Presentation - I will be doing a presentation on Workers Compensation at the North Carolina Mid State Safety Council's Yearly Conference. The conference is on 6/10/08 at the Dennis Wicker Center in Sanford, NC. The conference covers many different areas on safety. The conference begins at 8:30 AM and lasts until 3 PM. I will be presenting at 1:30 PM.

If you would like to be a vendor at or be a participant, please email me at jmoore@cutcompcosts.com

The main subject that I will be presenting is Safety Directors are just as responsible as anyone in a company for the claims process after a Workers Compensation accident has occurred. I like to call it Workers Comp Post Accident Safety.

A Question from One of Our Workers Comp Blog Readers - I see that you do quite a few presentations on Workers Comp. What is the subject that you talk about most and what subject causes the most questions?

The subject that I speak on Workers Comp about really depends on the audience. I spend a large amount of prep time tailoring my speech to the attendees. Workers Compensation is not the most exciting subject.

The subject that seems to be the most popular is the Workers Comp claims that have gone from a minor claim to a much more serious claim for no reason. The other main concern by employers is when employees will not return to work.

The main subject that I present is what can be done by employers to control Workers Comp costs TODAY. I will mention the Five Keys to Cutting Workers Comp Costs. There are prior posts that cover them in more detail. They are:

1. Immediate injury reporting
2. Medical Treatment Networks
3. Return to Work Programs
4. How the employee was treated
5. Adoption of management to cutting Workers Comp costs

I have spoken about these five for well over twenty years. It is amazing how many of the employers questions can be answered by these five topics.

If you are in the Raleigh NC area on 6/10/08, I will be presenting on Workers Comp. See the next post for more information.

A Word of Warning - There are two main situations where we have seen Workers Comp cause the premature demise of a business, especially small businesses. They are:

1. Not being familiar with the laws concerning the number of employees that require a Workers Comp policy. You may not have to have Workers Comp insurance with up to five employees in a certain state while other states require a policy with one employee. This is a quick way to hear from the Insurance Commissioner with a cease and desist injunction order.
   
2. Similar to #1, an employer that hires subcontractors may be on the hook for a claim if a subcontractor is injured. Make sure your contractors show you a certificate of insurance.

Let's say that you do not have enough employees to require your company to have Workers Comp insurance. You have contracted with a company that has seven employees but does not have Workers Comp insurance. The term that I have coined - The Ladder of Insurance(c) will apply.

The Workers Comp courts will start with the sub and move their way up the ladder of companies until there is Workers Comp insurance or the deepest pockets. What will happen in this case is that the court will rule against you for benefits. So, you do not have Workers Comp insurance? Well, you will need to dig deep and pay cash or sell everything in the business and pay the claim.

Let's say that you do have Workers Comp insurance but the same situation applies. The Workers Comp courts will find you liable as the sub did not have their own insurance. You turn the claim into your Workers Comp insurer and THEY DENY COVERAGE. Remember, you did not pay premiums to cover the sub. Once again, it is time to pay straight cash.

Free list of definitions at http://www.cutcompcosts.com/definitions.html

Below is an article about Ohio Workers Compensation. Ohio is one of the states that has a state-run Workers Compensation system. I have predicted that all monopolistic Workers Comp systems will eventually fail and/or open up to a free-market system. Ohio's Workers Comp system basically failed, but was propped up by the state government. It is great to see Ohio adapt a great cost saver for employers.

Nearly 280,000 employers participating in the Ohio Bureau of Workers' Compensation (BWC) system have the opportunity to select the managed care organization (MCO) that will manage their workers' comp claims for the next two years. MCO open enrollment is underway and runs through May 30, 2008.

BWC's mission is to protect injured workers and employers from loss as a result of a workplace accident, and to enhance the general health and well-being of Ohioans and the Ohio economy. A network of 24 MCOs support this mission, serving as a primary link between injured workers, medical providers, employers and BWC.

MCOs assist Ohio's employer community regarding medical management and return-to-work initiatives for their injured employees. They partner with employers to ensure prompt filing of claims, timely treatment for injured workers and swift implementation of recovery programs.
“As Ohio businesses compete in today's global economy, one of any employer's most important assets is a safe and healthy work force,” said BWC Administrator Marsha Ryan. “When an unfortunate incident occurs in the workplace, the goal of a safe and timely return to work is paramount. MCOs are an important component in ensuring rapid and adequate treatment for the injured worker.”

Every two years, BWC holds an open enrollment period that allows Ohio's public and private state-fund employers the opportunity to evaluate each MCO's customer service and medical management performance. It is the employers' decision to remain with its current MCO or to choose another MCO to medically manage workers' compensation claims.

BWC provides MCO services to Ohio employers as part of their workers' compensation premium payment. These services are available at no additional cost.

To assist Ohio employers in choosing their MCO during this open enrollment period, BWC offers educational resources including the MCO Selection Guide and MCO Report Card. These tools can be found by visiting ohiobwc.com, or more information may be provided by phone at 1-800-OHIOBWC.

Next up - A Question from one of our readers

What is the UNISTAT date and why is the most critical date of any Workers Compensation policy?

