Tag Archives: injured employee

State of Workers’ Comp in California

At the 2015 California Workers’ Compensation & Risk Conference, this panel of industry stakeholders weighed in on the overall condition, including cost drivers and legislation, affecting California’s workers’ compensation system:

Moderator: Mark Walls, VP communications and strategic analysis at Safety National

David North, CEO at Sedgwick

Kevin Confetti, deputy chief risk officer at University of California

Ann Schnure, VP risk management, claims, at Macy’s

Dawn Watkins, AIC, PHR, ARM, director integrated disability management at LA Unified School District

Julius Young, partner at Boxer & Gerson

Richard M. Jacobsmeyer, founding partner at Shaw, Jacobsmeyer, Crain & Claffey

The first question was: How does the California’s workers’ compensation system compare with other states?

California ranks #1 in costs compared with the rest of the U.S. California simply has more claims that cost more money. That is why California is the most expensive and complicated state.
Every time California changes a law, the system gets more complex. What influences workers’ comp is far more than just the laws, though. The social norms are different in California. It is a unique culture of employment that affects everything. There are a lot of things that employers and the healthcare community do that are driving these costs.

Why are claims costs so expensive in the Los Angeles basin vs. the rest of California?

Injured employees are transferred away at a larger rate from the primary treating physician of the employer’s choice. There is a very different treatment pattern compared with other states, and this medical treatment is driving costs for employers. Litigation rates are higher, which is part of the culture in that area. Very often, LA attorneys try to take medical control and send the injured employees to the doctors that the attorneys prefer. Attorneys and physicians who have had long-lasting relationships are referring almost exclusively to each other. Attorneys are aggressively advertising to injured workers, and workers are responding.

What else is driving workers’ compensation costs in California as a whole?

Once an employee gets an attorney referral, it is out of the employer’s hands. The employer no longer has the authority to properly take care of the injured worker. California is the only state where, if you do not like what you are paid, you file a lien. This has nothing to do with the quality of care for the injured worker. The root of so many of these issues is the doctor community in the state. Maybe the doctors need to be trained on billing and medical treatment utilization schedule  (MTUS), but it’s believed that some may be billing higher than the fee schedule to see if someone will actually pay the higher rate billed. The most important person in workers’ comp is the injured worker. We should be spending all the money that employers pay on things like bill review on helping the worker heal. Too much of the costs that employers pay are not going to the injured worker.

What concerns do you have about current legislation and case law affecting the system?

We, mistakenly, have allowed legislation to tell us how to comply. It has become much more about the process rather than helping an injured worker get better. Doctors will say how they think they should treat, but have to send the case through utilization review, which sometimes contradicts the doctor’s opinion. This deflates that injured worker’s confidence on whether he is getting the best care. It is possible that doctors are not trained on the MTUS and keep trying to push things through the system that shouldn’t be. We should focus on how to better train doctors on the system. The system is so complicated. What employers need to do is try to stop the employees from getting into the system. We need to intervene fast. Get the employees good, quality medical care quickly and eliminate the potential for them to get stuck in the system.

How do you improve the quality of benefits to injured workers in California?

The least-likely employee to file a claim is the employee who thinks her employer cares about her. Employees are much less likely to litigate cases if the employer is providing them with good care and communication. That’s the gold standard for trying to decrease litigation. It is so important for employers to reflect on how they are treating their injured workers. Are you treating them like a member of your team or just another expense? Often, they are afraid that they are going to lose their job. Let them know what workers’ comp is and what they should expect. It is so complicated. Make sure they are well-informed and understand that return to work means they are not going to lose their job because of an injury. Claims examiners in California have a tough job. We need to hire smart people and give them appropriate workloads. They are the glue that holds everything together. California currently has a shortage of qualified adjusters, and it is a large problem. The industry, as a whole, needs to contribute to this issue so we can get quality people interested in this career path.

How to Manage Claims Across Silos

The long-minimized and largely untapped synergy between casualty claims and benefit programs may offer opportunities for both industries.

