Tag Archives: fmla

Huge Knowledge Gap on Leave Benefits

Alarmed by the results of the 2019 employee/manager FMLA Knowledge Gap survey with regard to the lack of understanding of leave regulations and the employee and compliance challenges due to it, we decided to follow up in 2020 in the hopes of seeing a significant improvement. Leave administration may not be a top of mind or a requirement detailed in most managers’ jobs, but nearly 50% of those surveyed indicated they are asked to educate their employees about leave options — specifically Family and Medical Leave Act (FMLA) and state-mandated family and medical leaves.  Additionally, managers are required to notify employees of their eligibility for these specific leave benefits. Easy enough, right?

Say you are a manager for a New York-based employer and have an employee whose father has suffered a stroke. The employee informs you they’ll need to be out of work for at least two weeks while they take care of him. You tell them that, unfortunately, they only have seven days of paid time off remaining this year, so they’ll need to return to work when their PTO is up.

Not so fast. You’ve failed to provide notice requirements to this employee relating to the other leave benefits available to them for taking time off work to care for a parent who has a serious health condition. As a New York state employee of a company with more than 50 employees, they’re entitled to job protection under the FMLA. Additionally, they are entitled to apply for New York Paid Family Leave that would provide wage replacement for their time out of work. By not advising this employee of their rights and responsibilities under these leave laws, you have inadvertently violated these laws, and as a manager you may be held personally liable.

Remember, you made him come back to work during a critical time in his father’s life. Perhaps he chose not to come back and took unpaid time? Perhaps you issued attendance points? You have now critically violated his FMLA rights.

And this scenario is just for one state. Each state has its own regulations, with state paid family leave becomingly increasingly common but, of course, still not available to employees in most states. With so many companies now moving to either permanent or hybrid models of work from home, employees can live and work from anywhere, complicating how you manage leaves of absence. 

An Alarming Knowledge Gap Among Managers

For the second straight year, we surveyed front-line managers to better understand how well they grasp the federal Family and Medical Leave Act (FMLA) as well as state paid family leave (PFL), provided they live in one of the states currently offering PFL. Though we slightly tweaked some of our questions from our initial research in 2019 — limiting the direct comparisons from 2020 to 2019 — the numbers continued to paint a bleak picture for managers’ understanding, creating operational and business risk for them and the company.

To be deemed “knowledgeable,” managers were required to answer our three questions on FMLA correctly. Of the 435 managers surveyed, just 11% answered all three basic questions correctly, reflecting a significant knowledge gap!

For PFL, we asked two questions to test managers’ knowledge, and just 17% of these managers were able to correctly identify the benefits eligible under PFL, including whether they live in a state currently offering PFL.

It would be one thing if these managers weren’t tasked with any responsibility with leave administration at their company, but that’s not the case. The graphic below shows that nearly 50% of managers said they are responsible for educating their employees on these leave benefits and notifying them of their eligibility.

Figure 1: Managers’ responsibilities in leave administration at their employer

Considering that 30% of managers in the study thought that FMLA provided insurance coverage to pay medical bills while on leave and 32% indicated FMLA provided replacement of lost salary/wage, it is easy to be concerned about having these managers responsible for educating employees on these leave options and benefits. Adding to the complexity and risk for the company is that having one of your managers treat their direct reports differently than another relating to the FMLA is also an FMLA violation. If one manager thinks FMLA can be taken for a family vacation, and another doesn’t, you have a significant compliance issue!

See also: The Key to Agency Management Systems

Figure 2: Employees’ and managers’ responses to the benefits provided by FMLA. Note: Respondents could select multiple answers.

We speculated after 2019’s report — in which we did not ask questions about whether managers had received FMLA training — that a lack of training was a major factor in the knowledge gap. Yet, after collecting training data from respondents in 2020, we found the knowledge gap among managers was virtually the same, regardless of whether the manager had formal training.

While this is yet another red flag, we did identify some benefits from training. Managers who had received FMLA training were significantly more likely to agree that as managers of employees, they could be sued for FMLA and ADA violations. They were also significantly more likely to agree they are responsible for helping with compliance at their organization.

What Role Does Technology Play in Educating Managers and Employees?

Customer portals are becoming commonplace for large employers as well as insurance companies — recent Majesco research found that insurers are heavily focused on customer self-service capabilities and portals, with 41% to 61% of companies saying they are implementing or have already implemented these.

