The Most Common Error in Workers Comp Premiums

We are asked this question very often. For quite some time there were so many answers that I could not actually give one answer. After reviewing hundreds of Work Comp policies and using statistics to quantify the errors, there is one that stands out as an obvious error.

The error we see most often is - you are going to have to contact us by email. Check out our website at http://www.cutcompcosts.com/ for the email contact info. If you email us, we will answer the question by return email. You will have answered the question just by emailing us. That may sound odd, but it is true.

West Virginia Workers Comp Environment

We are now closing in on West Virginia having an open market for Work Comp insurers to write policies as of 7/1/08. I have been asked often about what the market will look like as of 1/1/09. Brickstreet now has 100% of the market and will until 7/1/08. As I was quoted before in the Charleston Daily Mail, the insurance carriers will have to accept the Brickstreet model to enter the market as the data that NCCI has worked from to give Loss Cost Codes was data primarily provided by Brickstreet and data from "similar states."

The actuary from NCCI that set the rates for West Virgina commented in a meeting last month that it will take a number of years to have true data to use for rate setting purposes.

Overall, Brickstreet had a very huge and difficult task in taking on the claims directly from the Fund and taking on all new claims. However, the fund claims were sub-contracted out.

Back to the original question - I am unsure of how the market will look on 1/1/09. The closest state to West Virginia was Nevada in their Workers Comp situation. I think the main thing is that there be no outside interference to the market from any of the parties involved. The market will take care of itself as it has in many states for many years.

The West Virginia Insurance Commission website has a large amount of information. Commissioner Jane Cline has been very open with statistical information. Check out their website to find out a large amount of info.

West Virginia will need to monitor the PEO's (Professional Employment Organizations) that will come into the state to write business. We will explore PEO's later this week.

Next Up - The Most Common Error in Workers Comp Premiums

Workers Comp News Item

On Friday, the South Carolina Industrial Commission decided to not go along with Governor Mark Sanford's previous Order that the Industrial Commissioners decide permanency ratings based on the AMA guidelines. I did not think the Commissioners had that power as they were appointed by South Carolina's governor.

One of the most expensive parts and the reason for the horrendous increases of Work Comp rates premiums is that there is no standard in that state when a viewing takes place to assess the permanent partial disability. You could put the same person in front of two different commissioners and get two totally different South Carolina impairment ratings. North Carolina, for instance, is much more objective with their permanency ratings.

It is now and has been almost impossible for a Workers Comp adjuster to set the reserves on the file, as the final permanency rating is a roll of the dice, at best. The permanency ratings are a large part of what E-Mods consist of in charging the South Carolina employers their premiums. To be safe, the adjuster must put up a very high reserve to forecast the permanency rating which is akin to forecasting the weather.

This is one of the most unfriendly-to-business decisions I have seen come from any state body in many years. When employers pull up stakes and move to neighboring states, then the legislature and other governing bodies will wonder why the tax base is shrinking. This has happened before in Maine, Massachusetts, California, and other states. When employers pick up their businesses and move them, an alarm will go off. Who is hearing the alarm now except Governor Sanford?

There is a saving grace. The case may move into the courts to be settled. This will likely be one that the South Carolina Supreme Court will need to examine. Between now and then, South Carolina businesses have had a total of a 50% increase in their premiums over the last two years. West Virginia's motto is "Open for Business". Is South Carolina's "Going Out of Business?"

Next Up - A Review of the Workers Compensation environment in West Virginia

Another Question From Our Workers Comp Blog Readers

Another Question from Our Workers Comp Blog readers - There are a few companies that do Workers Comp premium reviews such as J&L. Do you do anything different than your competitors?

Answer - There are a few things that separate us from our competition. The main two are:

• Premium Audits/Reviews - I am a former Systems Engineer and programmer. We use homegrown software in doing our premium reviews. We are able to find more inconsistencies or errors in the premiums paid than our competitors. Our software drills down into the Workers Compensation data much further than the packaged software that is on the market as of today. As I have an actuarial/statistical, computer, and claims background, we are able to apply unique models to the data for analysis.
• Reserve Audits/Reviews - I have a heavy claims background that allows us to initiate a reserve review and a premium review at the same time. No premium review company has this level of expertise in both these areas. Ask one of the premium review companies about reserve reviews and they will usually tell you that they know of someone that they can refer you to in another company or they will refer you to a sub-contractor.

