Best Practice Strategies of a Workers’ Compensation Program August 26, 2010 Bill Unger, CPCU

Note: State and Federal Laws vary by jurisdiction. ALWAYS check with your attorney or insurance agent for specialized counsel.

Focus of this presentation: A new look at a common issue Best outcome of a WC claim Manage it right for employee and employer Minimize Cost So, What are the best practice strategies that companies use to lower their Workers Compensation cost of risk?

Most manage by reacting Some manage whole process with greater effectiveness and savings Those that do….have a succinct process for the best outcome

Have the greatest impact on your employer’s largest insurance cost Workers Compensation premiums comprise 62% of total insurance costs Human Resources & Risk Managers need hard numbers to sell their program and show value to the organization

Work Related Injuries and Costs Workplace injuries in the US have a direct cost (wages, medical cost, etc.) on employers of $131,000,000,000* Indirect costs (productivity, overtime, training, administrative overhead) are estimated at $381,000,000,000. (nearly 3 times direct) Total estimated costs = $512,000,000,000 * information reported by National Safety Council

Work Related Injuries and Costs More than 80,000,000 lost work days are due to occupational injuries* The Bureau of Labor statistics - 1.2 million employees lost an average of seven (7) days due to their injury/illness. * information reported by National Safety Council

National Trends During the last 10 years the rate of lost time injuries has decreased by an average of nearly 3% per year However, the overall cost of injuries and illness increased 6.4% per year. In the past 5 years it has increased by over 10% annually.

National Trends…continued Demographic changes to the work force are challenging Over 60,000,000 workers are 55 + 53% (32,000,000) are 65 + An aging labor force will create greater injury severities, longer lost time disabilities, and more challenging RTW situations

Sometimes there are opposing incentives by Employer and Employee in a WC claim Employer – Return the employee to work at all costs Employee – Maximize the amount he or she cannot do

Understand all the Principles in Play The definition of “disabled” under WC and ADA statute are different. An injured employee claiming WC benefits may be subject to FMLA and ADA laws. Employer must make a determination early in the claim to understand rights and obligations Seek legal advice early to avoid a retaliation claim or costly WC mistake

Core Principles of Workers Compensation Claims Identify where accidents/ injuries are occurring or likely to occur. Eliminate or lessen the exposure Prompt Reporting of Claims to Management - Late reported claims after 29 days can increase the cost by 45%. Have a solid, written Return to Work Program Should be defined as temporary, not a regular job, and be composed of pieces or parts of regular jobs.

Continued…Core Principles Utilize medical payment specialists, PPO networks, and pharmacy management. Savings can be up to 35%. Focus and communicate early and often with your injured employee & Adjuster Litigation increases cost of a lost time claim by 70% Human element part of a claim is very important Establish very early in a lost time claim the adjuster’s strategy for closure Know risks and costs if employee termination is inevitable

The end result of all your efforts will show……… Experience Modification Factor Premium Savings / Cost Indirect Cost Savings Bottom Line!

When do losses really count? What can you do to minimize the future cost of insurance? Medical Only claims vs. Lost Time Claims ERA states Net vs. Gross Reporting States State Waiting Periods Managing the Claim, Employee

NCCI States (in blue) Monopolistic States – Wyoming, Ohio, Washington, North Dakota (orange)

Experience Modification Factor

How can you lessen your actual losses? Your past history follows you for four years. For example, 2010 year is calculated with 2006, 2007 and 2008 losses

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