While these portals can be used for a multitude of reasons, they can be a tremendous resource for employees and managers when it comes to tracking and reporting absences. Our research found that self-service company portals are employees’ preferred method of obtaining answers to the number of days they’ve been absent and the days they have remaining. But when it comes to more detailed questions, such as the type of state of federally offered leaves available, employees are more apt to seek out this answer by contacting their HR department.

Figure 3: Where do employees go for their leave questions?

The benefits of an effective and informative self-service portal are substantial. Having a devoted platform where employees and managers can access this information 24/7 could play a pivotal role in ensuring both employees and managers are well-educated in the state and federal leaves available to them. Paired with software that can automatically determine an employee’s eligibility for these leaves based on built-in regulations is the type of error-proof compliance solution needed in the market. Hence the rising demand in absence and accommodation management software that employers can use or insurance companies can provide as a “value added service” to their employer customers. 

Insurance companies that are providing this offering, or are enhancing their portal, are well-positioned to be a go-to solution for helping employers mitigate their compliance risk and improve their leave management offering.

How Should Employers Address This Knowledge Gap?

As you might expect, there’s no silver bullet for solving this knowledge gap. For some companies, the gap may not be as substantial. And the approach to address this gap for one employer may not work for another. Take employer size and location. An employer with more than 10,000 employees that has offices all across the U.S. is going to have a much more complicated workforce than a 200-person company operating in a single state will. And, as noted, the rising acceptance of work from home will accelerate this complexity. 

Balancing multiple state paid family leaves alongside other local, state and federal leave laws, and any corporate leaves, is a lot for anyone whose full-time job is absence management. While no one is expecting these managers to have the same knowledge as those individuals, it probably doesn’t come as a surprise that managers who have a substantial list of their own day-to-day duties are struggling to correctly identify FMLA and PFL details. Simply allowing these managers to continue to play a role in leave administration without proper education isn’t the answer, though.

While our study found the existing training structure isn’t effective for educating managers, we heard through interviews with them that these training sessions were infrequent and covered a wide range of topics — they weren’t specific to leaves such as FMLA. Evaluating whether the existing training at your company is focused enough and effective with your staff is a great starting point.

For some employers, though, part of the answer may be to look to an insurance carrier or third-party administrator for a new “value added” service. Although it doesn’t absolve your managers of responsibility, outsourcing leave administration to insurers or TPAs is becoming increasingly common among employers. Insurance companies and TPAs have the resources and technology to optimize the business process and ensure compliance with these laws.

For a complete picture of the FMLA and PFL Knowledge Gap in 2020, you can download the report here.

Industry Trends for 2017

Every day, our colleagues take care of people facing uncertain situations. Whether they have a workplace injury, need time away for the birth of a child, experience a medical situation that will lead to time off, are in an auto accident or suffer product or property damage, we are here to let them know that it’s going to be okay.

Part of our job in caring for these people is to simplify and clarify the process and to explain what consumers can expect. An evolving system, shifting regulations, rapidly advancing technology and economic uncertainties add to the complexities they face. Key areas in the spotlight for the coming year include good health empowerments, regulation transformations, consumer-centric progressions, risk circumventions and tech modernisms.

We will continue to offer our insights as we monitor the following business advancements and challenges throughout 2017:

Good health empowerments

Accessing care via technology

Technology advancements will continue to influence healthcare delivery. Connecting a specific injury or condition with a quality provider in a virtual setting for more immediate treatment will make these advancements more readily acceptable and increase demand.

Balancing the scale of pain management

Increasing opioid addiction and the legalization of medical marijuana will ensure pain management remains at the forefront of industry discussions. Increased education about the dangers of opioid abuse, the availability of marijuana as a medical alternative and the introduction of alternative pain management techniques will continue to dominate the conversation.

Supporting mental health initiatives

The pressures to reduce stigma and strengthen initiatives aimed at psychosocial issues and behavioral health will continue to mount. The linkage between absence at the workplace and mental health will continue to be highlighted.

See also: 10 Insurance Questions for 2017  

Regulation transformations

Compliance enforcement

Employers will continue to manage compliance-related issues as they respond to changes in the ADA/ADAAA, FMLA and other federal and state laws affecting our industry. Political reorganization and shifting administrative priorities may also create regulatory shifts for OSHA and the EEOC.

Navigating regulatory changes

Assessing the impact of provisions introduced by newly elected officials from the federal and state level in the areas of healthcare, workers’ compensation and parental leave will be at the forefront. It will be necessary to monitor newly introduced legislation in key states such as California, New York and Florida to determine how best to respond and comply with new regulations.

