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California Workers’ Comp Reform Taking Shape – Again

Author DavidMalloy , 6/6/2012


"At a recent joint hearing in Sacramento on workers’ compensation in California with the Assembly and Senate, statistic after statistic flew out of the mouths of speaker after speaker during the nearly four-hour session.

It was titled, “Informational Hearing, Injured Workers Since SB 899: A Discussion on the Impacts of SB 899 on Permanent Disability Benefits.”

But the hearing was beyond a focus on permanent disability and the aftereffects of sweeping workers’ comp reform enacted in the last decade.

“I think we all agree that we’ve moved out of that post-reform period into another pre-reform period,” said Alex Swedlow, executive vice president of research at the California Workers’ Compensation Institute.

CWCI, a private, nonprofit organization of insurers licensed to write workers’ compensation in California, was one of many presenters at the hearing offering their taken on what problems the system has developed in recent years.

In fact the tone of most speakers suggested another reform package approaching the magnitude of Senate Bill 899, the legislation signed by Gov. Arnold Schwarzenegger in 2004 that changed or affected just about every part of the state’s workers’ comp system.

And last year Gov. Jerry Brown in signing several pieces of workers’ compensation legislation called for more comprehensive reform to be brought to his desk, saying that reform should be addressed on “a broad and balanced scale.”

Brown’s wishes were echoed at the joint hearing, where stats were given that showed just how big and unwieldy the state’s workers’ comp system is both in billions and in complexity.

Depending on who was giving the stats – applicants’ attorneys, insurers, the medical community, employer representatives – those numbers often showed different entities bearing an unfair share of the burden of a system that now seems to again be broken.

One person stated that workers’ comp medical treatment costs have been rising in excess of 10 percent each year in the wake of the systemic reform spearheaded by Schwarzenegger during his tenure.

Another speaker noted that accident year combined ratios are up around 130 percent, making those ratios well in excess of premiums. Following that someone noted that injured workers are getting 60 percent less in benefits today than in the pre-reform era.

But the speakers and their stats had two things in common: they painted a portrait of a system that’s broken, and all seemed to agree comprehensive reform is necessary.

Senate Labor and Industrial Relations Chair Ted Lieu, D-Torrance, headed the meeting along with Assembly Chair Jose Solario, D-Santa Anna. Both have drafted successful legislation to address areas of workers’ comp.

Lieu’s SB 863 will begin the process of reforming how the hundreds of thousands of liens filed each year are handled in the adjudicatory process. Solorio’s AB 378 removed financial incentives associated with prescribing expensive compound medications.

Both legislators during the hearing indicated more workers’ comp legislation is needed.

Lieu, who spoke to Insurance Journal following the March 28 hearing, said he believes several more bills will come out of Legislature next year as part of a comprehensive workers’ comp reform package. He and others at the hearing also said regulatory changes should be part of the reform.

“My view is to deliver as much cost savings as I can to the governor,” Lieu said.

The comprehensive reform—Lieu said it’s too early to describe exactly how it would look—would have to address two issues, he said. One is permanent disability benefits, which he said were drastically cut “to an extent that even the proponents of last decade’s reform did not intend.”

The second workers’ comp must, he said, is to make sure that premium rates do not rise in the future.

“There is evidence that workers’ comp companies are paying out more than they are taking in in premiums,” he said.

Such evidence was presented in detail by California Insurance Commissioner Dave Jones, who was at the hearing to offer his thoughts on the system.

Jones, a Democrat who just completed his first term as insurance commissioner, began by noting that in 1995 the workers comp market was deregulated by Legislature, leading to opening ratings replacing minimum rates. Fierce price competition ensued, he added.

“With no minimum rate law, carriers reduced rates below solvency,” Jones said.

The Department of Insurance was forced to take over and liquidate 31 carriers between 1997 and 2006, and California’s workers’ comp insurer of last resort, State Compensation Insurance Fund, swelled and was at one point writing over 50 percent of total market, Jones said.

Ultimate accident year loss ratios were at 141 percent of premium, and by 2003 workers’ comp rates paid by employers per $100 climbed to $6.29, he added.

Then came SB 899, which ushered in sweeping change and got control of upwardly spiraling costs, but “These major changes came at the expense of injured workers,” Jones said.

Quoting data from CWCI that shows average medical expenses per claim have been increasing by at least 10 percent per year from 2005 to 2009, Jones noted that increase in utilization was the main driver.

He also spoke about the positive impact of workers’ comp reforms, but those impacts may be losing steam since the rising costs “likely signal erosion in these measures.”

