Workers Compensation Experience Mod In Your Control or Out of Your Control?

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1 Workers Compensation Experience Mod In Your Control or Out of Your Control? Bill Daly Risk Manager National Accounts Federated Mutual Insurance Company

2 WC Managed Care: More than Managing Care A Simple Objective: One or two ideas to deploy One or two ideas for later

3 WC Managed Care: More than Managing Care Jurisdictional Impact on Work Comp Not All States Are Equal Monopolistic funds Demographics/population Industry Geographical considerations Judicial perspective Legislative action Medical Community

4 WC Managed Care: More than Managing Care Workers Compensation Insurance It s Not a Commodity Financial stability Knowledgeable sales force Field Support Field Services, Claims Coverage/Product Consulting nurses, claims adjusters Special Investigative Unit - Fraud

5 Experience Mod Overview Experience Mod Basics Specific to each business Can provide credits or debits Losses leave lasting impressions Frequency matters more than severity Medical vs. indemnity claims Deductible: gross vs. net Can be managed

6 Experience Mod Credits/Debits Experience Mod 1.00 Premium $50,000 Company A.75 $37,500 Company B 1.25 $62,500 Company C

7 Experience Mod Timeline 2009 Policy Year 2010 Policy Year 2011 Policy Year 2012 Policy Year 2013 Policy Year Included Included Included Not Included Not Included Experience rating provides time for losses to mature

8 Experience Mod Frequency/Severity vs. The impact of a single loss is limited by the rating bureaus

9 Experience Mod Frequency/Severity Five claims - $5,000 each $50,000 Base.99 Modifier $49,500

10 Experience Mod Frequency/Severity One Claim - $25,000 $50,000 Base.82 Modifier $41,000

11 Experience Mod Frequency/Severity 5 $5,000 each 1 $25,000 $50,000 Base $50,000 Base.99 Modifier $49, Modifier $41,000 $8,500 premium difference!

12 Experience Mod Net v. Gross Net Claim v. Gross Claim Example Injured knee $1,000 MRI (reveals no damage) Able to return to work, self-treat Claim closes with no other expense Company A No deductible on Work Comp policy Gross claim: $1,000 Net claim: $1,000 Company B $1,000 deductible on Work Comp policy Gross claim: $1,000 Net claim: $0

13 Experience Mod - Net v. Gross NH VT ME MT ND CA OR NV ID UT WY CO SD NE KS MN IA MO WI IL MI IN OH KY NY PA WV VA RI CT NJ DE MD MA NC AZ NM OK AR TN SC MS AL GA TX LA Net States FL

14 Experience Mod Net v. Gross Net Claim v. Gross Claim Example Injured knee $1,000 MRI (reveals no damage) Able to return to work, self-treat Claim closes with no other expense Benefit of Deductible Regardless of state, premium savings If Net state, shields claim cost from Experience Mod calculation Company B $1,000 deductible on Work Comp policy Gross claim: $1,000 Net claim: $0

15 Experience Mod - ERA Medical Only vs. Indemnity Claims Many states include in the mod calculation an Experience Rating Adjustment (ERA) 70% reduction if medical only Emphasizes importance of Return to Work and Prompt Claims Reporting

16 ERA States OR CA NV CO NM AZ UT WY MT ID ND SD NE KS OK TX OH IN IL WI MN IA MO AR LA TN FL GA AL MS MI PA VA WV SC NC KY NY ME RI DE MD MA NH CT NJ VT Experience Mod - ERA

17 Experience Mod - Split Point Changes In effect in 2013 Driven by rating bureau/regulators 2012 First $5,000 of loss is primary Portion > $5,000 is excess In place for 20-plus years Average claim amounts have tripled in that time

18 Experience Mod - Split Point Changes Experience Modification Factor Split Point Changes Primary Level $5, $10, $13, $15,000