Workers’ compensation strategies

Primary steps among industry leaders include finding common ground and developing strategies focused on benefiting all key stakeholders. Those who favor a federal workers’ compensation option point to inconsistent benefits, rules and regulations among the states. Others believe the state systems have proven to be effective and simply need to be updated. By understanding what should be changed or replicated, legislators can work to revitalize workers’ compensation and help ensure that it continues to fulfill its original purpose.

Consumer-centric progressions

Enhancing the claims experience

The current claims paradigm will continue to shift and be characterized by an increasing focus on the consumer. The needs of injured or ill employees and other consumers will assume center stage. Claims expectations will be established early on; information and resources to support the consumers’ needs will become more readily available; and care and concern will drive and transform the claims experience.

Bridging benefit models

Integrated benefit plans have long been discussed, but not widely implemented. Pushing the boundary between various benefit providers, administrators, payers and employers through advanced online platforms could be at the forefront of many discussions. In addition to technology advancements, there is a renewed health, wellness and compliance mindset that is fostering increased interest in integration.

On-demand consumerism

Consumer and customer expectations are on the rise, and providing an immediate response has become expected in many industries. Increased connectivity and immediate communication are now the standard. In the past, it was enough to provide claim and case details through push technology, seamless payment processing and direct bank deposits. Now, the gold standard is to provide a consumer-focused experience where access to resources and data are a click away. With enhanced consumer engagement comes faster resolution, reduced litigation and reallocation of resources to focus on more complex matters.

Risk circumventions

Crisis plans

Building resiliency through new predictive models in pre-catastrophic events and using new technologies in post-disaster recoveries is on the mind of many employers. Whether the emergency is natural or man-made, cyber- or product-related or a supply chain interruption, having the right pre-catastrophe plan in place continues to be a discussion among employers, brokers, carriers and payers.

Geo risks

More organizations are likely to consider an enterprise-wide response to growing political, economic and global risks as customer markets expand. There is also an increasing need to address travel risks for employees servicing global customers on a short-term or interim basis, and ensure preparedness plans are in place.

Talent strategies

There continues to be a need to attract, train and retain new talent as baby boomers enter retirement years. Employers must learn how to accommodate multiple generations with varied preferences – from telecommuting to technology – and ensure successful integration with the existing workforce. Creating strategies and using new tools for knowledge sharing will help enhance communication and understanding.

See also: 2017 Priorities for Innovation, Automation  

Tech modernisms

Artificial and emotional intelligence

The rapid advancement of technology has led to conversations and interest in artificial and emotional intelligence. Developments in these areas and others such as new connected health technologies, Internet of Things, drones, driverless cars and services using virtual technology are contributing to privacy law and ethical guideline debates.

Explosion in actionable data

With today’s technology advancements and increasing number of connected devices come an explosion in actionable data, creating a need for more data miners. There is a growing demand for data scientists and engineers who can interpret actionable information. The use and expectation of having more refined predictive analytics to drive decisions will continue to increase and underscore the need for this specialized talent. Deciphering actionable insights as more data pours in from various connected devices will continue to be an important topic of discussion.

Self-service innovations

Having been introduced in the banking and airlines industries early on, consumer self-service options are becoming increasingly popular in the risk and benefits industry. Consumers of claims services are seeking the same user experiences that they have become accustomed to in the B2C world, including instant information access, connectivity to tech support and two-way communication when and how they want it.

You can find the original report here.

Is EEOC an Unlikely Friend on Work Comp?

The traditional school of thought since the Americans with Disabilities Act (ADA) was enacted in 1990 is that it did not apply to state workers’ comp cases because they involve temporary disabilities and work restrictions. Claimants were not considered “qualified individuals with a disability” under the ADA. Even if the ADA provision for a “reasonable accommodation without undue hardship” is to be taken into consideration, the process would not begin until the claimant reached maximum medical improvement (MMI). But informal EEOC guidelines released in December 2014 stated that these traditional understandings may not be legal.

The EEOC release stated that it is “not true” that MMI should be considered the trigger for ADA-related protections for employees and obligations for employers. Employers must begin the ADA interactive process for return to work (RTW) much sooner than commonly thought. The EEOC is saying that workers’ comp and the ADA process are to run simultaneously, not sequentially. In addition, the worker must be an active participant in the process. This is a major surprise to many in the industry.

