HOW TO REIN IN WORKERS COMPENSATION COSTS. October 2013

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1 HOW TO REIN IN WORKERS COMPENSATION COSTS October 2013

2 COST DRIVERS: PREMIUMS AND CLAIMS COSTS Insurers pushing for workers compensation rate increases. Especially risks with unfavorable loss experience and/or large accumulations of insured employees. Historically unsustainable underwriting losses. NCCI statistics show: 9% increase in workers compensation premiums in 2012 over % 2012 combined ratio for private insurers (worse state funds included). Rising medical costs; ongoing, low interest rates; bulk reserve deficiency. Claim cost drivers include: co-morbidity factors like hypertension or diabetes, overprescription of narcotic drugs, and medical cost inflation. Uncertainty around the future of the Terrorism Risk and Insurance Program Reauthorization Act. MARSH October 23,

3 MPACT SM FROM MARSH S WC CENTER OF EXCELLENCE MPACT provides clients with a holistic and integrated process to manage their workers compensation total cost of risk. Looks at details on loss drivers. Provides a complete understanding of retained and transferred risk. Incorporates predictive analytics. MARSH October 23,

4 MEDICAL SEVERITY INCREASES Source: NCCI MARSH October 23,

5 MANAGED CARE Managed care or medical management contemplates a host of services that: Help an employee injured on the job to return to work as soon as he or she is medically able. Help to mitigate the cost of medical care. Managed care services include: Helping an employee obtain the right medical care. Helping injured employees understand proposed treatment plans and options. Working with the medical community to ensure selected providers understand the nature of work, including light duty positions, offered by a given employer. Ensuring the medical providers are paid the right amount. Paying close attention to pharmaceutical management. Encouraging dialogue between specialists. Recognizing the broad array of ancillary services. Services available are vast: No single claim will benefit from every service. MARSH October 23,

6 MEDICAL COST SOLUTIONS: NURSE TRIAGE 24/7 nurse triage: Specially trained nurses speak directly with the injured employee soon after the injury. Goal is to match the level of care with the injury. Using clinical protocols, the nurse may suggest self-care, or help facilitate visit to a provider. The nurse typically sends key information directly to the medical provider, with baseline injury information and available light duty options. Nurse triage model has been used primarily by decentralized organizations or those with operations that do not fit into the traditional workweek schedule. More employers are now recognizing the benefits of an advocacy model in workers compensation. MARSH October 23,

7 ADVOCACY MODEL Workers compensation originated as a no-fault line of coverage, but has evolved into a highly litigious, expensive industry. Advocacy model: Aims to help the injured employee understand that his or her wellbeing is important. Employers see claim frequency decrease Mix of lost-time and medical-only claims improve. Adjuster remains responsible for determining the compensability of the claims and the benefits owed to the employee. Adjuster benefits from the information gleaned by the nurse, in most cases literally minutes after the on-the-job injury. Nurse and adjuster may use the same platform, or there may be a data feed between the clinical and claim administration systems. MARSH October 23,

8 NARCOTICS PRESCRIPTIONS Source: CorVel MARSH October 23,

9 IMPORTANT DATA CONSIDERATIONS Start with reliable and complete data! Create meaningful metrics. Data Consider data influencers. Base program decisions on solid analysis. Decisions MARSH October 23,

10 CASE MANAGEMENT: EXAMPLE < $5000 incurred medical > $5000 incurred medical < $5000 incurred medical > $5000 incurred medical MARSH 23 October

11 BENCHMARKING Types of managed care benchmarking: Internal benchmark. TPA book of business benchmark. National standards. Peer benchmark. MARSH 23 October

12 MEDICAL AND INDEMNITY CLAIMS COMPARISON MARSH October 23,

13 DISABILITY MANAGEMENT MARSH October 23,

14 RETURN-TO-WORK ANALYTICS Action items: Success rate of RTW placement. Number of task restrictions forwarded for task redesign review and percent implemented. Lag time in securing RTW status from physician. Lag time in supervisor finding a suitably matched position. MARSH October 23,

15 THE NEW REALITY OF RISK WORKERS COMPENSATION: REINING IN COSTS Read Marsh s RETURN-TO-WORK STRATEGY: A KEY TO CONTAINING WORKERS COMPENSATION COST To access the report, visit MARSH October 23,

16 This document and any recommendations, analysis, or advice provided by Marsh (collectively, the Marsh Analysis ) are not intended to be taken as advice regarding any individual situation and should not be relied upon as such. This document contains proprietary, confidential information of Marsh and may not be shared with any third party, including other insurance producers, without Marsh s prior written consent. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modeling, analytics, or projections are subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Except as may be set forth in an agreement between you and Marsh, Marsh shall have no obligation to update the Marsh Analysis and shall have no liability to you or any other party with regard to the Marsh Analysis or to any services provided by a third party to you or Marsh. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or reinsurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage. Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer, and Oliver Wyman. Copyright 2013 Marsh Inc. All rights reserved. MA