We are able to analyze both areas to the fullest. We start with the premiums paid and work our way back to the E-Mod and then to the reserves on the Workers Comp files. We then analyze the reserves to make sure that the files are reserved properly. We do all of the statistical processes "in-house."

I regret sounding like advertising, but it is the truth. We are not in business to be like the other companies.

Next Up - News Article Analysis

Blog Readers' Questions and Comments on Workers Comp

We received this question recently:

A consultant came into our offices and sold us on doing Workers Compensation premium reviews. The services looked similar to what you offer to employers.

The consultant said that they found a major error which would result in a premium refund of $36,500. By contract, we had to put up 1/4 of that amount ($9,125) to start the premium recovery process from our Work Comp carrier. The consultant wrote a letter for us but disappeared after that time. The carrier needed followup information from the consultant. We have heard nothing from the consultant and we have received $0 in refunds from the carrier. What should we do? Is this normal?

PS on the question - I sent back an email and asked them if the contract guaranteed the consultant 25% upfront and it did.

Answer - We see this situation a few times a year. We are contacted by a company that had a Work Comp premium review by a consultant and money was paid upfront and the consultant was nowhere to be found and no help.

There are many reputable companies in the Premium Audit/Review business that accept no $ until their client company receives a refund or credit. We heavily advise against putting up a deposit or paying upfront until your company receives the Workers Compensation premium refunds first.

PS on the answer - We were able to contact the carrier and we found out that the consultant company was incorrect in the errors that they supposedly found in the Work Comp policies. The consultant would not return our calls.

Next up - Another question from our blog readers - you may email any questions you have to info@cutcompcosts.com Our main website is at www.cutcompcosts.com. There are archives on our Workers Comp blogs on the right side of the page.

Searching For Workers Comp Terms in Google

Below is a list of commonly misspelled words as used in searches for Workers Compensation terms. We have highlighted the words that caused the mistaken Workers Comp searches in all of the search engines. Why did these Work Comp searches result in zero results? They all contained misspellings. Google will usually correct the words, but not always. The other search engines may just give you a null result.

One interesting thing to note is that there were multiple searches with these errors in them. Some are over 500 instances a year. These were not one-shot errors.

• lawers for workmens comp
• waiver of suborgation on workmen's
• workmens comp laws settelmemts
• negociating workmens compensation settlements
• workmans compensation permanancy
• find average workmans comp insurance settelment payment
• average workmans comp insurance settalment payout
• repetive motion injuries and workmans compensation
• aplacation for wv contractors workmans comp
• utah workmans comp fraud investgators
• how do I aquire workmans comp insurance
• colorado workmans comp modfied duty
• permanent disabilty for workmans comp
• permanent disabillty for workmans comp
• workers comp average settelment offer
• insurance settelment offers workers comp
• insurance settalment offers workers comp
• calucating workers comp disability
• workers comp termenated
• workers comp settelments
• workers comp retialiation cases
• workers comp aattorneys
• workers comp iinsurance
• workers comp exepemt
• workers comp atorneys
• usual settelment for back
• workers comp laweyer
• sycattic nerve damage
• locatins of workers comp cases
• cotractors workers comp
• employer requiremtents
• eduacate workers comp trial
• disfiurement workers comp
• directral of special fund workers
• clalifornia workers comp
• setttlements fro workers
• work comp attorny

Next Up - Blog Readers' Questions and Comments on Workers Comp

Workers Comp Captives

The blog post today was supposed to be about Searching for Workers Comp terms in Google and the mistakes that are made in the Work Comp searches.

We will get back to that tomorrow as there was a bit of interesting news today from the IRS about the use of Captives. I have been through a few Captive training courses that left me asking the question - How can a captive count as Workers Compensation insurance? The IRS is back to contemplating about insureds not paying a tax on the reserves that are held for Workers Compensation expenditures.

For quite some time, companies that were insured through captives did not pay any tax on the reserve amounts. The IRS may one day rule that the reserves are taxable. In fact, there is an article out now saying that this may be the case. The situation will need to be monitored very closely in the next few years. My understanding is that offshore captives would still not be taxable, as the IRS would have no jurisdiction over any offshore Work Comp captives. This would be very harmful to the domestic captive business, as the reserves remaining non-taxable is one of the greatest benefits of being in a captive. Vermont would be heavily affected.