The UNISTAT date is the actual date that the reserves/total incurred is used to calculate your E-Mods. It is not the policy renewal date. We have seen agents, adjusters, and even some underwriters become so very concerned about an employer's Workers Comp policy during the last month of the policy. Other than marketing the insurance company, the last month of a Workers Comp policy is a useless time to do anything in regards to reducing the reserves on a file.

The UNISTAT report is filed by your insurance carrier with the State Rating Bureau or NCCI to calculate your Experience Mod. The UNISTAT report is one of those kind of "hidden" factors that figures into your Workers Comp policy.

When is your UNISTAT Date? Email us at info@cutcompcosts.com to see when your UNISTAT occurs. As I said in the last paragraph, it is not and never will be your policy renewal date.

OK, so what is the all important Workers Compensation date? Not one employer has emailed us the correct answer.

We have posted on this subject before in this blog. We usually hear the following answers:

• The Workers Comp policy renewal date
• The Workers Comp policy expiration date
• The date that the NCCI or State Rating Bureau calculates the E-Mod
• The Workers Comp audit billing date
• The day the Insurance Carrier's Workers Comp auditor visits

None of the above are correct - the last one is important, but not as important as the Unistat Date. Check the next blog for an explanation of the Unistat Date

A Quick Question - What is the most important date of all having to do with your insurance policy for Workers Compensation? This is one that I have asked about in a post previous to this one.

If you said the renewal date, you are throwing Workers Comp $ down the drain. Check with this blog tomorrow to find out that very important date.

Why do I keep bringing up this very important Workers Comp date? Over 99% of the employers we have asked this question to has said the renewal date. When only .6% of the employers know the answer, we become very concerned.

Email me at jmoore@cutcompcosts.com if you think you know the answer, or if you would like to know before tomorrow's post.

Our main website is www.cutcompcosts.com

The One Thing We Are Unable To Do - We are very assertive/aggressive in dealing with Workers Comp insurance carriers, NCCI, State Rating Bureaus, and other parties. We owe that to our clients.

The one thing that we have been asked to do that WE WILL NOT DO is to intentionally aid in the misrepresentation of classification codes and other insurance data to cut Workers Comp costs. Trying to cheat insurance carriers will only cost more in the end. Quite a few states are now pursuing employers that intentionally lower payroll info, pay claims under the table, or misclassify their employees. As we have advised in the past, it is best to pay your fair share.

This situation does not come up often, but we do have to address the situation now and then.

We also will never try to cut Workers Comp costs by taking " a roll of the dice" on a long shot to see if any cost reduction might occur for our clients. This often will backfire and end up costing our clients even more of their Workers Compensation budget. We only make recommendations on statistically significant data and results.

Bottom Line - you should pay what you owe, but not one penny more.

Our main website is www.cutcompcosts.com

You corrected a problem on your year 2003 Workers Comp claims loss run. Can you expect a refund of premiums? Under most circumstances, there would be no refund as it was too far into the past. In fact, the ONLY loss run that can be corrected is the most current one.

We have been asked very often to try to dispute an old loss run. Over 95% of the time, we are unable to assist due to the NCCI or State Rating Bureau rules. We cannot correct a file that was seriously over-reserved on old Workers Comp loss runs.

How does your company or any employer keep from over-paying due to incorrect loss runs with mistakes such as over-reserving, claims from a different employer, double entry of the same claim, etc?

As I have posted in the past - please check my old posts - follow the files with online claims access or obtain a Workers Comp loss run monthly or at least quarterly. Review and monitor the loss run like a financial statement. If you see something that looks odd, question it immediately.

If you ever feel that you need assistance, please call in a Workers Comp claims loss run expert.

Up Next - A Controversial Workers Comp Definition

Our main website is www.cutcompcosts.com

The Experience Mod or E-Mod - your business's nightmare credit report. How does a credit report compare to the E-Mod or X-Mod?

The main difference between a credit report and a Workers Comp E-Mod is how fast each can be corrected. Let's say that you have your business's E-Mod and your credit report sitting in front of you. If you find a way to correct something in the credit report, the results are immediate. If you want to try to improve your E-Mod and take steps to improve it, the results will take many months or years to show for your efforts.

Another major difference is that if you find an old error on your credit report, you can fix the old error immediately. For instance if you find an error from 2000 on your credit report, you can fix the error and improve your credit score. You cannot correct a Workers Comp reserving error from the year 2000. It just does not work that way.

Check out my next blog to see why correcting an error on your loss run from the year 2000 will not help your E-Mod.

Our main website is www.cutcompcosts.com

A Question from some of our readers - What types of employers have the most mistakes in their Workers Compensation policies?

We used to have an exhaustive list of employers that listed all of the employers that had mistakes in their Workers Comp policies. After examining Workers Comp policies for over 12 years, we have found that no one type of employer has more mistakes in their policies. We have found that West Virginia employers have a higher rate of Workers Comp mistakes in their policies than other states.

Recently, two types of employers have popped up on our radar screens for having errors in their Workers Comp policies. They are companies that:

• Manufacture or use dyes or inks in their manufacturing processes
• Manufacture non-woven fabrics

Our main website is www.cutcompcosts.com

Question from one of our readers - How long do we have to dispute the payroll audit results that we just received? Should we call in NCCI to do an inspection?

