1. California Workers Compensation Reducing Cost April 14, 2004 Women in HR Janice Berthold, CLU, ChFC, CPCU Jberthold@allwestinsurance.com (408) 626-6000

2. Claims Compensability AOE – Arising out of Employment COE – In the Course of Employment

3. Causes of Inappropriate Claims Medical Indemnity Mistakes Lack of Understanding Resentment Unscrupulous Service Providers

4. Some of the Solutions The Investigation A Joe Friday A Barbara Walters The Protocol

5. Training Employees Management Team Benchmarking

6. Indirect Costs – The Rest of the Iceberg Work disruption Residual slowdowns Temporary help or overtime Hiring and training costs Ruined products

7. Pre-Loss Initiatives Post-hire/pre-placement Safety and Health

8. Post-Loss Initiatives Investigation Early Return-to-Work Programs

9. Benefits of Early Return-to-Work Prevention of wage loss Faster recuperation Positive social reintegration Avoidance of “disability syndrome” Improved self-worth

10. Climbing Costs The average medical cost per claim in California was 23% higher than the median state’s average medical cost per claim. Workers compensation claims payments to chiropractors in California averaged $2,066, 148% higher than the median states studied ($833) and 70% higher than Illinois, the next highest state ($1,215). More than 28% of the claims in California involved therapists, compared with 20% in the median state. Six out of eight workers comp back surgeries are unnecessary.

11. Reasons for the Increase Cost shifting from non-occupational health care to workers compensation More sophisticated and expensive medical technologies Added costs associated with medical case management Over-utilization of medical services

12. Combined Loss & Expense Ratios As of 12/31/02 127% 141% 153% 171% 177% 161% 140% 116%

13. Marketplace Chaos Ensues 26 Carrier insolvencies Seven Carriers withdraw from the marketplace No new carriers coming into California Marketplace contraction, capacity crisis

14. You Can Reduce Loss Costs Develop standards for accident and incident investigation. Offer modified duty and return to work. Monitor all indemnity claims. Consider surveillance.

15. What Else Reduces Cost? Complete incident reports showing as much detail as possible with eyewitness accounts if available. Monitor all treatment and medication to determine if they are appropriate. Keep continuous communication open between yourself and your Insurer to make sure case reserves are proper.

16. What Else Reduces Cost? (Cont.) Assure claims are closed out as quickly as possible. Question anything that looks like Fraud. Make sure claims coded to you are in fact yours.

17. Indicators of Workers Compensation Fraud Conflicting history of accident by claimant, hospital, doctor. Accident not witnessed OR an overly enthusiastic witness. Monday morning/Friday evening accident. Claimant is difficult to contact by mail/phone. Claim filed just prior to job completion. Claimant not at home during the day. Minor accident incurs major medical expenses.

18. Claims Review Look for frequency - will usually require loss control. Watch open claims - are they still open? Track large reserves - can there be a reduction before Unit Stat Filing?

19. Who Should Report the Accident? NOT THE FILE CLERK! A fully trained employee should have responsibility for reporting the claims.

20. Additional Cost Saving Ideas The Medical Triage System The Time Card Release Plan The 1-3-5 Plan Classification Pro-Action The 90-Day Delay Program

21. Highlights of Work Comp Reform Repeals requirement that laws primarily favor the employee Requires ER sponsored physician only Requires that employment is predominant cause of injury Promotes objective medical findings Provides independent review of medical treatment disputes

22. Conclusion Loss Control and Claims Management will reduce costs Make your Insurance Agent/Broker earn his money by assisting you in all claims matters Understand that what is measured is improved, and so continuously measure your results.