Some argue that these worlds are just too different and distinct to bring together, whether through simple alignment or partial to full integration. Managers are often more comfortable in their own functional areas, and sometimes crossing over can stretch expertise and focus. Fundamentally, however, claims are claims.

There’s been a shift in thinking and a growing interest in a more collaborative, aligned and even fully integrated services approach – one that takes many forms but that at its core incorporates a more combined strategy from date of incident through claim closure. The targeted goals for this approach are:

  • Ensuring an appropriate employee experience throughout the life of the claim
  • Targeting and delivering optimal outcomes
  • Minimizing the cost of risk associated with the reasons employees are under medical care or unable to contribute productively to their employer’s mission

Shared Goals

On its face, the value of collaboration seems obvious. From both an employee benefits and risk management perspective, providing care for the individual is of the utmost importance. One of the main objectives is ensuring the right outcomes, which includes leveraging the basic skills of investigation, verification, documentation and equitable resolution that are common between these two realms.

The nuances and distinctions that exist between them are not insignificant, but the key goals are the same – caring for people under medically related distress (regardless of source), minimizing disruptions to workforce productivity and closing claims efficiently and effectively with fairness to all parties and their respective goals and objectives.

Although these objectives have varying levels of importance in each field, they are fundamental to process effectiveness in both. This is not to say that there aren’t peculiar and unique aspects of each that require certain expertise and skills to achieve specific goals.

However, while blending skill requirements among a common group of claims professionals can be challenging, it is not rocket science. Defining and filling positions to enable successful claims handling in both worlds is eminently doable. The biggest hurdle may in fact be the necessary collaboration between these typically distinct functional areas and their leaders.

Many employers are already effectively managing employee injury and disease exposures. There are discernible trends emerging toward fewer silos and more performance-oriented measurements that are focused on short- and long-term strategies. Those companies taking a more collaborative approach can benefit from key elements such as:

  • Compassionate care that puts employee interests first
  • Integrated reporting and measurement across departments
  • Robust analytics that result in prescriptive actions with impact
  • Innovative tools targeted to specific process opportunity areas
  • A more holistic focus on the care of affected employees
  • The over-arching goal of a healthy, productive workforce

So whether or not you have direct responsibility for both functional areas, I urge you to lead the charge that would leverage this opportunity for the benefit of your organization.

Debunking ‘Opt-Out’ Myths (Part 1)

Those who believe in the current workers’ compensation system share objectives with those who believe that companies should have the ability to “opt out.” We all want quality care for injured workers, better medical outcomes, fewer disputes, a fair profit for insurance companies and the lowest possible costs to employers. However, supporters of “options” to workers’ compensation object to a one-size-fits-all approach to achieving these objectives. They want to be able to either subscribe to the current workers’ comp system or provide coverage to workers through other means.

The Texas nonsubscriber option has proven beneficial for injured workers, employers and insurance carriers for more than 20 years. The Oklahoma Option has been in effect for one year and is delivering promised results for injured workers and employers, including lower workers’ compensation costs. Legislation to provide for options in Tennessee and South Carolina was introduced earlier this year.

New laws need to be studied carefully. They take time to develop, understand and implement. Injury claims also take time to properly process and evaluate. That is part of the challenge. It takes time to develop the facts of every claim and to hear everyone’s story. The true test of whether a law or new system works is the outcomes it produces over time. Option opponents should take some time to review the results being achieved now in Texas and Oklahoma, and the fact that the Tennessee and South Carolina options are built upon the exact same principles that have led to happier employees and substantial economic development.

To cover the issues related to workers’ comp options, I am writing an eight-part, weekly series. This overview is Part 1. The remaining seven will be:

Part 2: Low-Hanging Fruit – Dispelling some of the most common myths about workers’ comp options

Sometimes, these myths are simply because of misunderstandings. Sometimes, they are outright lies in a desperate attempt to maintain the status quo for workers’ compensation programs that are championed only by a subset of interested insurance carriers, regulators and trial lawyers.