We have often seen where the insurance carrier tells the employer that they have ten days to pay or dispute an audit when sending an audit billing. Most State Rating Bureaus and the NCCI allow a dispute up to 30 days after receipt of the audit results. That does not mean the receipt of the billing if a notice of audit adjustment has preceded the billing.

Calling in your State Rating Bureau or the NCCI and disputing the audit may cost your company more than it is worth. It is usually best to dispute the audit with the insurance carrier. If you call in NCCI, you will have to pay for the inspection, which can be expensive. What happens if the NCCI causes your rates to be ever higher after their inspection? You can possibly cost your company even more Workers Comp premiums. There are certain times such as this to call in an expert such as J&L to examine the premium audit.

Our main website is www.cutcompcosts.com

A Question From One of Our California Readers - Is California a tougher state than other states for your company to provide Workers Comp review services?

We have heard this question often over the past five years. Fortunately, we have aided employers in recovering premiums from SCIF and have been able to reduce quite a few CA companies' Workers Comp costs. The rules in CA are somewhat different than most other states. I have noticed that quite a few of the rules from the WCIRB (Workers Compensation Insurance Rating Bureau) have been modified to be more like the NCCI. This was a good move by the WCIRB.

The main differences are the span of time that can be examine for overcharges and there was only one provider of Workers Comp insurance for many years. The latter made it very complicated to look elsewhere for Workers Comp insurance coverage. That has all changed with SB 899 which has finally enabled a semi-open market for Workers Comp insurance.

That being said, please look at one of my old posts on The Red Flags for Overcharges. This list applies to any state or states.

We have also heard the same question often from employers in:

• Ohio
• West Virginia
• New York
• North Dakota
• Wyoming

The bottom line is that do not let the states that you are operating in dictate your insurance budgets.

Up Next - How Hallmark (r) Can Help Your Insurance Budget

Our main website is www.cutcompcosts.com

The Oklahoma Manufacturers Association's Big Mistake - A few days ago I had posted about the Oklahoma Manufacturers Association wanting to establish a self-insurance pool for Workers Compensation. They have done well with a health insurance pool and wanted to try to do the same with Workers Comp.

Workers Comp requires a large pool of employers to insure themselves. The Law of Large Numbers requires a huge pool of insureds. I also question that the pool should be homogeneous employers. The Law of Large Numbers is the same as the old saying about "Safety in Numbers."

So many self insurance pools have went under that I will not list them as it would take up tens of pages. Why did these self insurance pools not survive? The Law of Large Numbers requires the risk to be spread over a very large group.

If the Oklahoma Manufacturers Association starts a self insurance or risk pool, they will be segmenting the manufacturers from all other employers in the state of Oklahoma. If all manufacturers are having problems with say, back strains and carpal tunnel, what in the group would offset these injuries?

One of the other problems is that ALL manufacturers would have to join the risk pool. Usually when a risk pool in founded, a small percentage of the possible members will join. There may be more members joining later, but usually the pool has already suffered too many losses to spread the risk and the members see their Workers Comp premiums double the next year.

Pools will usually take in all applicants, regardless of their past claims histories and E-Mods. This initiates the process of Adverse Selection. Adverse Selection occurs when the riskiest companies sign on to a risk pool without the balance of the safer companies also coming into the risk pool.

I do hope the Oklahoma Manufacturers Association has a very successful risk pool for Workers Compensation. The odds are stacked very heavily against them.

Up Next - More on Oklahoma
Our main website is www.cutcompcosts.com

Before we go on to the OK analysis of the Compsource bill, I thought it was best to answer the most popular question from our blog readers - this was also blogged on 10/25/07.

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."

We have also started doing quite a large number of performance file reviews for larger insureds.

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

Our main website is www.cutcompcosts.com

Oklahoma is near and dear to my heart as it is my home state. There are many problems with this bill that is not understood by the Oklahoma house. This could be an insurance disaster in the making. Please see my blog response underlined below. They did not consult an Workers Comp insurance consultant before they passed the bill.

Bill would expand CompSource coverage to out-of-state workers
by Janice Francis-SmithApril 24, 2008

OKLAHOMA CITY – Oklahoma businesses will get better service from the state-created workers’ compensation insurer if House Bill 1959 is signed into law, the president of CompSource Oklahoma said Tuesday.

HB 1959, by Rep. Ron Peterson, R-Broken Arrow, would give CompSource the authority to provide insurance coverage for employees who work out of state for an Oklahoma-based company. The Legislature created CompSource to make sure Oklahoma businesses would always have access to workers’ compensation coverage for their employees. The agency operates as a non-profit, self-supporting insurance company for Oklahoma employers.

Current law requires CompSource to provide insurance coverage only for employees who work in Oklahoma. Oklahoma-based businesses that have employees working in surrounding states have to obtain coverage for those workers from companies in those states.

