zero in on workers’ compensation cost drivers and trends presented by: chris desmarais, sales...
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Zero In On Workers’ Compensation Cost Drivers and Trends
Presented by: Chris Desmarais, Sales Manager Hunter Wells, Account Executive
April 16, 2015
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© 2015 PMA COMPANIESAll Rights Reserved.
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Today’s Agenda
• Learnings from workers’ compensation industry studies
• Survey Trends: What risk managers had to say
• Solutions for workers’ compensation costs for public entities
• Questions and discussion
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PRIMA Survey Overview
• Survey demographic--public entities:
‒ PRIMA members--government members only
‒ Nationwide response
• Independent market researcher--confidentiality
• 25% response rate--above industry norms
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© 2015 PMA COMPANIESAll Rights Reserved.
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Introduction
Why Did We Do This?
Workers’ compensation environment is changing and becoming increasingly complex.
New approaches and solutions are needed.
Then Now
• Indemnity/medical split, 60%/40%
• Pharmacy
‒ Small part of medical
• Metric for medical savings was PPN penetration
• Complexity of fee schedules/billing was limited
• Aging workforce was not an issue
• Traditional insurance
• Segment approach to controlling costs
• Medical is 60% of claims costs
• Pharmacy
‒ 19% of medical spending
‒ Narcotics about 30% of Rx spend
‒ Physician dispensing
• Claims
‒ Age, obesity, co-morbidies driving higher costs
‒ Economic pressure on return-to-work
‒ Aged claims are very expensive
• More alternatives
• Holistic approach needed to reduce TCOR
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Consider the True Cost of Workers’ Compensation
True Cost of Workers’
Compensation
Indemnity
Medical
Nurses
Excess
TPA
RMIS
MoraleTime to Investigate
Property Damage
Replace
IW
Pharmacy
Voc Rehab
Legal
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Workers’ Compensation Issues, Concerns, & Challenges as outlined
by PRIMA’s Risk Managers
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Biggest Workers’ Compensation Concerns
Please Indicate Your Two Biggest Workers’ Compensation Concerns
Other
Access to credible risk mgt info
Medical costs (write-in)
Ability to benchmark results
Increasing WC regulations
Resistance to safety culture
Severity of exposures and risk potential
Co-morbidity issues impacting claims
Returning employees to work
Controlling claims frequency
The aging workforce
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
11%
2%
5%
10%
14%
14%
17%
22%
31%
31%
42%
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Recent Cost Trends
The Changes in Workers’ Compensation Costs for the Respondents in the 3 years Prior to the Survey
In-creased
38%
Remained about the same34%
De-creased
27%
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Reasons for Workers’ Compensation Cost Increases
Select The Top Four
Other
Inadequate safety programs
Insufficient RTW programs
Increased regulations
Workers compensation reform
Co-morbidity impacting claims
Cost of premiums and/or TPA
General economic conditions
Increased claims frequency
Aging workforce
Increased pharmacy costs
Increased medical provider costs
0% 10% 20% 30% 40% 50% 60% 70% 80%
22%
5%
15%
16%
18%
25%
28%
35%
35%
47%
53%
76%
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Two Most Significant Factors Risk Managers Anticipate
Healthcare reform
Increased regulations
Budgetary concerns
Co-morbidity affecting claims
Liberal definitions of WC injuries
Aging workforce
Medical costs
0% 10% 20% 30% 40% 50% 60% 70%
13%
14%
18%
21%
30%
37%
65%
Will Impact Workers’ Compensation Costs ‒ Next Three Years
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Solutions for Controlling Workers’ Compensation Costs
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Sampling of Public Entities Data
Predicting the Future
What to expect from a database of 20,000 claims
• Gender: Male 54%, female 46%
• Accident causes--top three
‒ Strains: 32%
‒ Falls/slips: 29%
‒ Struck by: 13%
• Age at accident
‒ 15-24: 4%
‒ 25-34: 16%
‒ 35-49: 40%
‒ 50+: 40%
• Most expensive claims by age group: 50+
• Top three parts of body frequency: Knee, lower back, and shoulder
• Top three most expensive claims by body part: back/disc, internal organs, heart
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Workers’ Compensation Cost Reduction Strategies
Are Attempting or Will Attempt ‒ Select The Four Most Important
Other
Employee incentive programs
Change vendors (insurance/TPA)
Fraud prevention
Nurse case management
Pre-screening of employees
Claims settlements
Mgr accountability/charge-backs
Wellness programs
Return to work programs
Improved safety programs
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
8%
10%
11%
15%
27%
29%
30%
47%
56%
72%
78%
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Risk Managers Can Use a Holistic Approach
To Reducing Their Total Cost of Risk
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Loss Prevention: Strategic Approach
• Evaluate your loss prevention program annually
• Understand from where your losses are coming
• Understand what’s driving costs
Establish specific, measurable, and achievable goals for loss prevention!