19 Experience Mod - Split Point Changes Split Point 2012 ($5,000) $4,000 Claim $12,000 Claim $50,000 Claim 2013 ($10,000) 2014 ($13,500) ($15,000) Primary $4,000 $4,000 $4,000 $4,000 Excess $0 $0 $0 $0 Primary $5,000 $10,000 $12,000 $12,000 Excess $7,000 $2,000 $0 $0 Primary $5,000 $10,000 $13,500 $15,000 Excess $45,000 $40,000 $36,500 $35,000

20 Experience Mod - Split Point Changes Split Point - Example Closed 2010 Claim - $20,000 paid Experience Mod Calculation Year Calculated Total Claim Value Primary Excess 2012 $20,000 $5,000 $15, $20,000 $10,000 $10, $20,000 $13,500 $6,500

21 Experience Mod Split Point Timeline 2010 $5,000 Primary $15,000 Excess $10,000 Primary $10,000 Excess $13,500 Primary $6,500 Excess

22 Experience Mod - Split Point Changes Effect of Split Point Changes Those with higher $ losses likely higher mod Those with lower $ losses likely reduction Multi-state businesses Changes being phased in State filing dates will differ Likely will have differing split point phase-in dates

23 Workers Compensation - Managed Care What is Managed Care? Appropriate Medical Care Prompt Delivery Cost Effective Focus on Return to Work

24 Workers Compensation - Managed Care Critical Elements of Managed Care Prompt Reporting Light Duty Providers with Occupational Focus Drug-Free Workplace

25 Prompt Claims Reporting Federated s Goal: > 70% of WC claims reported within 7 days of injury Federated Results: Per claim average shows claims reported late paid 25-50% more than Promptly Reported Claims Federated claims data

26 Prompt Claims Reporting Average Claim $12, $10, $8, $6, Late Reported Promptly Reported $4, $2, $

27 Prompt Claims Reporting Direct Benefits Allows opportunity to interview witnesses, secure evidence Allows for direction of medical care to in-network facilities specializing in Work Comp/Light Duty Allows for timely and appropriate claims management Prompt filing of state forms can preserve legal defenses Allows for prompt drug testing, with potential reduction or elimination of claims exposure

28 Return to Work/Light Duty Programs Formal program is important for loss of work time claims Employees typically are able to return in some capacity Release obtained from treating physician Employer accommodates restrictions within Return To Work Program guidelines

29 Return to Work/Light Duty Programs Benefits to Employers: Returns experienced employees to work in a safe and timely manner Reduces training costs for replacement workers Helps maintain good employer/employee relationships and shows employees they are valued Lowers Experience Mods Benefits to Employees: Reduces concern about financial uncertainty and job security Helps maintain sense of attachment with co-workers Improves recovery time and quality of life

30 Return to Work/Light Duty Programs Light Duty Considerations: Invite providers to visit your sites safety meetings, equipment/tour, etc. Have written job descriptions support light duty assignments as appropriate Discuss light duty w/ employees before injury

31 Network Partners Preferred Provider Organizations (PPO) Medical networks Throughout the U.S. Discounts when treated in the PPO Network

32 Network Partners Client Base Accessibility Discounts Regional Rural v. Urban Ease of Administering Company Dr. Relationship? Savings Below Fee Schedule RTW Focus Occupational Medicine

33 Network Partners - Postings

34 Network Partners - Resources

35 Network Partners When employers did recommend health care providers, injured workers followed their recommendation 92% of the time The Journal of Workers Compensation

36 Network Partners Direction of Care In general, states align the Workers Compensation medical choice at the option of the employee or the employer NOTE: Most are not simple rules

37 Network Partners Direction of Care NH VT ME MT ND CA OR NV ID UT WY CO SD NE KS MN WI IA MO IL MI IN OH KY NY PA WV VA RI CT NJ DE MD MA NC AZ NM OK AR TN SC Employer-directed TX LA MS AL GA Employee-directed Not Applicable FL

38 Drug-Free Workplace Drug-Free Workplace In most states, Work Comp benefits can be denied based on drug use or intoxication Several states reduce benefits only. Some have no provisions.