I have been a proponent of using “the spirit of the ADA” to implement return-to-work practices in workers’ comp programs for 25 years. (See previous ITL article, “Return-to-Work: A Success Story,” June 25, 2014.) However, these new “interactive process” guidelines may change the whole practice of RTW in workers’ comp because most employers and their third-party administrators (TPAs) or insurers typically postpone attempts at a reasonable accommodation until the claimant reaches MMI. That may now be construed as a violation of employee rights and employer obligations under the ADA.

In addition, the EEOC guidelines give a very broad definition of disability and when it applies under the ADA. The EEOC spokesperson said the ADA applies “all the time” and “as soon as notified” when “a medical condition has the potential to significantly disrupt an employee’s work participation. . . . The only relevant question is whether the disability is now, or is perceived as potentially, having an impact on someone’s ability to perform their job, bring home a paycheck and stay employed.”

That is a mouthful to swallow and think about. The ADA would apply if the disability is “perceived” as having an impact on the ability to perform a job. Perceived by whom? The employer? The employee? The physician? What physician?

What does this mean for employers?

The EEOC stated that its biggest concern is the employee who has a disability but who can perform the essential functions of a job with a reasonable accommodation. The cause of the disability is considered irrelevant under the ADA. It will now be very difficult for employers to say that a worker is not a “qualified” individual under the ADA because the person obviously held the job prior to the disability.

The EEOC stated that everyone, including treating physicians, TPAs and employers, should “keep that in mind” but that only the employer is accountable for complying with the ADA. Treating physicians and employer vendors who fail to communicate with employers during the “stay @ home” process may be exposing the employer to increased risk and liability, and the EEOC spokesperson said this failure would be particularly troublesome if a treating physician who is picked by the employer doesn’t tell the employee about adjustments that might allow her to work. The employer may be liable for failing to provide that accommodation even if not properly passed along. The EEOC spokesperson went on to say that physicians and vendors should be educating employers. But who, may I ask, is educating the physicians and employer vendors?

How should employers react to these EEOC process guidelines for workers’ comp and other non-occupational disability programs? Employers should embrace them!

Most that is truly considered workers’ comp managed care and RTW best practices are encompassed in these interactive guidelines: prompt, high-quality medical care followed by 24-hour contact between workers, treating providers and supervisors. Safe return to work, with or without reasonable accommodations, should be the goal from day one and documented in each case, even without intervention by the EEOC.

Sebastian Grasso, CEO of Windham Group in Manchester, NH:

sgrasso@windhamgroup.com

which specializes in “failed return-to-work,” agrees and argues that the EEOC action should be a “wake-up call” for employers. Grasso, like several other industry experts interviewed for this article, said that in his 25-year career in the RTW business his employer/insurer clients have never brought up the ADA in workers’ comp cases. He said the two problems faced on a daily basis in the workers’ comp industry that severely hamper RTW efforts are erroneous job descriptions and inflexible employers who won’t take injured workers back unless they are “100%.” This traditional mindset and passive approach to RTW may now be considered an ADA violation, so employers and insurers may have to re-think their RTW policies and procedures.

Grasso stated; “We get injured workers back to their original jobs; it’s what we do every day. It’s the right thing to do; it’s non-adversarial and benefits all the players in the process.” This approach appears to be both within the spirit and now actual guidelines of the ADA, according to the EEOC.

Ted Ronca (medsearch7@optionline.net), a leading workers’ comp and disability attorney based in New York, also stated that he never saw the ADA brought up in a workers’ comp case in New York in the past 24 years. Ronca also feels employers should “champion” the new approach for workers’ comp RTW programs. He recommends the first thing for employers is to establish job requirements and bring the employee into these preliminary discussions. Ask the worker for his input on reasonable accommodations and document the discussion.

Back when the ADA was enacted in 1990, many believed a slew of litigation would result from workers’ comp cases. This has rarely, if ever, happened. Most experts I have spoken to are not aware of any cases, but the original fears may now come to fruition. As Ronca noted; “75% of the cases in the New York work comp system involve cases where the claimant’s attorney is claiming total disability and seeking a lump-sum award.” Getting that injured worker back to work is not on the claimant’s attorney agenda but should be on the employer’s.

Employers should not fear the ADA but embrace it. The ADA has built-in protections for employers such as that any accommodations must be “reasonable without undue hardship.” This means significantly difficult or expensive. In addition, employers are not required to eliminate or reduce the essential functions of a job even temporarily. The EEOC is simply saying that employers may choose to reduce job demands and productivity expectations on a case-by-case basis and that no blanket policy is appropriate.

