Tag Archives: trucking

How Risk Management Drives up Profits

Diane Meyers, director of corporate insurance for YRC Worldwide, manages the insurance and associated risks of one of the most hazard-prone industries in the world – trucking. YRC is the largest long-haul trucking company in U.S., operating in all 50 states and Canada. It has 14,500 tractors and 46,500 trailers and ships 70% of all transported cargo throughout the U.S. each year. YRC’s origins trace back to 1924 to the Akron, Ohio-based company Yellow Cab Transit before the independent trucking companies of Yellow, Roadway, Reimer and others were combined in 2009 into the YRC banner.

I asked Diane about her biggest challenges in managing the risks associated with the YRC fleet, including 32,000-plus employees (a number that has grown in busy times to more than 50,000) and 400 physical locations. She said her top three hot buttons are: collateral, collateral and collateral.

For anyone familiar with high-deductible or self-insured workers’ comp programs, insurers and state governments rely on a company’s posted collateral (aka security deposit) as the financial backstop should the company go bankrupt or default in its obligations. Companies with high-risk jobs can experience workers’ comp costs that can easily be 400% to 500% greater than white collar jobs. Posted collateral needs to cover the costs expected to be associated with the life of each claim and can be a huge drain for any company, including YRC.

Diane, who reports to the treasurer, says YRC negotiates collateral requirements with one excess workers’ comp insurer for its high-deductible program in 24 states. Collateral is typically posted using LOCs (letters of credit) or surety bonds. YRC’s self-insured program in the remaining 26 states means meeting the collateral demands of their 26 separate governing entities.

Meeting with the YRC’s carrier’s actuary along with her own actuary every three months, Diane also has to deal with each state at least annually. “Working with multiple sets of actuaries is a whole other challenge, since I have to educate them on the realities of our own workers’ comp program and its achievements, like return-to-work,” she says. “Besides that, in working with actuaries, I have to speak their language and understand how they work their crystal ball.”

Diane added: “These are monies that are tied up for decades to come that cannot otherwise be used for our company’s operations. I have to find ways to save the company from the ever-changing collateralization demands through ongoing, complex negotiations with insurers and regulators. Safety and loss control programs have to demonstrate traction and real savings to our workers’ comp and liability exposures.” Diane noted that safety is so important that each YRC operating division has its own safety department.

As with most large companies, YRC is self-insured for most of its liability risks. To assist Diane with vehicle and general liability claims, YRC uses its own, as well as outsourced, legal counsel to manage risks up to its retention level. There are also a myriad of state and federal rules and regulations regarding long-haul trucking that require strict adherence and attention to changes.

When asked about her unique challenges at YRC, Diane said, “I have to understand the legal demands and expectations of all 50 states, Canada, and D.C.”

She also faces the complexity of working with a corporation that has grown through acquisitions of older companies. To find key claim-related data, she says, “I have had to go through various insurance policies and records of the companies we acquired going back as far as the ’60s!”

With the ever-changing demands for long-haul transportation by various industries, YRC experiences significant fluctuations in its workforce. There have been times when the workforce has expanded more than 50%, and, during recessions, there have been significant reductions. A swing either way can create huge risk management challenges, especially when there are continuing workers’ comp claims to deal with. This is made even tougher because most of YRC’s employees are in the Teamsters union, and some issues could require collective bargaining or at least close communication and cooperation between labor and management.

What An Employer Can Do To Reduce Soft Tissue Injuries In The Transportation Industry

The trucking industry accounted for nearly 20 percent of all days-away-from-work cases in 2011. Correspondingly, trucking was among the seven occupations which had an incidence rate greater than 300 cases per 10,000 full-time workers and who had greater than 20,000 days-away-from-work cases.

OSHA defines a Musculoskeletal Disorder (MSD) as an injury of the muscles, nerves, tendons, ligaments, joints, cartilage and spinal discs. They identify examples of Musculoskeletal Disorders to include: carpal tunnel syndrome, rotator cuff syndrome, De Quervain’s disease, trigger finger, tarsal tunnel syndrome, sciatica, epicondylitis, tendinitis, Raynaud’s phenomenon, carpet layers knee, herniated spinal disc, and low back pain.

The average cost of a work-related soft tissue injury in the trucking industry exceeds any other industry. According to the U.S. Bureau of Labor Statistics (BLS), Musculoskeletal Disorders nationwide typically account for 33% of work-related injuries, while the incidence of Musculoskeletal Disorders in the transportation industry is 60-67%. The Bureau of Labor Statistics also noted that there were 1.4 million total transportation workers, and each year 1 in 18 is injured or made ill by the job.

