Presentation outlining risk management approaches to controlling workers' compensation costs

1. Managing Workers’ Compensation
Kenneth M. McGee II, CIC
Vice President
Clark-Mortenson Insurance and Financial Services

2. The State Of The WC Union
• Market Analysis
• 2013 Primary Loss Increases
• If you’ve relied on “the market” to control
costs, it may be time to adjust

3. Controlling Costs – The 1 hour list
 Identify top loss sources
 Adopt a return to work program
 Control your MOD or it will control you
 Pick partners who know it well
 Streamline reporting procedures
 Utilize occupational medicine specialists
 Mitigate legal expenses

4. Insured Costs
 Medical
$1 …….  Compensation
Uninsured Miscellaneous Costs
Investigation time
Cost of hiring and/or training others
Overtime
Extra supervisory time
Clerical time
Wages not compensated
$4 to $10 …………...Down time
Negative public image
Legal fees
Reduced employee morale

5. Is there a ROI on your iceberg?
Do you measure costs,
total cost of risk,
returns, or a
combination?
Do you benchmark?
Are you including soft
costs (as positive and
negative)?

6. Return to Work Programs
– 4.1 million employees experience work-related injuries
or illnesses in America each year.
– According to the Bureau of Labor Statistics (BLS), the
average time away from work per injury is eight days.
– Employees who are off work for more than 16
consecutive weeks rarely return to work at all.
– 70% of quick returners do not let their condition
consume their thinking
– 76% of quick returners refuse to feel victimized by their
injury

7. Return to Work Projections
100%
Chance of Returning to Any Work
75%
50%
25%
0%
6 months 12 months 24 Months
Time Away From Work
Source: New York State Workers’ Compensation Board, 2011

8. Successful Return To Work
Programs:
 Clearly detail expectations and duties of
employees
 Write job descriptions (and maintain them)
 Include physical demands required to perform
job functions
 Create a modified duty job bank
 Spell out ramifications of non-compliance
(jeopardize workers’ compensation benefits)
 ALWAYS try to get someone back to work

9. Benefits to Employee
• Maintains full earning capacity
• Maintains productive mindset
• Keeps them on the “biological work clock”
• Prevents them from becoming dependent on
a disability system
• Provides sense of security and stability
• Reinforces management’s commitment to
employee’s well-being

10. Benefits To Employer
• Demonstrates a consistent procedure
• Establishes solid communication all around
• Improves ability to manage the claim/restrictions
• Places experienced employees back on your
premises (less time/money spent on recruiting
and hiring)
• Enhances employee’s self-worth
• Discourages abuse
• Reduces financial impact

11. Your Medical Team
Designate Medical Providers
Make it easy for medical team
Prevent lack of cooperation:
– Send written notice to treating physician indicating modified duty is
available
– Physicians may tell employee to stay home until they can return to full
duty, not realizing modified work is available
– Generally, restrictions short of complete bed rest can be
accommodated as employee recovers
Emphasize your concern of employee well-being, so doctor
understands you want what’s best for his/her patient

12. Occupational Medicine
– Identify local clinic(s)
– Invite staff physicians to tour facilities
– Review expectations of Return to Work program
– Supply clinic with Return to Work forms
– How does employee get care?

13. The Experience Modification Factor

14. Basic Concepts
• Experience MOD for November 28, 2012
– 2008-2009
– 2009-2010
– 2010-2011
• Primary vs. Excess Losses
• Experience Rating Adjustment (ERA) for medical only claims

15. How do you control your MOD?
• Make Sure it is Correct
– Find out minimum MOD
– What’s the financial difference between today and minimum
• Claims Prevention
– Hiring Right
– Safety
– Accident and Incident Investigations
• Claims Management
– Timely Reporting
– Return To Work Programs
– Fraud Investigations

16. What Drives Premiums
• Payroll
– How often do you review
– Is your payroll fixed
– Can you budget
– How big are your audits
• Employee Classifications
– There are almost a thousand class codes for employees
– Can you allocate payroll to partial class codes
– Do you have a representative who understands where employees should be
• Experience Modification Ratings
– What is your mod, what can it be, why is it that number
– How do you figure it out
– How can you use it as a tool

17. Claims
• Having a claim doesn’t make you bad
• How it’s managed can
– Medical Only
– Return To Work
– Reserving Practices
– Time of Reserving
– Who’s representing you (your team)?

18. Financial Impact
• Managing the experience mod factor
– Medical-only claims = less impact
– In states that use the NCCI to calculate mod
factor, medical-only claims are reduced by 70%
• Lost wages substantially higher than medical
costs
• Return to work program can help:
– Control hidden costs
– Address indirect costs
– Mitigate via loss prevention
– Improve loss ratios

19. Claims Management
• Early Reporting
Claims reported greater than 10 days after the incident
occurred have incurred values 2.5 times higher than claims
reported within 2 days from the incident
• Regular Review
• Analysis

20. Managing Claims
– When possible, work with those who understand
your business and specialize in occupational
health
– Make it well known you have a return to work
program…the physicians can have a negative or
positive impact on employees returning to work
– You can’t dictate, but you can control and
manage

21. Managing Claims Cont.
• Let medical professionals have copies of job descriptions…send
them with the employee if you can
• Return To Work Programs
– Prevention of loss wages
– Avoidance of out of work syndrome
– Faster recuperation times
– Positive mental outlook
– Social aspects of being at work
– Shows the employer cares…reciprocation

22. Summary
• Workers’ Compensation is one of the most controllable insurance costs
(and accounts for 40-68% of every casualty dollar an organization
spends)
• Keys Include:
– Claims Management
– Return to Work
– Who are your partners
• The most effective cost control measure is the experience modification
rating
• Reducing workers’ compensation costs is an active process
• The first step is to see where you are today, why you are there and
what the ‘end game’ is

23. Kenneth M. McGee II, CIC
Vice President
kmcgee@clark-mortenson.com
@skipmcgee30