However, the EEOC goes on say that the ADA cannot be used to deny a benefit or privilege to which an employee is entitled, such as time off under the Family and Medical Leave Act (FMLA), workers’ comp, disability, sick leave, accrued vacation or any other leave and benefits. The EEOC considers the ADA “civil rights for people with disabilities.”

I just loved the EEOC comment that an employer’s stay @ home policy is not a reasonable accommodation. Not only is an interactive process the right thing to do for disabled workers, it will save money, improve productivity and protect employers from potential ADA violations and obligations.

It may be time to rethink your return to work program. It’s about time!

Absence Management: Work Comp’s Future?

American employers will dispatch hundreds of staff members to an April gathering in Washington, DC, on corporate compliance issues. In all likelihood, hardly any CEOs in the workers’ comp industry are fluent in these issues, even though by the end of this decade they may change the direction of the workers’ comp businesses, separating the successful from the laggards.

A change for workers’ comp leaders hides in plain sight.  Claims have been declining in frequency by about 3.5% a year. It’s prudent to expect continued decline, as jobs become safer every year. Average claims costs, which used to bump up by more than 5% a year, aren’t growing beyond a few percent.

Meanwhile, the typical employer’s agendas of employee leave, disability management and wellness have been surging in scope and complexity. A few workers’ comp companies have already repositioned themselves to provide a broad array of solutions for these agendas.

Most workers’ comp CEOs appear to think these burgeoning workplace concerns have little to do with their company’s future. They may be right. Or they may be whistling past the graveyard.

Since the beginning of the Great Recession, demographic, technology and legal trends visible in recent decades began to accelerate in the direction of smaller work injury risk and larger non-occupational employee risks. Frank Neuhauser of the University of California at Berkeley estimated that for most workers it is more dangerous to drive to work than to be at work.

And notice the rise in employee leave benefits and the greater emphasis on wellness (despite deserved criticism of overselling that concept). Perhaps this is how Occupy Wall Street ends: not in a revolutionary bang, but a paid parental leave benefit and a worksite yoga studio.

The Disability Management Employer Coalition puts on the April conference as its annual problem-solving exercise for the Family and Medical Leave Act and Americans with Disabilities Act. In addition to these federal mandates, states and localities have been promulgating leave-related mandates by the dozens. In January, for instance, Tacoma, WA, enacted a law requiring employers to offer at least three days of paid sick leave come January 2015.

ClaimVantage, which sells absence management software, reports there are about 140 federal and state family leaves across the nation. When adding ancillary leaves like jury duty and blood donor leaves, the numbers rise to about 400. Paid family leave is gaining momentum to become a mandated benefit. The U.S. is the only high-earning country that does not offer paid leave after the birth of a child and only one of eight countries in the world that doesn’t mandate paid leave for new mothers.

According to the Integrated Benefits Institute, workers’ comp accounts for a mere 11% of all work absences involving a medical condition.

Legally mandated and voluntary benefits, disability accommodation, wellness and other employee-centric programs have by intertwining themselves raised their visibility in corporate C-Suites. No single, memorable descriptor today captures them successfully. Phrases such as “health and productivity management” and “total health” are bandied about. I suggest a simple term, “absence management,” in a report I wrote called “Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers’ Comp,” which WorkCompCentral published in February.

The absence business beckons

Although the labels will evolve, the need of employers for expert outside assistance to address their agendas is bound to grow. Will workers’ comp companies deliver solutions?

The employers most ready to ask for help include those with relatively large workers’ comp costs to begin with: middle- to large-sized employers. Workers’ comp claims payers today will process about $65 billion in workers’ comp benefits this year. Perhaps 15% of these benefits involve very large employers. A further 25% involve employers that are not that large yet incur workers’ comp losses of about $200,000 a year or more. Combined, these employers account for 45% of workers’ comp benefits. In other words, about half of the workers’ comp business today is with employers big enough to know they have a complicated absence management problem on their hands.

Their human resource executives and legal counsel have been telling CEOs that the compliance risks of government mandates can’t be ignored. The mandates have grown into an elephantine mass so thick that without expert outside assistance an employer has a high probability – say, 100% — of violating some law or other.

The more alert and early-adapting segment of employers tends to affiliate with the San Francisco-based Integrate Benefits Institute. Their individual staff members join the San Diego-based Disability Management Employer Coalition. These membership organizations feed the demand for training, resource networking and applied research.

Broadspire, ESIS, Sedgwick, York and perhaps other third-party administrators already market services to manage at least some aspect of non-occupational absences.