39 Drug-Free Workplace From Our Files: Delaware: 26-year-old tech; emergency transport for knee injury; morphine and heroine in system Claim denied w/ no dispute Idaho: 26-year-old w/ back pain from stacking product; marijuana in system; terminated Medical covered under Comp, no lost time benefits paid Tennessee: 36-year-old w/ bleach/chemicals in eye; drug screen refusal to cooperate ; employee voluntarily terminated Claim denied w/ no dispute

40 Drug-Free Workplace 38-50% of all work comp claims are related to substance abuse in the workplace Substance abusers file 3-5 times more WC claims Source: Working Partners, National Conference Proceedings Report; Sponsored by the US Dept of Labor, the SBA, and the Office of Nat l Drug Control Policy Nearly 75 percent of all adult illicit drug users are employed, as are most binge and heavy alcohol users Source: National Institute on Drug Abuse

41 Drug-Free Workplace Credits Formal Drug-Free Workplace Potential for Policy Premium Credits/Reductions

42 State Programs OR CA NV CO NM AZ UT WY MT ID ND SD NE KS OK TX OH IN IL WI MN IA MO AR LA TN FL GA AL MS MI PA VA WV SC NC KY NY ME RI DE MD MA NH CT NJ VT Drug-Free Workplace Credits

43 OR CA NV CO NM AZ UT WY MT ID ND SD NE KS OK TX OH IN IL WI MN IA MO AR LA TN FL GA AL MS MI PA VA WV SC NC KY NY ME VT RI DE MD Federated Programs MA NH CT NJ Drug-Free Workplace Credits

44 OR CA NV CO NM AZ UT WY MT ID ND SD NE OK TX OH IN IL WI MN IA MO AR LA TN FL GA AL MS MI PA VA WV SC NC KY NY ME CT Schedule Credits RI DE MD MA NH NJ VT KS Drug-Free Workplace Credits

45 State Programs Federated Program Schedule Credits OR CA NV CO NM AZ UT WY MT ID ND SD NE KS OK TX OH IN IL WI MN IA MO AR LA TN FL GA AL MS MI PA VA WV SC NC KY NY ME VT RI DE MD MA NH CT NJ Drug-Free Workplace Credits

46 Managing Claims Claims Management/Oversight Federated s Claims Management Team (CMT) Nurse, claims processor, insured Injured employee and provider Efficient utilization of health care resources Assist recovery and return to work Federated nurses deployed where allowed Participation in PPO Proper procedure coding Appropriate procedures

47 Managing Claims Medical Bill Review Annually, Federated spends close to $100,000,000 in Work Comp paid losses Federated s Bill Review Unit Input bills daily Approx. $150,000 savings daily

48 Managing Claims Unmanaged Claim Employee self-treats Reported two weeks after incident No post-incident drug screen Options for direction of care are now limited Physician approves a return to work, with restrictions Employer won t accommodate restrictions Employee obtains all treatment outside of network Claim drags on Managed Claim Injury reported promptly Employee obtains treatment in-network Employer accommodates work restrictions Employee returns to full-time work Claim closes

49 Managing Claims Unmanaged Claim Medical Bills (retail).. $5,000 Non-network treatment... -$0 $5,000 Lost wages; no RTW program... $3,000 $8,000 Late reported claims cost 30% more (on average)... $2,400 Grand Total.$10,400 Managed Claim Medical Bills (retail). $5,000 In-network treatment (avg. 40% reductions) $2,000 $3,000 No lost wages; ERA state 70% medical only reduction....($2,100) $900 Grand Total.. $900

50 Thank you This presentation is intended to provide general information and recommendations for risk prevention. This is not provided as a substitute for any regulatory requirements or standards which may apply. It should not be considered legal advice regarding your unique needs nor a guarantee of specific results. Qualified counsel should be sought regarding questions specific to your circumstances. Federated Mutual Insurance Company Federated Service Insurance Company* Federated Life Insurance Company Home Office: Owatonna, MN Not licensed in the states of NH, NJ, RI, and VT Copyright 2012 Federated Mutual Insurance Company