In fact, Jones expressed concern the market dynamic may lead to a correction, and eventually to higher premiums due to underwriters being more cautious and raising premiums on risky businesses.

“We can’t say for certain when a market correction will occur,” Jones said, adding that it’s also not known whether a correction will be moderate or severe.

During questioning of Jones by committee members, he noted there are definitive indicators that workers’ comp insurers are experiencing ever-increasing losses.

“There appears to be significant evidence that combined ratios are in excess of premiums right now,” he said.

There are several cost savings measures being looked at, including possible enhancements or changes to medical costs containment and utilization, but DOI is not at the place to introduce them, Jones said, adding, “We need to identify what those additional cost savings measures are.”

Marty Morgenstern, secretary of the California Labor & Workforce Development Agency, testified that the need to raise permanent disability is paramount. However, that goal cannot be achieved on the backs of employers, he cautioned.

“The permanently disabled worker is not being fairly compensated,” he said, adding, “we cannot take payroll money to do it. We cannot raise the payroll costs to employers at this time.”

Like others who testified, Morgenstern said the key to achieving workers’ comp reform is reducing wasted costs by looking at inefficiencies, as well as practices and policies that need reforming.

“We think there is money within the system that can be utilized,” he said. “We need the medical and legal practitioners, the insurers, the employees in their organizations, all working together in a cooperative way to fix this system. And that’s what’s going to do it.”

Department of Industrial Relations Director Christine Baker, and Rosa Moran, administrative director of the Division of Worker’s Compensation, offered their take on fixes and talked about their efforts to gather public input. Baker and Moran have been conducting a series of public meetings across the state to provide open forum discussions on issues in workers’ comp and to gather information from stakeholders and the public on suggestions for improvements

“We recognize the need to restore essential benefits even while working to mitigate the costs,” Baker said, noting that will likely require eliminating unnecessary costs and looking for significant savings in the system.

A consensus will “likely require legislation and regulation,” she added.

Moran said internal cost cutting in her division is already under way.

“We’ve been doing tremendous consolidations to try and bring down the costs,” she said.

Michael Nolan, CWCI president, said “there’s no doubt that permanent disability is one of the core issues.”

Looking at ultimate accident year data, it was rising to 2002, and decreased following the reforms. Now it’s beginning to rise again, he said.

“The average cost of everything associated with an indemnity claim is higher today than in 2002,” he said, adding, “it’s primarily on the medical side.”

There’s been a shift in the average claim percentage to about two-thirds expenditures on the medical side, where previously it was close to 50 percent on medical and 50 percent on indemnity.

And even with workers’ comp costs to employers at its present rate of $2.30 per $100 of payroll, “California is in the top tier,” he said.

CWCI’s Swedlow said if those involved are serious about cutting costs, there are a few places to look at and to place blame: the rising influence of attorneys, an aging work population, rising secondary injuries.

“Permanent disability has been in fact rising by about 11 percent per year,” he said, adding, “It’s harder to manage a claim in workers’ compensation relative to other systems.”

On the employer side was Sean McNally, vice president of corporate and government affairs for Grimmway Farms, considered the world’s largest carrot grower.

McNally said the cost of doing business in California is forcing Grimmway to continue to expand into other states with less problematic workers’ comp systems like Washington, Florida and Georgia.

McNally believes there is one overriding problem with California’s workers’ comp system.

“There are too many lawyers in the system; there’s too much litigation in the system,” he said.

He called for a system that’s “more administrative, more predictable, more affordable.”

But such ideology doesn’t set well with some.

Brad Chalk, president of the California Applicants’ Attorneys Association, argued that it’s workers who are being neglected and suffering the largest burden of the state’s dysfunctional workers’ comp system.

“The California constitution says that the people are supposed to have benefits, and they’re supposed to be adequate benefits,” he said. “The focus that this has taken is all about the insurance company.”

He added, “If you think that this is a hard economy, try being an injured worker.”

Angie Wei, legislative director off the California Labor Federation, blamed “unneeded speed bumps in the system that is screwing the injured workers.” She added: “permanent disability benefits got slashed much deeper than they were intended too.”

Wei suggested that while looking at inefficiencies and waste, “we should look at a minimum loss ratio. A bottom-line loss ratio. What’s good enough for the health insurers should be good enough for the workers’ comp insurers.”

She added that would shine “a brighter light into the insurance industry.”"

Paul Binsfeld: Nurse Hotlines & Injury Triage: 9 Things You Should Know

Author DavidMalloy , 5/31/2012
From Company Nurse

Due to continued escalation of medical and indemnity costs, many organizations may soon experience a rise in workers’ compensation premiums. A recent report, “Workers’ Compensation: A Bumpy Road from Recession to Recovery,” released in April 2012 by Conning Research & Consulting outlines the key drivers that have led to inadequate rates and the industry not reaping a profit since 2006.