Workers’ comp claims payers can manage non-occupational absences because they already possess the needed core competencies. Pared down to the essentials, the workers’ comp claims payer does six things:

  • It processes claims.
  • It assists at some level of intensity in reducing the rate of incidents that end in claims.
  • It coordinates medical treatment and vocational recovery
  • It understands return to work.
  • It prices its product.
  • It complies with pertinent laws.

Absence management does basically the same things.

Further tying together workers’ comp and non-occupational absences in a workforce is the vital role of health behaviors of employees. The workers’ comp claims executive is acutely aware that health behaviors of injured workers often drive up claims costs. It is increasingly clear that smoking can be a more costly unsafe act than, say, distraction. Not that smoking precipitates an occupational or non-occupational injury (there’s scanty evidence of that), but that smokers are at more sharply higher risk to heal slowly and to become dependent on opioids in treatment.

The Integrated Benefits Institute has for years carefully analyzed patterns in non-occupational absences. It says that employers can and should use a coherent master plan for absences of all kinds, wellness initiatives and claims management.

In a phone and email exchange, IBI President Tom Parry suggests that workers’ comp claims payers think through their strengths in medical care, disability management and return to work. “These all are key parts to an employer’s strategy in taking a comprehensive approach to lost work time management,” he says.

Also, he advises, be prepared to benchmark and compare. Get hold of industry-specific benchmarking data across lost time programs, workers’ comp, FMLA and short and long-term disability. Become fluent in plan design terminology on the non-occupational side. Review the research literature on the cross-program impacts of health and a total absence management approach. IBI just published research on claims migration across programs, “Crossing Over — Do Benefits and Risk Managers Have Anything to Talk About?”

Why companies may hold back

A workers’ comp claims payer might enter the absence business because it does not believe that the workers’ comp industry is shrinking. For instance, the average cost of claims may, as it has in the past, grow faster than the reduction in injuries, leaving claims payers with an ever-larger pie. But in recent years average indemnity and medical costs have greatly slowed their growth and in some jurisdictions declined. And the incidence of lost time compensable claims continues to decline, the one clear exception being the island of all exceptions, Southern California.

Also, workers’ comp executives might say there is no apparent demand from their clients for non-occupational services. This sort of flies in the face of the experience of TPAs that have launched non-occupational service units. (True, they focus on the higher end of the employer market.) But the observation also doesn’t jibe with the workers’ comp industry’s experience with emerging services in the past. In instances of innovation, from medical bill review to pharmacy management to Medicare set-asides, large-scale and profitable services emerged after initial years of puzzlement. The fog banks eventually lift.

Then there are impediments in the broker community. It’s almost inevitable that absence management involves insurance products sold through benefits brokers and products sold through property and casualty brokers. They don’t talk a lot, even when working under the same roof. This complicates the work of product design and marketing.

Another reason to say no to opportunity is the challenging learning curve that absence management brings. But look at how the TPAs handled that. Those that have expanded their service offerings beyond workers’ comp claims all appear to forge alliances with, or acquire, servicing partners already steeped in some aspect of absence management.

It may be too harsh to equate workers’ comp claims payers with the railroad industry, which 60 years ago asserted that it was in the railroad, not the transportation, business. Perhaps too harsh, but there may be a lesson in that story.

The decline of work injuries

Injuries requiring at least 31 days away from work

year 1993 2015 2022 (projected)
injuries 450,000 250,000 175,000
Total employment 110 million 133 million 148 million

 

 

Workers’ Comp Issues to Watch in 2015

Tis the season for reflections on the past and predictions for the future. As we kick off 2015, here are my thoughts on the workers’ compensation issues to watch this year.

What Does TRIA’s Non-Renewal Mean for Workers’ Compensation?

Thanks to congressional inaction, a last-minute rewrite added this subject to the issues for this year. I’m not about to predict what Congress will do with TRIA legislation in 2015, as there are no sure things in the legislative process. We have already seen the reaction from the marketplace. Back in February 2014, carriers started issuing policies that contemplated coverage without the TRIA backstops. We saw some carriers pull back from certain geographic locations, and we also saw some carriers change the terms of their policies and only bind coverage through the end of the year, giving themselves the flexibility to renegotiate terms or terminate coverage if TRIA wasn’t renewed. But while some carriers pulled back in certain locations, others stepped up to take their place. While some carriers tied their policy expiration to the expiration of TRIA, other carriers did not.  Going forward, some employers may see fewer carrier choices and higher prices without the TRIA backstop, but ultimately most employers will still be able to obtain workers’ compensation coverage in the private marketplace. Those that cannot will have to turn to the State Fund or assigned risk pool.