“We had an Oklahoma business that had to go to four or five mechanisms just to find coverage sometimes,” said Terry McCullar, president and CEO of CompSource. HB 1959 will simplify matters for those companies, allowing them to insure all of employees with the same company.
“We’re not going to be licensed on all those different states,” said McCullar. “We will have to enter into an agreement with a private carrier. They will actually write the business on their paper, and we will assume the risk. Will it amount to a lot of business, no. But it is certainly a customer service issue. It makes doing business in Oklahoma easier.”

HB 1959 passed easily on its own merits in the state Senate after Lt. Gov. Jari Askins voted to end a skirmish over a proposed amendment to the bill. Sen. James Williamson, R-Tulsa, had proposed an amendment to require Senate confirmation of gubernatorial appointments of judges to the Workers Compensation Court.

Askins voted in her capacity as president of the Senate to break a party-line tie vote, defeating the proposal to add Williamson’s amendment to HB 1959. Once the amendment was removed, the bill passed on a vote of 29 to 19, sending the measure to Gov. Brad Henry’s desk for his signature.

The best way to get the best services without government subsidy is to privatize the state fund through a mutual company, and allow it to operate like a real insurance company, beholden, not to political and internal interests, but to their policyholders. Comment By John Thompson

Privatizing any insurer is always the best way to go. I have commented on that often in my blog http://www.cutcompcosts.com/www/blog.htmlHowever, how will Compsource inspect the out-of-state risks? Will they use NCCI? They cannot just blindly write coverage with some type of inspection. What if they have employees in CA? CA will not allow insurance out of Okla. Is Compsource registered to write coverages in these states? Has anyone consulted a WC insurance consultant. What benefits will be paid - based on OK or the other state? This is going to be a complete legal mess.

Legislation by non-WC knowledgeable personnel will end up costing big bucks.

Our main website is www.cutcompcosts.com

This is a great article on Workers Comp risk and the Law of Large Numbers - Check back tomorrow to see why this type of Workers Comp arrangement rarely survives long term.

By Jim Stafford
NewsOK

Broad acceptance of a health insurance plan offered by the Central Oklahoma Manufacturers Association has prompted the group to explore a workers' compensation package for the state's manufacturers, officials said Tuesday.
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The manufacturing group has hired Arthur J. Gallagher Risk Management Services of Tulsa to develop a new workers' compensation insurance package for small and medium manufacturers, said Bob Carter, an extension agent with the Oklahoma Manufacturing Alliance.
What are the savings?The proposed workers' compensation insurance could save manufacturers 10 to 20 percent on premiums, Carter said.

Workers' compensation insurance is a major expense to manufacturers, said Jory Gromer, president of the Central Oklahoma Manufacturing Association. Gromer is general manager of Green Bay Packaging in Chickasha.

"This is why we are looking at the feasibility of a plan on an association basis,” Gromer said. "In order to accomplish this, we are asking member and nonmember manufacturers across the state to provide us with certain workers' compensation data. All data will be held in strict confidence.”
The plan would be offered to manufacturers statewide, said Carter, who works closely with the association through his role with the not-for-profit Oklahoma Manufacturing Alliance.

The group's health insurance product, which is offered in partnership with Blue Cross and Blue Shield of Oklahoma, has enrolled more than 200 manufacturers throughout the state, Carter said. That covers about 12,000 employees and their family members.
"Blue Cross told us the increase for COMA participants in the 2008 health plan would be zero,” Carter said. "One of the nicest things that could ever happen to this group is the fact that there was no premium increase in 2008 for any company.”

The Central Oklahoma Manufacturers' Association claims 339 member companies from across the state. Member companies pay an annual membership fee of $50.
A statewide plan?Oklahoma's workers' compensation rates are higher than neighboring states of Texas, Kansas and Arkansas, Gromer said.

"Our intent with this plan is two-fold,” Gromer said. "First, we want to help local manufacturers save a substantial amount on workers' compensation premiums. Second, we hope the state would consider using this plan, along with our health care and long-term care plans to attract out-of-state manufacturers to Oklahoma.”

Up Next - Why Employer Group Associations Insurance Plans Are Rarely Successful

Bill Review in Workers Comp - One of the most controversial areas in Workers Comp from we have observed is when the carrier or TPA charges an employer to do their Workers Compensation bill review. We have seen overcharging for things such as:

• Price per bill or per line
• PPO Network Access Fee
• % of Savings - this one is abused the most
• Physicians Discount Fee
• Hospital Bill Negotiation Fee
• Many others using different and catchy names

This is one area that if you feel that you do not understand, it is best to call in an expert. We discovered in 1998 a bill review and PPO company that was overcharging a public employer $680,000 per year in just bill review fees. The public employer signed off on the review contract, so there was no $ to be recovered.

There are now "boutique" PPO and bill review companies that are independent of insurance carriers and TPA's. They are really catching on in California with their recent Workers Comp law changes. These boutique PPO companies work directly with the employers, usually Self Insureds or Large Deductible programs.

These bill review fees may be billed off-claim, which makes them very hard to track.

Next Up - PBM's - are they worth the fees?

Acting Like a Workers Compensation Fully Self Insured = Control = Workers Comp Cost Savings .