Whether organizations utilize commercial coverage or self-insurance, the industry has been hard hit with losses for the last few years. Although frequency of injuries had dipped for a short time, injuries are now on the rise, particularly those severe in nature and which require more time away from work. This challenging environment has called for innovative solutions that unite the claims community in a collaborative effort toward controlling costs over the long term and to support a happier, more productive workforce.

To do this, many organizations—whether insurance companies, third-party administrators, risk pools, employers or public entities—have successfully deployed nurse hotlines at the front-end of their claims process. This one strategy has helped to enhance injury management for the benefit and advantage of all stakeholders.

In fact, there are nine things you might not have known about nurse hotlines and how they help the overall workers’ compensation process:

1. Telephonic Demand Management.
In workers’ compensation, nurse hotlines have become an effective way to telephonically manage and direct the demand for care. This strategy, also known as injury triage, ensures the most effective use of medical resources; controls medical costs; and matches the severity of an injury to an appropriate disposition for care. For example, when an injured employee presents at the ER with a minor injury, they often have to wait two hours or longer to be seen, as the more critically ill or injured patients require treatment immediately and typically ahead of them. With a nurse hotline, telephonic demand management channels injured employees to a more appropriate level of service, which improves—not only costs—but also convenience and satisfaction for injured employees.

2. Prompt Reporting of Injuries.
The traditional injury reporting process has been plagued with challenges—primarily timeliness and compliance. Injuries are often reported late—sometimes as much as five to 10 days after an injury occurred. By that time, injured employees may have already visited an ER, taken time off from work, and entered a temporary disability status. In essence, the organization has missed its opportunity to manage care and influence return-to-work (RTW) results. In this way, an initial lag in reporting can result in multiple setbacks in coordinating the best-possible outcome. By using a nurse hotline, the injury reporting process is streamlined and immediate. The employee or supervisor can simply call the toll-free number to report the injury 24 hours a day. Triage nurses are trained to perform thorough questioning to gather comprehensive injury information. They also handle paperwork, which greatly reduces the burden on supervisors and injured employees to fill out and submit forms. With such an easy process, organizations often achieve a high rate of same-day reporting.

3. The “Day of Injury” Advantage.
The “day of injury” is the most critical point in the workers’ compensation process, as it is the time when organizations can exert the greatest influence over medical care and RTW results. Nurse hotlines provide a major advantage in injury management, as employees are able to speak with a nurse within minutes of an injury occurring. The triage nurse makes immediate, critical medical decisions that set claims on the right course from the start, and positively impact patient care, as well as claims’ costs and outcomes.

4. A Coordinated Approach.
After triaging an injury, the nurse hotline will send an immediate injury report to all designated contacts, including the worksite supervisor, claims adjuster, HR liaison, and RTW coordinator. Prompt distribution enables all stakeholders to initiate their respective roles in the workers’ compensation process, enabling each person to optimally affect the claim’s outcome. The nurse hotline also sends an alert to the medical provider office. Staff and physicians then know an injured employee is being sent to their facility for care. The report includes the employee’s personal and injury information, as well as employer details and workers’ compensation insurance. With this information, provider offices are able to handle workers’ compensation cases much more efficiently, and the physician is able to stay focused on providing the best-possible care and getting employees back to work quickly and safely.

5. Triage Algorithms & Nurse Expertise.
Nurse hotlines have been around for a while, but the sophistication of the model has grown and evolved significantly over time—from structured protocols to clinical algorithms that lead to a more reliable and systematic process in triaging injuries. Algorithms are decision trees that enable nurses to make an in-depth evaluation of an injury and the patient’s medical background. The result is a sound triage decision based on clinical knowledge and supplemented by a nurse’s compassionate, personalized attention to each and every injured employee.

6. Right Level of Care.
Worksite supervisors are often involved in making treatment decisions on where to send injured employees for care. However, these managers are not trained medical professionals. Many decide it is best to err on the side of caution, sending every employee for treatment with a medical provider. The result is unnecessary medical costs for minor and non-emergency injuries. With a nurse hotline and triage process, every injury is assessed by a medical professional and is referred to a level of care appropriate to the injury’s acuity. In an analysis performed by Company Nurse, it was shown that many employers reduce “unnecessary” ER visits by as much as 300 percent.