Part 3:  Homework and Uninformed Hostility

Everyone complains about the inefficiencies, poor medical outcomes, cost shifting and expense of workers’ compensation systems until a viable, proven solution is presented. Then, suddenly, everyone loves workers’ comp? It’s time to take a breath and look at some homework.

Part 4: Option Impact on Workers’ Compensation Systems and Small Business

Does an option force employers to do anything? Does an option force changes to the workers’ compensation system? Are all workers’ compensation carriers opposed to options? Should past workers’ compensation reforms just be given more time to take hold? Do options hurt the state system by depopulating it of good risks? Do options increase workers’ comp premiums for small business? Is the option just for big companies, and they all elect it?

Part 5: Litigation Uncertainties

Are Texas negligence liability claims out of control?  Should Oklahoma Option litigation delay other state legislatures? Should Oklahoma Option litigation further delay employers from electing the option? Does an option create animosity between business and labor?

Part 6: Option Program Transparency and Other “Checks and Balances”

Are immediate injury reporting requirements unfair? Are option benefits simply paid at the discretion of the employer? Are option programs “secretive” and provide no “transparency?” Are there other “checks and balances?”

Part 7: Option Program Benefit Levels and Liability Exposures

Are option benefits less than workers’ compensation benefits? Are option benefits less than workers’ compensation because of taxes?  Where do the savings come from?

Part 8: Impact on State and Federal Governments

Do option programs shift more cost to state and federal governments? Do option programs increase state and federal regulatory costs? Do option programs give up state sovereignty over workers’ compensation?

‘4-Lanes’ Approach to Work Comp Claims

Claims operations have ascended the value chain from an “island in the stream” technical function into a key facet of the customer value proposition. To handle the growing demands, it’s important to think about work comp claims in terms of four lanes.

The first lane is governed by compliance rules and requires not just compliance awareness, but the knowhow to optimally integrate compliance into the operation.

The second lane is focused on vendor management. This needs to go beyond simply outsourcing non-core competencies. Successful companies concentrate on ways to leverage vendors to achieve superior outcomes and competitive advantage.

The third lane is defined by business rules. This is where automation is fully deployed and constantly improved. This lane draws from rules-driven facets of each of the other three lanes.

The fourth lane is the “interpersonal, interpretative and professional judgment” perspective. It relies on the subjective application of knowledge and human interaction. This lane leverages engagement, training, technology and analytics to continuously accelerate accurate decision making, enhance performance and improve quality.

The four lanes represent perspectives and should not be confused with a company’s organogram. Indeed, each lane touches every facet of any organogram found in the insurance industry today.

The compliance, vendor management, business-rules and professional judgment lanes all benefit from a strong commitment to business process improvement (BPI). Data capture and analytics that support measurement of performance along the entire claims’ value chain is integral to BPI. The BPI discipline uses data to identify best practices, implement those practices, assess their effectiveness and uncover opportunity for further improvement.

Embracing the four-lane view and BPI model will help carriers make strong, data-based decisions as they reconfigure their claims departments to control costs, stabilize case reserving and improve outcomes of their claims operations.

Great tools, talented people and sound business practices are the timeless ingredients of success, as is operational adaptivity. Today’s workers’ compensation carriers are operating in an environment of increased uncertainty and complexity. Carriers face headwinds because of a shift into a healthcare-centric business, which has caught many carriers flat-footed. Medical costs are approaching 70% of the total claims spending in many jurisdictions. The utilization and cost of pharmaceuticals is rising at a rapid rate. According to the California Workers’ Compensation Institute, pharmacy and home-medical-equipment costs have risen by  more than 250% since 2004. Today’s companies must adapt their models to concentrate on effective and efficient delivery of care that improves patient outcomes, exudes customer value and underpins superior combined ratios.

The undeniable reality is that the nature of work comp claims has changed. Traditional ideas on the core competencies necessary to operate an effective claims operation need to be challenged and adjusted. Positive differentiation and sustainable market leadership depend on effectively incorporating the ingredients of success into a well-defined strategy that produces desired results and provides an agile framework for continual business evolution.