I have covered the ways that almost any employer can apply some of the techniques used by fully self insured employers to control Workers Comp costs. We started with what the very small employers can do up to very large employers.

There is one area that I intentionally left out until now. Somewhere in the mix between small deductibles and fully self insureds, captive insurance arrangements may be applicable. I recently had a client ask if they could have a captive when they were actually large enough to be fully self insured. The marketer for the captive seemed to have them convinced that a captive was superior to being fully self insured. I could not agree, unless there was some arrangement about captives that I do not understand.

I have posted about captives in the past. The definition of a captive is:

Captive insurance companies are limited purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups, they sometimes also insure risks of the parent company's customers. A captive is a risk management technique where a large corporation can finance losses by making payments to a wholly owned subsidiary called a captive insurer who then pays the losses. If the captive only insures its single parent corporation and/or subsidiaries owned by the parent it is called a pure captive. Captives are located in many places offshore from the United States, including Bermuda, Cayman Islands, Vermont, Guernsey, Luxembourg, Barbados, and the British Virgin Islands.

There are many advantages to captives. One of the areas that we have covered over the last few posts is control. Some of the control is turned over to a captive manager and the claims are usually handled by a TPA. One of the concerns that we have heard from captive insureds is the inferior claims handling by the assigned TPA. The other concern we have heard is when the fronting company or captive manager goes out of business. Who handles what then?

Captives are still very new to the Workers Compensation industry. Therefore, we cannot recommend the use of or the avoidance of a captive.

Cutting your Comp Costs - Acting Like a Self Insured - Self Insured with a TPA

One of the most misunderstood areas of Workers Comp that we have seen over the past fifteen years are Self Insureds with a TPA that is paid on a flat fee basis. The Self Insureds have told us that they are out of the Workers Compensation system as they are paying fee out-of-pocket and are only paying for reinsurance and a TPA fee. Nothing could be further from the truth.

TPA's are spending $ directly from your insurance budget. A really bad claims year cannot be reduced by the E-Mod system as with regular insureds. The claims have to actually be monitored MORE closely than with a regular Workers Comp insurance arrangement.

The term LDF (Loss Development Factor) actually becomes the replacement for the Workers Compensation E-Mod system. As I have pointed out in the last three articles, CONTROL is the most important factor in reducing Workers Comp costs. How can a Self Insured with a TPA reduce their insurance budget by keeping control of the claims? The easiest way is to bring the claims fully in-house, thereby eliminating the TPA. This is not a simple task, but it will pay off a large amount of $ in the long run. With the claims department as part of your company controlling costs are much easier than hiring a TPA and control of the claims will increase as there are no outside parties involved in the Workers Compensation claims process.

All overhead expenses, salaries, claims processing systems, and other costs must be compared to the TPA costs to see if this is a worthwhile venture. One of the minimum things to consider is if there are enough claims to make a claims load for at least one adjuster.

I skipped over Captives and will discuss that next time.

Next Up - Captives for Workers Comp

Workers Comp Premiums Savings - Acting Like a Fully Self Insured

Large Deductible Programs

We have received many emails and calls from employers with Large Deductible programs. The number of clients we have with Large Deductible programs has grown phenomenally over the past few years. Most of them want to become fully self insured which is a great option. That will be covered in the next post.

Large Deductible programs require/allow an employer to set a deductible of $250,000 or $500,000 with an aggregate number of say $5,000,000. If a single claim goes over the single claim limit or all the claims exceed the total aggregate, then regular Workers Comp insurance would kick in to pay the claims.

The employer pays their claims under the limits out-of-pocket and their claims are handled by a TPA. This is very close to the goal of being fully self insured. The companies must be large enough for a carrier to set up this type of agreement.

A large amount of premiums dollars can be saved by paying claims out-of-pocket. However, there is one surprise that occurs with Large Deductible programs. We are contacted often when this occurs. EVEN THOUGH YOU ARE IN A LARGE DEDUCTIBLE PROGRAM, ALL CLAIMS ARE STILL REPORTED TO THE NCCI OR STATE RATING BUREAU. PLEASE DO NOT THINK YOUR E-MOD IS REDUCED BECAUSE YOU ARE PAYING THE CLAIMS DIRECTLY OUT OF YOUR BUDGET.

I have a NCCI Experience Rating Report for a large trucker right in front of me now. They were told by their agent that the E-Mod can be reduced by being a Large Deductible. That in not true and can heavily affect how the Large Deductible Program is written. This may also be an impediment when an employer tries to become fully self-insured.

Questions? Our email address is info@cutcompcosts.com Our website address is www.cutcompcosts.com There is a list of free info under the tab -Free Stuff-.

Ways to Save on Workers Comp Premiums - Acting Like a Fully-Self Insured

Workers Comp Insurance Pools

Insurance Pools were a great way to save on premiums in the past. Homogeneous employers were grouped together into risk pools and each member of the pool paid their share of the Workers Comp total costs. The Insurance Pool Administrator which operated like a hybrid TPA would adjust the claims, handle all filings, and handle all administrative duties for a fee.