7. First Aid.
With approximately 20 to 40 percent of incoming calls, a nurse hotline may recommend first aid or self-care guidelines. After speaking with a nurse, many of these employees do not require or request additional medical services. Others may utilize first aid advice to address injuries prior to seeing a physician, which often improves treatment results. Many calls, however, result in “report only” or “first aid” injuries, which do not enter the workers’ compensation system and do not become compensable claims. This can often lead to a 10 to 30 percent reduction in claims.

8. Improved Utilization of Preferred Providers.
Many organizations invest time and effort in establishing a list or network of preferred providers, who are most qualified to treat occupational injuries and understand workers’ compensation objectives. However, the rate of referrals to these providers is often less than optimal. If this type of list does not exist, organizations will encourage their worksites to identify providers on their own and to establish a consistent referral process. However, this is very difficult to do without proper knowledge and a structured system. A nurse hotline has the expertise to help organizations identify and pre-designate quality providers within a reasonable radius of worksites. This list of providers or an existing network can be integrated into the hotline’s triage process. In this way, organizations have a mechanism to consistently utilize the best, most cost-effective facilities in their area.

9. Compassion Reduces Litigation.
Injured employees usually experience a higher level of recovery and satisfaction if they’re able to speak to someone about their injuries. A nurse hotline serves this purpose, so it’s the injured workers who benefit most. By speaking with a triage nurse, employees receive a compassionate response to what is often an upsetting workplace accident. Nurses listen closely to the details of each injury and focus on the individual’s unique medical needs. As a result, employees have an overall positive experience with the triage process and walk away with greater peace of mind. With nurse triage in place, one Florida-based employer reduced its rate of litigation by almost 40 percent.
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Controlling Medical Costs

Author DavidMalloy , 4/11/2012
PMC Insurance Group Ask the Workers’ Comp Expert: Controlling Medical Costs
by Robert G. Jones, Vice President, PMC Insurance

Business owners continue to look for ways to contain and reduce expenses. Reducing workers’ compensation medical costs may be one overlooked area. The National Council on Compensation Insurance reports that medical services represent 60 percent of workers’ compensation claim costs. Historically, indemnity costs were the largest portion of claims.

To an extent, business owners can contain and reduce medical costs through prescription drug plans, medical provider networks and other proactive cost-containment measures. However, a key driver to lower claim costs is the absence of workers’ compensation claims. In past columns, we presented the business case for a zero injury workplace embedded within an organizational culture of safety and employee wellness.

A culture of safety and employee wellness is essential in sustaining a zero-injury work environment. That said, employees filing bogus workers’ compensation claims remain an enormously costly and challenging problem. Business owners must also take proactive measures to identify and aggressively dispute fraudulent claims. The key to Identifying them is consistent and ongoing communication with medical providers.

Containing and reducing workers’ comp medical costs is all about hiring the right employees. Drug screening, background checks, testing and accurate job descriptions help business owners avoid hiring employees with high claim risk potential.

PMC Insurance Group is IIABNY’s endorsed workers’ compensation specialist. Our insurance professionals have extensive experience helping IIABNY members expand their marketing capabilities by providing workers’ compensation solutions for their clients. Give Bob Jones a call at (440) 313-5002.  

Operating in the Continental US!

           Phone:  1-877-PMC-COMP | (781)-449-7744

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Impact of an Aging Workforce on Costs

Author DavidMalloy , 4/9/2012
PMC Insurance GroupAsk the Workers’ Comp Expert: Impact of an Aging Workforce on Costs
by Robert G. Jones, Vice President, PMC Insurance

Much has been written and speculated about the impact of older workers and the presumed increased cost of workers’ compensation. The numbers of jobs held by baby boomers will more than double in the period from 1995 to 2020, due in part to older workers postponing retirement.

According to the National Council on Compensation Insurance, while the loss costs are higher for older workers due to the severity of their claims, those costs tend to be offset by higher premiums resulting from higher wages earned by older workers. Also, older workers file fewer claims than younger workers, which tend to offset their higher claim costs.

Research indicates that workers age 35 to 64 appear to have similar loss costs per worker. On the indemnity side, higher wages paid to older workers drive higher costs. For medical costs, older workers may require more treatments per claim, which drives total costs.

NCCI research indicates that frequency has fallen across all age groups, and differences in frequency by age have narrowed. Occupational mix does not present a material impact on frequency as in general workplaces keep getting safer for all occupations. Of note, the generation following baby boomers in the workplace is now proportionally a larger group. Currently, the impact of an aging workforce on higher loss costs is less than conventional wisdom had predicted.

PMC Insurance Group is IIABNY’s endorsed workers’ compensation specialist. Our insurance professionals have extensive experience helping IIABNY members expand their marketing capabilities by providing workers’ compensation solutions for their clients. Give us a call at (440) 313-5002.  