The following 28 states allow Workers Comp captives:

• Alabama
• Arizona
• Arkansas
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Florida
• Georgia
• Hawaii
• Illinois
• Kansas
• Kentucky
• Maine
• Missouri
• Montana
• Nevada
• New York
• Ohio
• Oklahoma
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Utah
• Vermont
• Virginia
• West Virginia

Not all of the 28 states have Work Comp captives operating in them yet.

Next up - Searching for Workers Comp terms in Google and the mistakes that are made in the Work Comp searches

How To Search For Workers Comp Terms in Google, Excite, Yahoo

Searching for what you want to find in Google and the other search engines can be very tough. Work Comp searching is even more difficult. Some things to remember are that there are many versions of Work Comp.

There are quite a few variations on Workers Compensation:

• Workers Compensation
• Work Comp
• Workers Comp
• Workmens Comp
• Workmans Comp
• Workers' Comp
• Workmen's Comp
• Workman's Comp
• Worker's Comp
• Many more terms - some of the above ones are spelled wrong, but that is what people are searching for in their Work Comp searches.

The list is mind-boggling. What does one do in Google? My suggestion is to not use apostrophes whenever possible. Google in their great way will try to help with the spelling. My hat is off to Google for spellchecking.

Use exact searching - Workers or Workers Comp or Workers Compensation will give you different results. I recommend always putting your searches in quotes. The word Workers by itself has 205,000,000 search results in Google.

Next up - What terms will give you a zero in results when you do a Workers Comp search ? There is a theme to it. Honest, really.

Our Marketing System Has A New Name - CompScreen

We wish to unveil our new services to the public and to update our marketing staff. We now have compiled a great system to allow our marketers to quickly and successfully assess the needs of a client or prospect company/organization. With our CompScreen(c) process, our client's and future client's Workers Compensation needs can be compacted and distilled to a few pages.

This will enable our clients to receive quick, efficient, and effective servicing of their Workers Comp needs. I do not wish to call it a sales manual as we are going to be a services provider and not just a sales company.

The Secret Question You Can Ask

What is the secret question to ask anyone that deals with your Workers Comp to see if they understand the whole Work Comp picture? The answer - you will need to email me at info@cutcompcosts.com to find out. It is a good one that I use very often. I have busted quite a few so called Workers Comp gurus with it.

One more housecleaning item - I have been jumping around trying to give a good overall view of Workers Compensation. I will go back into the archives from the last few months to see if any Work Comp matters that I brought up need to be finished - have the loose ends tied up.

Check the bottom of my last blog to see how to get a ton of free info from our http://www.cutcompcosts.com/ website.

Up Next - Workers Comp News

Reserve Reviews-The Hidden Way to Save $

Reserve Reviews - the hidden way to save $ on your Workers Comp premiums - Reserve reviews are not something that most of our competition cares to address. However, reserve reviews are just as important as premium reviews. Once again, we try to use the word review and not audit - see previous blog.

Premiums reviews "look-back" three years into the past. Reserve reviews are the "here and now" part of your Workers Compensation premium. It is virtually impossible to go back in time and try to negotiate reserves. What you have on the file today is what counts.

Workers Comp file reserves are the engine of the E-Mod process. Reserves are not only what is spent out on a Workers Compensation file, but what the adjuster thinks will be spent out on the claim over its lifetime. Please remember, the funds that are paid on an open file to date have little to do with the reserves on the Work Comp file. You are charged THREE TIMES over three years for the reserve figure on the file. Not reviewing your reserves is like putting cash in the shredder.

Reserves run a totally different cycle from premium reviews and your E-Mod. For instance, to figure your E-Mod for 1/1/08, the reserves are used as they were on your Unistat date which should be 6/30/07. Here is a very important point. Whatever the reserves are on 6/30/07 at 5PM is what your E-Mod is figured from for your 1/1/08 policy date.

If you/we happen to find that a Workers' Comp file is over-reserved on 7/11/07, that is just the way the ball bounces. What I am getting at is that you should start your reserve review program as soon as your new policy goes into effect.

For a 1/1/08 policy, the reserve review needs to start at least by 3/1/07. It takes a few weeks to begin studying, negotiating and tracking your reserves. Your reserves need to be tracked up to and including 6/30/07.

This is a different cycle than the Work Comp premium reviews - see previous note. The Bottom Line is that you must start very early to get your reserves in line. If you feel that you are in over your head, call a reserve review specialist such as our company. Do not just write checks.

Next Up - What is the secret question to ask anyone that deals with your Workers Comp to see if they understand the whole Work Comp picture?