Rising Generic Drug Prices

The opioid epidemic, physician dispensing and the increased use of compound drugs are issues the industry has faced for years. While these issues continue to be a problem, I want to focus on something that is getting less attention. Have you noticed that the costs for generic prescription drugs are increasing, sometimes significantly? In the past, the focus was on substituting generic drugs for brand names, which provided the same therapeutic benefit at a fraction of the costs.  But now the rising costs of these generic medications will drive costs in 2015. These price increases are being investigated by the Federal Drug Administration (FDA) and Congress, but I do not expect this trend to change soon.

Medical Treatment Guidelines

Another issue to watch on the medical side is the continued development of medical treatment guidelines and drug formularies in states around the country. This is a very positive trend and one that our industry should be pushing for. There is no reason that the same diagnosis under workers’ comp should result in more treatment and longer disability than the same condition under group health. One troubling issue that I see here is the politics that come into play. Sorry, but I do not accept that human anatomy is different in California or Florida than in other states. I feel the focus should be on adopting universally accepted treatment guidelines, such as Official Disability Guidelines, or “ODG,” rather than trying to develop state-specific guides. The ODG have been developed by leading experts and are updated frequently. State-based guidelines often are influenced by politics instead of evidence-based medicine, and they are usually not updated in a timely manner.

How Advances in Medical Treatment Can Increase Workers’ Comp Costs

There is one area in which advances in medicine are actually having an adverse impact on workers’ compensation costs, and that is in the area of catastrophic injury claims. Specifically, I’m referring to things such as brain injuries, spinal cord injuries and severe burns. Back in 1995, Christopher Reeve suffered a spinal cord injury that left him a quadriplegic. He received the best care money could buy from experts around the world, and he died less than 10 years after his injury.  But as medicine advances, we are now seeing that a quadriplegic can live close to normal life expectancy if complications can be avoided. Injuries that used to be fatal are now survivable. That’s great news. The downside for those paying the bills is that surviving these injuries is very costly. The cost of catastrophic medical claims used to top off around $5 million, with a $10 million claim being a rarity. Now, that $10 million price tag is becoming more the norm.

The Evolving Healthcare Model

For years, workers’ comp medical networks focused on two things: discount and penetration.  Sign up as many physicians as you can as long as they will agree to accept a discount below fee schedule for their services. I’m happy to say that we are slowly, finally, evolving away from that model. Payers are realizing that a better medical outcome for the injured worker results in lower overall workers’ compensation costs, even if that means paying a little more on a per-visit basis. We are now seeing larger employers developing outcome-based networks, not only for workers’ compensation, but for their group health, as well. Employers are also starting to embrace less traditional approaches such as telemedicine. Finally, more and more employers are recognizing the importance that mental health plays in the overall wellness of their workforce. In the end, we are slowly starting to see is a wellness revolution.

The Need for Integrated Disability Management

The evolving healthcare model is tied directly to an evolving viewpoint on disability management. More employers are realizing the importance of managing all disability, not just that associated with workers’ compensation claims. Employees are a valued asset to the company, and their absence, for any reason, decreases productivity and increases costs. I feel this integrated disability management model is the future of claims administration. Employers who retain risk on the workers’ comp side usually do the same thing with non-occupational disability. These employers are looking for third-party administrators (TPAs) that can manage their integrated disability management programs. And make no mistake: Having an integrated disability management program is essential for employers. Human resource issues such as the Americans With Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA) cross over into the workers’ compensation realm. The same interactive process required on non-occupational disability is required in workers’ compensation. Employers must be consistent with how they handle any type of disability management, regardless of whether the cause is a workers’ compensation injury or non-occupational.

Will We See a Push for ‘Opt Out’ in Other States?

Most people know that non-subscription, or opt out, has been allowed in Texas for many years. The Oklahoma Option that started last year is viewed as a much more exportable version of opt out. Under this system, employers can opt out of workers’ compensation, but they must replace it with a benefit plan that provides the same (or better) benefits available under traditional workers’ compensation. While some view the Oklahoma Option as the start of an opt-out revolution, it is just too early to tell what impact it will ultimately have. But, make no mistake, discussions about opting out are spreading to other states. A group called the Association for Responsible Alternatives to Workers’ Compensation is currently investigating the possibility of bringing opt out to other states. I expect to see opt-out legislation in a handful of other states in the next three to five years.