Operating in the Continental US!

           Phone:  1-877-PMC-COMP | (781)-449-7744

Email PMC | Visit our website

MA Workers Comp Rates Could Increase By 19.3 Percent

Author DavidMalloy , 4/2/2012
PMC Insurance Group The cost of employee compensation insurance for Massachusetts employers could rise dramatically later this year if rates proposed by insurers are approved by state regulators.

The Workers’ Compensation Rating and Inspection Bureau of Massachusetts, which represents companies that write workers’ compensation polices, asked the state to approve an average rate increase of 19.3 percent. Most businesses are required to carry workers’ compensation insurance, which covers the medical treatment, rehabilitation, and lost wages of employees injured on the job.

If approved, the rates would go into effect in September.

The substantial increase is necessary, the bureau said, because the cost of claims continues to rise, but the state has denied smaller requests in three of the past four years. The Division of Insurance rejected proposed increases of 2.3 percent increase in 2008, 4.5 percent increase in 2010, and a 6.6 percent increase in 2011.

“If these three small increases in rates had been granted by the Commonwealth,’’ said Paul Meagher, president of the Workers’ Compensation Rating and Inspection Bureau of Massachusetts, “we would not need such a significant rate increase now.’’

Richard C. Lord, president of Associated Industries of Massachusetts, the state’s largest employers’ group, said yesterday in a blog post that the rate request deserves consideration. He said he is concerned that without an increase, fewer companies will offer the insurance, making it harder for businesses to buy policies.

“Private-market coverage is harder to come by because the economics of workers compensation no longer add up for insurers,’’ Lord wrote. “The growing disconnect between costs and premiums has already prompted several insurance companies to scale back their activity in Massachusetts.’’

Massachusetts once had some of the highest worker compensation costs in the country, but following reforms in 1991, those costs have declined steadily, falling by two-thirds over the past 20 years. If a premium cost $100 in 1991, the current rate would be $33.21. If the new rate request is approved, that premium would rise to $39.62, according to the Workers’ Compensation Rating and Inspection Bureau of Massachusetts.

The bureau said insurers need the increase to cover the rising costs of health care and wage replacement, driven by higher salaries and the longer leaves that claimants are taking. The number of claims has declined, but not fast enough to offset the increases in medical and wage replacement costs, the bureau said.

“While we recognize that the current filing calls for a significant rate increase, it reflects the real costs of providing this kind of insurance,’’ said Meagher. “Without a rate increase, we will be unable to maintain a competitive market for workers’ compensation insurance in Massachusetts.’’

The proposed rates will be examined in hearings held by Joseph G. Murphy, the state insurance commissioner. Murphy said yesterday that his office intends to “take a long, hard look at the process. This is a large increase, and this administration is particularly sensitive to the cost of doing business in the state.’’

Murphy said he expects to schedule a public hearing by the end of March.  

This article is courtesy of, Source- Boston Globe dated mar 2, 2012  

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Getting Injured Workers Back Involves Morale, Limiting Cost

Author DavidMalloy , 2/24/2012
Ask the Workers' Comp Expert: Getting Injured Workers Back Involves Morale, Limiting Cost
by Robert G. Jones, Vice President, PMC Insurance Group

In today’s challenging economy, the insurance industry has found itself under increased pressure to help return injured workers back to the job while effectively managing costs, according to John Shilts, Oregon Department of Consumer and Business Services. Business owners are under pressure to increase worker productivity while operating with reduced workforces. Getting injured workers back on the job is critical to cost containment and key to addressing employee insecurity following work-related injuries.

Generally, direct costs associated with workplace injuries account for less than one third of total claim cost. Indirect costs, including lost productivity, replacement worker expense, additional training costs and management time, account for the larger portion of total claim cost. A significant percentage of injured workers who are out of work for extended periods never return to the job.

A meaningful economic opportunity exists for business owners to control the cost of workplace injuries through effective, multi-faceted return-to-work programs. Two undisputed ingredients are a willingness to change organizational culture and commitment to necessary resources for the long term. There is often a void in the management of workplace injuries. Business owners must fill the void and manage their return-to-work programs from within. Effective programs also keep injured workers connected emotionally and physically to their employer, often promoting faster recovery and contributing to improved morale.

PMC Insurance Group’s only business is workers’ compensation. Our insurance professionals have extensive experience helping IIABNY members expand their marketing capabilities by providing workers’ compensation solutions for their clients, including offering guidelines for creating and implementing effective return-to-work programs.

 Operating in the Continental US! Phone: 1-877-PMC-COMP | (781)-449-7744 Email PMC | Visit our website