Our main website is at www.cutcompcosts.com. If there are any terms that you need to look up, please click on the Definitions tab or use the Contact tab to email us for questions.

What Is The Difference Between Premium and Reserve Reviews?

Often during one of our presentations or in speaking with current or potential clients, we are asked how our Workers Compensation premium reviews differ from our reserve reviews.

To keep from boring you to tears, we will cover Premium Reviews today and Reserve Reviews next time. We avoid the word audit when we can as audit has such a bad connotation - IRS audit, year-end payroll audit by the insurance carrier, etc. Audits sound confrontational.

Premium Reviews - this is also called a policy review. We look at the "mechanics" of how your Workers Comp premium has been calculated. We look at various items including:

• Payroll Statements
• Current and previous Work Comp policies
• Website advertising and brochures
• Previous Work Comp year-end payroll audits from the insurance carrier
• NCCI or State Rating Bureau sheets
• Audit Billing Statements
• Audit Workpapers
• Any type of premium adjustment after initial policy issued
• Job Descriptions for each employee
• Description of Operations

We are often asked why we need website info, brochures, advertising, and a description of operations. We want to take the time to understand your company and what your company does in its operations. Without knowing it exactly, we would not be able to do a complete and accurate premium review.

We can usually go back three years from the date of the review. If we find errors, we can usually recover the error for three years, not just one. With a premium review, we are looking at the current Work Comp insurance situation and back in time for three years.

Next Time - Reserve Reviews - the hidden way to save $ on Workers Comp

PS - Our main site is at http://www.cutcompcosts.com/. Feel free to read our archived articles. They can be accessed by clicking on the months on the right side of the web page.

When Do We Usually Hear From Companies?

This is a question that was posed to me at a recent conference. Surprisingly, the 80/20 rule applies here. 80% of the companies that contact us have just renewed or are going to renew their Workers Compensation policies within the next few days. 20% contact us at other times during their Work Comp policy year.

If you have just renewed a policy and we find errors in your Work Comp policies, your company would likely lose one year of refunds. There is a three year "look-back" for premium recoveries. If we are contacted on January 15 on a January 1 renewal, the third year that is furthermost in the past may be lost. We recently had a small trucking company lose the third year of refunds which were worth about $30,000 to the company.

The best time to contact us is three months before your policy expires. That gives us time to do a very thorough premium review. If you want us to do a reserve review, then we need to start three months after your policy renews.

Do not get me wrong, we are always glad to hear from companies that need our help on their Workers Compensation policies. We just hate to see a company miss out on recoverable funds, especially in this economy.

Next Up - How do Premium and Reserve reviews differ? (Hint - night and day difference)

Retired HVAC Classification Code

NCCI Retired an HVAC Classification Code - where does that put your company?

Quite a few of our clients that have been overcharged on Workers Compensation are HVAC employers. Now, to complicate matters even more, the HVAC Classification Code 5536 has been eliminated due to problems of code enforcement. The Code was moved to other Classification Codes, all being at a higher rate than Classification Code 5536. We are starting to see this more often when the NCCI shifts or closes out a Class Code.

If you have had this Class Code in the last five years in your Workers Comp program, you may need to have an underwriting expert check this situation for your company. There are only a few states where the 5536 Classification Code is still allowed.

The NCCI has always been a very professional and fair organization to deal with over the years. We are not questioning their integrity whatsoever. We just do not want any employer to be overcharged in their WC policies or at the time of the year end payroll audit.

The "look-back" period to recover Workers Comp Premiums is three years.

Next Up - We answer the question - When do we usually hear from companies that need help?

An Apology

My Apologies - due to traveling and being in an area with sketchy WiFi and very slow dial up service, the blogs have not been tended to for about 10 days. Our main website is at http://www.cutcompcosts.com/

Brickstreet has a class action suit filed on them - a manufacturer is asking for class action status. The only Workers Comp carrier since 1/1/06 in West Virginia has been Brickstreet. It seems that Brickstreet has allegedly been charging an agent's fee on all of their Workers Compensation policies even though they have not had any agents providing their services. If this is the case, this is a very serious allegation.

If you are from West Virginia, please click on our above homepage link as there is a message there for West Virginia employers. We have found additional errors in the Workers Comp policies on over 2/3 of the ones we have examined for WV employers. One of Brickstreet's underwriters was quoted as saying there are errors on over 80% of their policies. You owe it to your company to have your policies reviewed.

Next Up - NCCI retires a classification code that involves HVAC employers