These are not as popular as they were in the 1990's due to the law of large numbers. Risk pools such as trucking, construction, food service etc. did not have enough members to spread the risk. One or two members having a very poor Experience Rating would over-burden the rest of the pool. The pools were often not large enough to offset the employers with many or a few very serious claims. Insurance Pools are still in existence.

If you are considering joining an insurance pool, make sure you have an expert or a team of experts analyze the pool before signing on. We received many calls and emails on trucking pools where the employer had very few claims and their Workers Comp premium doubled.

There are now very many hybrid insurance pools that may save an employer on premiums. Once again, please make sure that the pool is healthy before turning your Workers Comp program over to a pool administrator.

Next Up - Large Deductibles - some surprises

Questions? Our email address is info@cutcompcosts.com
Our main website address is www.cutcompcosts.com

Small Companies Can Operate Like A Self-Insured (in a way) - From the last post we are going to start with the smallest companies and work our way up to the largest. The theme is saving money by operating like a Workers Comp fully self insured.

• No Coverage - this is a very controversial topic. I am not saying to avoid paying Workers Comp premiums. In certain states, there is a minimum of employees that are required for the State to require that you have Workers Compensation insurance. Some states will not require a company to have Workers Comp coverage if they have less than three employees. Make sure to email us or call your State's Department of Insurance before making this decision.
• Ghost Policies - this is another controversial way to cover a small company's Workers Comp burden. Companies can purchase policies that provide nothing other than a certificate of insurance for Workers Comp coverage. I have come across these with trucking companies. Before buying one of these policies, make sure that all the options are explained to you.
• Small Deductible - As companies grow, this may be a viable option. The employer can pay all claims out-of-pocket to a certain amount, say $300. This cuts the small claims down significantly. There are many options on this type of coverage such as all claims are still filed with the insurance carrier, but the first $300 is billed back to the employer. One of the complications of doing this is when the employer does not report a serious claim timely. There are many ways to use the small deductible programs.

The first three options above are for the smaller companies to retain some of their risk like a larger company that is fully self insured. When an employer retains some of the risk, they can control their Workers' Comp costs at least partially.

We will move onto the next three tomorrow. As always, email us at info@cutcompcosts.com with questions and check out our main website at www.cutcompcosts.com

One of the Easiest Ways to Control Workers Comp Costs - in one word - The word which has already been used in the last sentence is CONTROL. The more control that your company has over the way that your Workers Compensation claims are handled will ALWAYS result in a reduction in what you pay in Workers Comp premiums.

The ultimate goal of every employer should be to handle their own claims in-house with their own on-staff adjusters. In-house claims handling is usually reserved for only the largest of insureds as a company must prove to the State Insurance Commissioner that they are large enough and stable enough to be a Self-Insured.

So you are sitting there reading this and saying - "I am too small a company to be Self-Insured." That may be true, but there are techniques that are employed by Self-Insureds that a company can use in your everyday operations to cut Workers Comp Costs.

For this and the next few posts, we will cover some of those techniques. We will go from the techniques that larger companies can use down to the companies that pay the minimum Workers Compensation premiums.

The list of techniques by company size is as follows:

• Self-insured with a TPA handling your claims


• Captive


• Super Large Deductible


• Large Deductible


• Insurance Pool


• Small Deductible


• Ghost Policies


• Flying with No Coverage - not the illegal kind

Remember, what the bottom line is to make your insurance department like a in-house fully self-insured. As this may go a little long, I will cover two per day. Keep reading each day as there will be something in here for a company of any size in any state.

Bookmark this page in your favorites and come back to see the next post tomorrow. As always if you have any questions, please email me at info@cutcompcosts.com or call me. Our main website is at http://www.cutcompcosts.com/

Up Next - Operating Like a Fully Self-Insured Part I

More on the West Virginia Conference - Outside of the Mandolidis decision, I thought that the insurance carriers were very positive about writing Workers Comp coverage in West Virginia. I was interviewed by the Charleston Daily Mail which is the local newspaper for Charleston, WV. I commented in the interview that I wished that Insurance Commissioner Cline would have been able to make it, but I was informed that she was in China for the National Association of Insurance Commissioners (NAIC).

I wish to thank the West Virginians for their hospitality. I enjoyed working with quite a few of the employers and look forward to the open market that will exist post 7/1.

The NCCI has done a commendable job in setting rates as how could rates have been set without any prior data? The NCCI used seven similar states to come up with rates, which is about as good as it gets.

We shall soon see how the open market functions. Well, it is not quite an open market as Brickstreet, the monopolistic carrier will be handling all the governmental employees' Workers Comp for a few years into the future.

The Bottom Line - all this can only come out positive for the citizens and business of West Virginia.

Next Up - More Workers Comp Cost Cutting Techniques

Our main website is www.cutcompcosts.com

The Mandolodis Decision and West Virginia Workers Compensation - On 04/08/08 I attended the West Virgina Workers Comp Conference. The Conference is a prelude to the open market for Workers Comp in WV as of 7/1/08.

The Mandolodis decision discussion became very contentious. The one area that concerned me, as it did most of the insurers, was the Mandolodis decision. Please see my last post for a breakdown of what the suit entails for Workers Comp insurers.