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Loss Prevention
Additional Strategies
• Execute good employee recruiting, hiring practices, and onboarding
• Enhance employee engagement
‒ Education and job recognition programs promote job satisfaction
• Demonstrate leadership commitment
‒ Observe, recognize, and demonstrate safe work practices
• Establish a “culture of safety”
‒ Factor safety in all business decisions
• Offer wellness programs
‒ Help your aging workforce stay well
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Public Entity Risk Management Success
Lori Gray, Risk Management Division Chief, Prince William County, Virginia, named
2013 Business Insurance’s “Risk Manager of the Year”, joining an elite group of risk
managers, including past winners from Microsoft, Verizon, Coca-Cola, Boeing, and
Johnson & Johnson
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Prince William County’s Holistic Approach
Five Major Areas of Focus
• Improved communication, processes and safety culture
• Enhanced data collection for business decisions
• Invested in the safety program
• Opened an employee health clinic--focusing on wellness/fitness, injuries, etc.
• Conducted strong return-to-work program
Results
• In-network usage of 86% (FY 2012) versus 71% statewide average
• 32% reduction of billed medical charges from July 1, 2011 through June 30, 2012
• 71% of claims reported in three days; overall average five days
Workers’ Compensation Strategies
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Aging Workforce
Impact on Workers’ Compensation
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Aging Workforce
Key Points
• Awareness: Aging workforce is a developing issue in our society
• Medical and indemnity severity are the lead issues, not frequency
• Motor vehicle accidents are the leading cause of occupational fatalities over 55
• Workplace safety management will benefit entire workforce
• Incorporate multi-disciplinary management approach
• Capitalize on the collective strengths of your most experienced employees
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Aging Workforce
Multi-disciplinary Risk Management Approach
• Examples of methods to help prevent claims involving older workers:
‒ Helping older workers stay healthy
» Exercise, eye examinations, physical accommodations, safety features
‒ Weight limits
‒ Avoid climbing
‒ Implement slip-and-fall prevention program
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Addressing Medical and Pharmacy Costs
Managed Care Strategies
Medical Cost
Adjuster Edits- Relatedness- Reasonable- Necessary- Litigation
Fee/UCR Applications- Additional review- Rules interpretation- Code review
Nurse Clinical Evaluation- Direct negotiations- Larger med bill- Appropriateness- Home health
PPO Networks
Specialty Networks- PT- Diagnostics- DME
PBM- Generic- Home delivery- Formulary blocked performance- Physician outreach- Narcotics utilization review
Bill Review Process- Adjuster- RN- Certified coders
Out of Network Pharm Nurse- Focuses on narcotic spend trends- Drug testing- Morphine equivalent therapy
Intervention Nurse- Free assessment for LT- Serious medical-only claims
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Return-to-Work Programs
Strategies for Public Entities
• Paying attention to injured workers in a timely, consistent, and caring way
• Facilitating return-to-work as soon as medically appropriate is critical in managing
claim costs
• Implement an effective modified duty program
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Setting-up a Modified Duty Program
Guidelines
• Develop a formal written policy with time limits--obtain management and union buy-in
• Train and educate the supervisors on why return-to-work is important, expectations
concerning use and how it saves money
• Inventory potential modified duty jobs
‒ Consider developing “job banks”
‒ Each supervisor/manager recommends three jobs in their department
• Educate medical providers on:
‒ Availability of modified jobs
‒ Need for physical capacity information
‒ Return-to-work philosophy
• Track and manage employees on modified duty
• Consider central budgeting of modified duty expense
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Return-to-Work
Supervisors and Managers
• Additional insights on gaining supervisor/manager buy-in:
‒ Introduce return-to-work as a policy
‒ Hold supervisors/managers accountable for losses and compliance
‒ Communicate compliance and savings achieved
‒ Include in performance evaluations
‒ Develop specific roles, particularly who will manage the return-to-work
policy
‒ Avoid “no one in charge of returning employee”--engage human resources
‒ Establish policies that encourage return-to-work
‒ Semi-annual meeting with stakeholders
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Integrating Wellness Programs and Risk Management
Strategies for Public Entities
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Integrating Wellness program and Risk Management
Strategies for Public Entities
Occupational health and safety vs. wellness programs:
Occupational Health & Safety Wellness Programs
Goal
Risk management program that strives to foster a safer work environment. Focuses on preventing workplace-related injuries and illnesses.
