the insurance agent for the employer must have the insurance carrier list the states the employer operates in or expects to operate in at the inception of the policy. In a separate section, states are listed where an employer expects it may have employees working but the work in those states will begin after the effective date or renewal date of the policy (with some exceptions). The policy requires that the policyholder (employer) must notify the insurance company at once if the employer begins any work in any state listed in this section. Broad wording (suggested in the full article on this topic) is recommended to assure coverage in most jurisdictions even in unforeseen circumstances.

When a state is listed on the work comp policy, essentially we have attached hundreds of pages of work comp statutes and laws and thousands of pages of case law for that state. Add multiple states and I would argue that, although the basic policy is only about six pages long, the addition of statutes and case law make the work comp policy the largest and most complex policy an employer buys.

Employees working, living, traveling in or through other jurisdictions frequently present special work comp challenges including state specific time limits, variations in benefits, state law, reciprocity agreements and other issues.

To compound the challenges, work comp pricing is often driven by pressure to minimize work comp costs. This presents risks to employers as carriers may deny claims or charge some or all of a claim back to an employer. Errors in extraterritorial issues can result in devastating financial consequences to employers.

Knowing how the pieces of work comp policy and law fit together is especially challenging due to the lack of a national standard. For agents and employers, it is critical to understand each state’s work comp laws, customs and practices and, in doing so, to secure the broadest coverage possible. They also need to understand that any claim can result in a dispute as to which benefits apply as well as other extraterritorial issues. In these cases, it is best to work through these issues constructively with employees rather than engage in a standoff.

Trick or treat, WorkCompEdge blog readers. In the spirit of Halloween, this week we offer some scary stories contributed by our staff. Some are true and some are imagined, but all illustrate concepts of which employers should beware. Can you tell which is which?

Of course, we think the scariest thing of all is an employer who doesn’t understand their experience mod!

Category 1: Do we really want this employee returning to work?

The employee who tried to siphon liquid chemicals with his mouth.

The skull and crossbones must not have been enough. Now there has to be a label that says
“use an approved siphoning device.”

The employee who instigated an assault that led to work comp claims for himself and another employee.

Talk about needing an improvement in corporate culture.

Category 2: They said that?

Employer: “What’s wrong with putting our gear machine operators in code 8810?”

8810 is the common code for office and clerical workers. A manufacturer classifying all employees in this category would probably be charged with, let’s see, falsifying business records and committing a fraudulent practice.

Employer, in incredulous tone: “That’s the sixth work comp claim this employee has made?”

Needless to say, they hadn’t been doing much with claims management.

Employer, on buying work comp insurance: “I went with the low bid.”

Cliches are usually true. You get what you pay for.

Employer, on buying work comp insurance the next year: “I don’t know why my premiums went up so much this year.”

It’s called experience rating. Your agent should be helping you understand it.

Agent to employer: “The mod? I really can’t explain it, but I know it’s better if it’s low.”

Time for a new agent!

Are there really that many “bad employees” out there crippling the workers comp system?

The prevailing message I received at a recent two day workshop on workers compensation is that there are. But I don’t agree.

The workshop was conducted by a renowned risk management organization and primarily attended by risk managers, claims people, and safety managers from large, self insured organizations. The Bad Employee, mentioned again and again, was synonymous with one who malingered in recovery, experienced a delayed recovery, or committed fraud.

“How easy it is to make people believe a lie, and how hard it is to undo that work again!” – Mark Twain(Photo from Wikimedia Commons)

I keep asking myself why so much emphasis was put on the Bad Employee as a major, if not primary, cause of costs and problems in the work comp system. Addressing that question prompts several additional questions in my mind:

1. Why is it that in the information age it is so difficult getting good information to people who can make a difference?
2. Is it because the person doing the telling has something they want to sell you and can benefit from such erroneous myths?
3. Is it because dusting off and rolling out the same old tired stuff is easier and takes less effort?

I realize that these questions point to a range of ills, from operational legacies to intellectual laziness to the much more serious intentional deceit. My dad, who got smarter as I got older, used to say that a person’s position depends on his position. In other words, a person’s point of view depends on his or her station in life or business. Is it too cynical to think that service providers think they can make more and easier money off the Bad Employee story as opposed to a an alternative, more credible story?

Truthfully, I’m not that cynical most days. I think it’s more the case that the Bad Employee just makes a good story, an easy scapegoat. But I know for sure that these workshop leaders vigorously defended the current methods of management in the workers compensation system. Are we all thinking the same ways on these issues, or are we simply overdue for new thinking to reach all levels of the work comp business?

There are ample amounts of academic and actuarial research written over many years that tell a story different from the Bad Employee one. But, as Mark Twain said, “How easy it is to make people believe a lie, and how hard it is to undo that work again!”

In addition, John Kenneth Galbraith said, “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.”

Do you think Bad Employees are the root of all problems in the work comp system? Is a malingering employee a Bad Employee? Post a comment to the blog and let’s get a discussion started!