These higher rates of injury can be attributed in part to several factors. Due to the nature of their work, many drivers maintain a poor diet, rarely get enough sleep, and are sedentary. As a result, they find themselves more susceptible to heart attacks and diabetes, as well as a myriad of strains, sprains and various other Musculoskeletal Disorders.

Additionally, the percentage of older workers is higher in transportation than in most industries, with the Transportation Research Board estimating that up to 25 percent of truck drivers will be older than 65 by 2025, translating into more severe Musculoskeletal Disorder claims.

These factors are contributing to more workers’ compensation claims for drivers which increase employers’ costs. As part of the job, many truck drivers are required to unload the goods they transport, leading to serious sprains and strains. Heavy lifting after long periods of sitting can increase the likelihood of severe sprains and strains. In addition, drivers often rush at the delivery site in an effort to meet the demands of tight schedules. This combination contributes to 52% of the non-fatal injuries in this industry, with trunk and back claims accounting for 70% of these cases.

Due to its unique workplace circumstances, the commercial transportation industry is at higher risk for increased frequency of injuries and costs to the industry. The following describes the framework of this dilemma:

  1. Commercial transportation jobs expose workers to high physical demands and extended hours of exposure.
  2. The transportation industry experiences one of the highest work-related injury rates among all workplace sectors.
  3. The transportation industry experiences a high level of turnover on an annual basis, which results in a high number of newly hired employees exposed to unfamiliar and physically demanding tasks.

While this is an industry-wide issue, we will focus on California in order to illustrate how problematic it truly is. In March of 2010, the California Workers’ Compensation Institute (CWCI) issued its latest scorecard for the California Trucking Industry. Over eight years, $480 million dollars was paid in medical and indemnity costs alone. The study found that, even though this industry accounted for only 1% of all California industrial claims, they accounted for 1.8% of the state’s workers’ compensation paid benefits. It was also found that medical and indemnity payments were higher than any other industry. The average lost-time direct claim cost at $18,587 is 41% higher than the industry average in California. The indirect costs in this industry range from a 2x to a 10x multiple, and in an industry known for low profit margins, controlling costs is critical.

It should also be noted that California can retain jurisdiction of a workers’ compensation claim even if the injury did not occur in that state; the employee only has to live in California, drive through California or have been hired out of California. This is such a significant problem that in 2010 the U.S. Department of Transportation initiated the Compliance Safety Accountability measure of driver’s fitness. This is specific to transportation, is publicly available, and the ratings are tied to insurance rates and letters of credit.

With the numerous reforms taking place in 2013 and the Centers for Medicare and Medicaid Services (CMS) Mandatory Reporting Act, it is now essential that employers become proactive and only accept claims that arise out of the course and scope of employment. Medicare has mandated all work-related and general liability injuries be reported to CMS in an electronic format. This means that CMS has the mechanism to look back and identify work comp-related medical care payments made by Medicare. This is a retroactive statute that will ultimately hold the employer and/or insurance carrier responsible for these payments.

Should CMS have to pursue the employer in court, the amount owed is doubled. The insured or employer could pay the future medical cost twice — once to the claimant at settlement and later when Medicare seeks reimbursement of the medical care they paid on behalf of the claimant. There is no statute of limitations on compliance with the MSA requirements. CMS can review claims closed last year, five years ago, or even longer to check for compliance. Penalties and fees for noncompliance are $1,000 per day if medical care is not paid within 30 days.

Historically, soft tissue injuries have been difficult to diagnose and even harder to treat due to the broad spectrum of disorders related to soft tissue. Most diagnostic tests are not designed to address Musculoskeletal Disorders and are unable to document the presence of pain or loss of function … two key complaints.

Employers need a way to manage their Musculoskeletal Disorder exposure and provide better care to their injured workers. The key to managing this problem is for employers to obtain the ability to only accept claims that arise out of the course and scope of employment. The only viable solution for employers is to conduct a baseline soft tissue assessment in order to establish pre-injury status. The baseline must be job and body part specific and objective to comply with the Americans with Disabilities Act Amendments Act of 2008.

The baseline assessments are not read or interpreted unless and until there is an injury. By not identifying a potential disability, employers are able to conduct baseline assessments on new hires as well as existing employees while maintaining compliance with the Americans with Disabilities Act Amendments Act. If there is a soft tissue injury, the employee is sent for a post-loss assessment to determine what and if there is any change from the baseline assessment. If no change is noted (no acute pathology), then there is no valid claim. This proven baseline program is known as the EFA Soft Tissue Management Program (EFA-STM Program), which utilizes the Electrodiagnostic Functional Assessment to objectively provide this data.