Marijuana

Marijuana legislation is a very hot topic these days.  In national polls, the majority of Americans favors legalization of marijuana in some form.  Recreational use of marijuana is now legal in four states (Colorado, Washington, Oregon and Alaska), and 23 states allow medical marijuana. When it comes to workers’ compensation, much of the attention has been focused on medical marijuana as a treatment option for workers’ comp because a judge in New Mexico allowed this last year. My concern is around employment practices. Employment policies around marijuana have been centered on the fact that it is illegal, so any trace in the system is unacceptable. That is going to change. I fully expect the government to reclassify marijuana from Schedule I to Schedule II in the next few years. When that happens, zero-tolerance policies in the workplace will no longer be valid. Instead, the focus will have to be like it currently is with alcohol: whether the person is impaired.

The Next Pandemic

Another hot topic these days is Ebola. While the threat from this particular disease seems to be subsiding, the concerns about Ebola last year showed we are not ready for that next pandemic. People who were exposed to the disease were allowed to interact with the general population and even use commercial travel. Government agencies debated whether travel to certain countries should be limited. The problem is, diseases don’t wait for a bureaucracy to make decisions. While this threat didn’t materialize, you can see how easily it could have. With work forces that travel around the globe, the threat of a global pandemic is very real. You know where you send your workers as part of their job, but do you know where they go on vacation? As an employer, are you allowed to ask about what employees do during their personal time? Are you allowed to quarantine an employee who traveled to an infected country during vacation? These are very complex legal questions that I cannot answer, but these are discussions we need to be having. How do we protect our employees from the next pandemic?

Rates and Market Cycle

You cannot have a discussion around issues to watch without talking about insurance premium rates in workers’ compensation. After several years of increasing rates around the country, the National Council on Compensation Insurance (NCCI) is projecting that, in 2014, workers’ compensation combined ratios were below 100% for the first time since 2006. This means that, as an industry, writing workers’ compensation is profitable again. So what should buyers expect in 2015? Well, it depends. California continues to be a very challenging state for workers’ compensation costs. New York is challenging, as well. Given the percentage of the U.S. workforce in those two states, they have significant influence on the entire industry. Some employers will see rate reductions this year, and some will not. In the end, your individual loss experiences will determine what happens with your premiums. That seems to be the one constant when it comes to pricing. Employers with favorable loss experiences get lower rates, so it pays to stay diligent in the areas of loss prevention and claims management.

Will We See More Constitutional Challenges Similar to Padgett in Florida?

While I don’t think the Padgett case will be upheld on appeal, I am concerned that the case is the first of many similar ones we could see around the country. Look at the main arguments in Padgett: The workers’ compensation system is a grand bargain between injured workers and employers. Workers gave up their constitutional right to sue in civil courts in exchange for statutorily guaranteed, no-fault benefits. Over the last 20 years, many workers’ comp reform efforts around the country have focused on lowering employer costs. Standards of compensability have been tightened. Caps have been put on benefits. The judge in Padgett looked at these law changes and ruled that workers’ compensation benefits in Florida had been eroded to the point where it was no longer a grand bargain for injured workers. He ruled that the workers’ compensation statutes were unconstitutional on their merits because the benefits provided are no longer an adequate replacement for the right to sue in civil court that that the workers gave up. Attorneys tend to mimic what succeeds in other courts, so I expect we are going to be seeing more constitutional arguments in the future.

Impact of the Evolving Workforce

One of the biggest issues I see affecting workers’ compensation in 2015 and beyond is the evolving workforce. This takes many forms. First, we are seeing technology replace workers more and more. When was the last time you went to a bank instead of an ATM? I have seen both fast food and sit-down restaurants using ordering kiosks. Also, we are seeing more use of part-time vs. full-time workers. Some of this is driven by concerns around the Affordable Care Act. But part-time workers also have fewer human resource issues, and their use allows employers to easily vary their workforce based on business needs. Unfortunately, part-time workers are also less-trained, which could lead to higher injury frequency. Finally, the mobile work force is also creating concerns around workers’ compensation. Where is the line between work and personal life when you are using a company cell phone, tablet or computer to check e-mails any place, any time? Where do you draw the line for someone who works from home regularly? There have been numerous court cases around the nation trying to determine where that line is. This is a very complex and evolving issue.

To view a webinar that goes into these topics in more detail, click here: https://www.safetynational.com/webinars.html