While the NCCI said that Mandolodis would not affect any employers' E-Mod, there was a great concern that there would be coverage under Part B of a Workers Comp policy. Part B of a Workers Compensation policy is known as Employers Liability. It was designed as a catch-all in case a suit was brought against an employer that would be considered a liability claim.

Most state statutes and Supreme Court cases have ruled that there is a sole remedy for Workers Comp and that employees could not choose to sue their employer under a liability claim. Such suits would wreck the Workers Comp system.

Mandolodis seems to have punctured the employer's veil of Workers Comp as a sole remedy. That leaves the insurers and employers of WV in an interesting situation. One of the solutions that I had heard at the conference was to have a stop-gap policy that addressed the Mandolodis claims. This would seem to work on the surface, but Mandolodis claims involve an INTENTIONAL act by the employer. Insurance never has and never will cover an intentional act. This may complicate the situation even further.

The NCCI (National Council on Compensation Insurance) is the final decision maker on whether those claims affect the E-Mod. They gave their assurance that it would not affect an employers Workers Comp E-Mod. My understanding is that Brickstreet (the state-mandated temporary monopolistic Workers Comp carrier) is offering a Mandolodis coverage for a certain % on top of the original policy.

I am sure there is going to be some effect from the Mandolodis decision in WV. We may have to wait until 2010 to see what the final effect was from this conundrum.

Next Up - More on the West Virginia Conference

Our main website is www.cutcompcosts.com

The West Virginia Workers Comp Conference 04/08/08 - Instead of covering most of the major topics, I thought I would cover the Mandolodis decision that has so many of the insurance carriers very concerned about writing new Workers Compensation policies beginning 07/01/08.

In 1978, the West Virginia Supreme Court of Appeals issued a ruling in Mandolidis vs. Elkins Industries Inc. that meant an employee can sue his employer for "deliberate intent" without having to blame a specific person for the injury.

Following the Mandolidis decision, the state began a new insurance program, called the Employers Excess Liability Fund, which allows companies to buy additional coverage to protect them from the added potential liability stemming from the Mandolidis decision. The Legislature turned the opinion into law, which was followed by a "flurry of cases in 1992 and 1993." The statute established a strict, five-part test a plaintiff would have to meet to file a legitimate deliberate intent lawsuit. But the Supreme Court, in its interpretation of the five-part test, watered down those standards significantly.

A 2000 Supreme Court opinion in Roberts vs. Consolidated Coal Co. has made deliberate intent cases even more problematic. The workers' compensation statute removes certain defense strategies a company can use in return for legal protection from lawsuits. The court ruled in Roberts that because deliberate intent lawsuits relate to that statute, the defense limitations apply.

Thus, employers cannot present evidence that criticizes the injured worker. For example, if a worker sues his employer because he believes an injury was the result of faulty equipment, the employer cannot argue the worker used the equipment incorrectly. The employer would be limited to proving that the equipment functioned properly. Mandolidis litigation is a problem because it seems that every serious injury results in a deliberate intent lawsuit being filed.

West Virginia and the Mandolodis Decision Part II

Our main website is www.cutcompcosts.com

Definition - Consent to (Consented) Premium - Consented premium allows the insurance carrier to deviate from their state filings for a certain Workers Comp Class Code. This is a popular way to write policies in the state of Florida. A carrier supplied factor is added to the filed rates. The "consent" is given by the signature of the insured.

This usually happens when a company is very hard to classify or the classification code that is closest in nature to the company does not account for all of the risks inherent to the specific employer. These consented premiums must be pre-approved by the department of insurance where coverage is sought.

We had reviewed a recent policy where the consented premium was 280% more than the filed classification code. The insured employer had signed off on the consented premium.

The advantages to Consented Premiums are:

• Allows a hard-to-cover employer to have Workers Comp insurance coverage
• Must be approved by the Department of Insurance

The disadvantages are:

• A much higher Workers Comp premium cost.
• If any questions come up later about the policy or audit, it is very difficult to dispute as the premiums and classification codes were consented to by the employer
• There may have been a classification code that more closely fit the employer which could have avoided a heavy surcharge
• The E-Mods are being calculated from a less-risky classification even though there is a higher-risk element added to the policy

Next Up - The West Virginia Workers Comp Forum of 4/08/08

Our main website is www.cutcompcosts.com

To our blog readers - our blog producer software had a slight error which has now been fixed. We will soon have a place for our readers to sign up to have our Workers Comp daily blog emailed to them.

I have been traveling quite heavily over the last two weeks. We will have a blog on the West Virginia Workers Comp Forum next week. It should be interesting.

Please feel free to check out the large list of Workers Comp and Financial definitions at http://www.cutcompcosts.com/definitions.html

If you have any questions or comments, please feel free to email them to info@cutcompcosts.com

Workers Compensation Reserves - The Silent Budget Killer - I have posted very often about the process for calculating Workers Comp premiums. The one area that I could never cover enough is Workers Comp reserving. The reserves are the engine for all calculations that have to do with calculating your Experience Modification Factor or E-mod.