Focuses on enhancing the overall well-being of workers, addressing specific lifestyle behaviors, inside and outside of the workplace.
Typical Elements
• Incident investigation training• Safety planning• Rules and workplace procedures
• Nutrition education• Smoking cessation program• Stress management program• Access to fitness centers• Exercise program• Information on health topics
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Benchmarking
• Key question: who is your audience?
‒ You
‒ Safety Director
‒ Claims Manager
‒ Risk Manager
‒ Excess carrier
‒ Other public entity senior management
‒ The public
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Benchmarking
15 Measures of Your Workers’ Compensation Success
• 3-5 year payments
• Closure rates vs. database
• Average cost—closed claims
• Medical savings
• Costs of workers’
compensation/employee
• Breakdown of lost-time/medical-only
claims
• Loss run
• Average lost-time days
• Percentage claims closed within 90
days
• Number of injuries in first 90 days of
job
• Frequency ratio vs. database
• Prompt reporting/repeater report
• Percentage of claims by severity
• Frequency/severity by locations
• Age of injured workers
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Chargebacks
Strategies for Public Entities
Percent holding department managers accountable for workers’ compensation costs
Yes36%
No64%
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Chargebacks
Strategies for Public Entities
• Develop a system that is easy to understand and administer
‒ Complex systems do not provide clear incentives for performance
‒ Information should be easily verifiable
• Develop a system not subject to manipulation
‒ Suppressing claim reporting
‒ Suppressing reporting of claim information to lower projected costs
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This presentation and the information set forth herein have been prepared by and is the property of PMA. You should not share, distribute, copy, republish, orreproduce any portion of this presentation without prior express written consent from PMA. For more information, contact PMA at [email protected]
Chargebacks
Strategies for Public Entities
1. Establish goals for your allocation system
2. Assess your organization’s willingness and financial ability to budget and allocate costs at
the operating unit level
3. Define the risk management costs to be allocated
4. Determine whether prospective or retrospective allocation approach works best
5. Define allocation methods
‒ Exposure base
‒ Experience base
‒ Allocation limits
‒ Experience period
‒ Valuation dates
6. Partner with others: Agents, consultants, actuary, accounting, financial, senior management,
information systems, etc.
7. Perform trial calculations
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© 2015 PMA COMPANIESAll Rights Reserved.
This presentation and the information set forth herein have been prepared by and is the property of PMA. You should not share, distribute, copy, republish, orreproduce any portion of this presentation without prior express written consent from PMA. For more information, contact PMA at [email protected]
Action You Can Take
• Review this survey with your Sr. Management Team (education is a powerful tool)
• Study your trends--are they similar to what we saw today (aging workforce,
frequency, increasing medical and pharmacy costs)?
• Complete a Risk Management Assessment (RMA)
• Set 3-5 goals
• Measure results
• Benchmark
• Evaluate
• Publish results and action steps for improvement
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© 2015 PMA COMPANIESAll Rights Reserved.
This presentation and the information set forth herein have been prepared by and is the property of PMA. You should not share, distribute, copy, republish, orreproduce any portion of this presentation without prior express written consent from PMA. For more information, contact PMA at [email protected]
Questions & DiscussionThank you