What makes the reserves on a file so unique? In all the process of how your Workers Comp premiums are charged, the Reserves are the only unregulated numbers in the equation. The reserves on a Workers Comp file are left up completely to the claims department. The adjuster can set the file reserves at any level they wish. The only regulation the file has is the supervisory staff of the claims department.

How are reserves calculated? It is usually some form of an educated guess by the claims adjuster. You have very little control over the Workers Comp reserve figures.

How do you take control of your reserves? A Workers Comp Loss Run review is a great way to make sure you are not overpaying on your Workers Comp premiums. One of my prior post covers the review in detail.

If you feel that this is a very complicated process, you are very correct. Do not hesitate to call in a claims expert such as our company to help you make sure you are not overpaying.

Next Up- A Workers Comp Definition

Our main website is www.cutcompcosts.com

Another Workers Comp Definition - This is one that I have posted about previously - Total Incurred - is the funds that have already been paid out + the Reserves on the file. The E-Mod is calculated using Total Incurred as one of the main items. The Paid part of Total Incurred can rarely be adjusted. The Reserves, however, can be negotiated. The three parts of the Total Incurred are

• Indemnity Payments/Reserves
• Medical Payments/Reserves
• Expense Indemnity/Reserves.

If you look at your NCCI or Rating Bureau Sheets, you will only see one loss figure as the Total Incurred is the total of the above three bullets.

I wanted to start with the Total Incurred as I wanted to talk more about the Reserves part of the Total Incurred figure in the next post.

Next Up - Reserves - The Secret Budget Buster

Our main website is www.cutcompcosts.com

Two Subrogation Questions to Ask your Workers Comp Adjuster - there are two questions that you will need to ask the Workers Comp adjuster who is adjusting the file.

They are:

1. Have you sent a notice letter to the carrier of the negligent third party, and may I have a copy of that letter?
2. What is the status of the subrogation lien?

There is a much longer list of questions, but these are the two basic ones that a Workers Comp employer should be asking often if there is a possible lien on the file.

There are time limits for giving a third party insurance carrier notice. The Workers Comp adjuster may be absorbed into the Workers Compensation file and may have overlooked putting the third party carrier on notice. Any amounts recovered by your Workers Compensation carrier must be immediately entered into the file. Almost all Workers Comp adjusters do not have a background in Auto, Premises, General, or other type of liability coverages.

There are quite a few tricks and traps in Subrogation. Remember, when the Workers Comp Adjuster's lien is negotiated down, that is your money that is being lost. Not following the subrogation of your Workers Comp lien can ruin a great avenue to recover funds that will bring down your E-Mod.

Subrogation is one area where I recommend that you use an adjusting expert. Subrogation can be very complicated and confusing even to the adjuster that is on the file. We have had to assist the Workers Comp adjuster on quite a few claims in recovering the funds from a third party liability carrier. The largest one we have had so far is over $1million.

Next Up - Another definition from www.cutcompcosts.com/definitions.html A list of free definitions that you can download.

From Our Definitions Tab at http://www.cutcompcosts.com/definitions.html This is one of the most misunderstood areas in insurance, and especially Workers Compensation, that we see costing insureds millions of dollars a year.

Subrogation: Prevents the insured from collecting loss payments from his or her own insurer and from the responsible third party for the same loss. Once the insurer pays a loss caused by a third party, the insurer takes over, or is subrogated to the insured's common-law right of action against the negligent third party.

What does this mean to the employers? If there are any accidents where another party is responsible (critical - or even partially responsible) for an on-the-job-injury, your Workers' Comp carrier should be pursuing funds from the third party's insurance carrier. This is one area where we see so much of the employer's money go down the drain.

Next Up - Two Subrogation Questions to Ask your Workers Comp Adjuster

Our main website is www.cutcompcosts.com

Released from the West Virginia Department of Insurance

WEST VIRGINIA’S FOLLOW-UP CARRIER FORUM

In response to the overwhelming attendance from our Open Market Forum in September 2007 and the requests for updates of recent legislative items, the Offices of the Insurance Commissioner invite you to join your colleagues for a second Workers’ Compensation Open Market Forum.

This April 8th forum will provide you with the information needed to smoothly enter the West Virginia market and will allow you to ask specific questions your company may have regarding this new opportunity. Join the West Virginia Offices of the Insurance Commissioner and NCCI for a forum designed to provide workers' compensation carriers with additional information needed to begin writing business in WV. This is a valuable opportunity for senior management to learn first hand of what is being experienced in WV and provide answers to questions relative to this new market opportunity. Participants will learn about the legal updates that have occurred, NCCI's filings and what they must do to take advantage of the quickly approaching July 1, 2008 opening date.

WHEN: Tuesday, April 8, 2008 9:00 am to 3:00 pm (Registration starts at 8:30)

WHERE: Town Center Marriott, Charleston, WV

Among the topics we will cover are:

• The New West Virginia Market
• Legal Issues and Update
• NCCI Loss Cost Development
• NCCI Underwriting Plans
• Residual Market

We are going to attend and will post about the Conference on 04/08/08. This meeting is critical if you plan to write or are considering writing Workers Comp coverage in West Virginia.

Our main website is www.cutcompcosts.com