Tag Archives: workers comp

How Fort Worth Drove Down WC Costs…

The biggest myth in healthcare is that better care costs more. The city of Fort Worth, Texas busted that myth. Using advanced analytics to establish and monitor a provider network, the city got its injured employees better care while driving its workers’ compensation costs down, not up.

In 2015, Fort Worth had 6,250 employees, and its total workers’ compensation costs ‒ claims plus indemnity payments ‒ were $9.7 million. After implementing the provider network, the city’s costs in 2016 fell to $9.1 million, and they’ve fallen every year since. In 2019, the costs were only $8.2 million, despite the city’s number of employees increasing to 6,900.

How?

How did Fort Worth do it? The city created a physician panel under Chapter 504 of the Texas Labor Code that would be available to its employees only. To identify the providers to include, the city applied the outcome algorithms described below to two juxtaposed data sets and found the providers achieving the best outcomes for each injury type ‒ who cost the city less, not more.

Healthcare is not a commodity. We all think that our doctor is the best ‒ or at least above average ‒ but we don’t live in Lake Wobegon, where all the children are above average. Exactly half of all children are above average, and exactly half are below. It’s the same with doctors ‒ and the specialists and surgeons that they refer us to, and the hospitals that they put us in.

Although counter-intuitive, going to a good doctor costs less overall than going to a bad one. 30% of healthcare costs are unnecessary, the result of poor or ineffective care. Good doctors don’t incur those excess costs because they:

  • Make fewer errors;
  • Perform fewer unnecessary procedures;
  • Experience fewer patient complications; and
  • Get their patients better faster.

So how can you do what Fort Worth did? First, you need access to the two data sets on which to run the analytics ‒ your medical and pharmacy claims and your employee absence records. If you’ve self-insured your workers’ compensation program, like Fort Worth does, then you own the medical and pharmacy claims. You still engage a third party administrator (TPA) to process those claims for you, but you are at actuarial risk for them, and therefore you own the claims. If, on the other hand, you’re fully insured ‒ you pay the insurance company a premium, and the insurance company bears the risk ‒ then you won’t own the claims and won’t be able to perform these analytics, although your insurance company could.

If you have the claims, then you match them against the absence records to identify the time that the employee missed from work because of the injury. You can do so in two ways. First, juxtapose the claim dates against your Human Resources (HR) Department’s time and attendance records to find the days missed because of the injury and value that time off at the employee’s pay rate or a normalized rate. Alternatively, you can use the indemnity payments to the employee as a proxy for the absence costs. When a TPA or insurance company uses these analytics, this is the route that they take because they don’t have access to the employer’s HR records.

Next, you must be able to direct care ‒ tell the employee which provider to go to. Every state has its own rules. In Texas, an employer can do so. This can include establishing referral protocols and criteria for medical procedures that don’t require pre-authorization ‒ decreasing the wait times to obtain care and thereby driving down lost days and indemnity payments.

If you meet these three criteria ‒ you own the claims, can direct care and have absence data ‒ read on and learn how you, too, can drive down your workers’ compensation costs while improving the care for your injured employees.

Quantifying Outcomes

We begin with the premise that a “good outcome” is getting an employee back to work and keeping them there. We therefore accumulate all the costs to do so and then rank the providers based on the outcomes that they achieve.

See also: 7 ‘Laws of Zero’ Will Shape Future

First, let’s look at the claims. The chart below shows the average claims costs for 14 specialists treating back injuries. Specialist #1 on the far left is the best, with average claims costs of $1,000, while Specialist #14 on the far right is the worst, at $8,600.

The claims, however, are only half of it ‒ sometimes less than half. You have to add the absence costs, the amounts that the employer paid the employee while out with their injury. Not only are these absence costs a real cost to the employer, but they double as an indication of the effectiveness of the care. The quicker the doctor got the employee better and back to work, the more effective the doctor was. This chart adds each specialist’s average absence costs on top of their claims.

Now Specialist #2 goes from being second best to second worst; and Specialist #9 is doing a better job than we originally thought because that doctor is getting their patients better and back to work faster.

There’s one more step. If you ask any doctor why their costs are more than another doctor’s, they’ll always give the same answer: “Because my patients are sicker.” And sometimes they’re right.

Sicker patients cost more and take longer to get better. If you have two employees with the same back injury, one of them young and otherwise healthy, while the other is older, overweight and diabetic, the older employee is going to cost more. So we adjust for comorbidities by assigning each employee a risk score. That way our rankings are based solely on the provider performances, not the patients that they treated.

There are a number of risk-scoring systems. One that is open-source is the Chronic Illness and Disability Payment System (CDPS). CDPS was designed by the University of California, San Diego and is employed by many Medicaid programs around the country. Accordingly, it is demographically appropriate for a working age population.

The CDPS system looks at various demographic and clinical data, including age, gender, diagnoses and the prescription drugs that a patient is taking and assigns the patient a score: 1.00 being an individual of average health, below 1.00 healthier than normal (the lower the score, the healthier) and above 1.00 sicker (the higher the score, the sicker).

The chart below shows the relationship between an employee’s risk score and the number of days that they miss from work. As you would expect, the higher the risk score ‒ the less healthy the employee ‒ the more time that they miss.

Going back to our back specialists, when we risk-adjust their patients and level the playing field the results change again.

Now the doctors’ total costs and rankings are based on their performances, not the patients that they treated. Doing this, we see that Specialist #13 was doing a better job than we initially thought. This doctor would now be ranked 10th, not 13th.

When we re-order the doctors based on their average risk-adjusted total costs, Specialist #1 is still the best, and Specialist #14 is still the worst. But other than Specialist #12, the order has completely changed. The green arrows show the doctors who moved up, and the red arrows show the ones who moved down.

We can also show this on a quadrant graph. Along the horizontal axis, we graph each provider based on their average claims costs relative to the group average, and along the vertical axis we do the same for the absence costs. The best providers are in the upper right quadrant ‒ low claims costs and low time off ‒ and the worst providers are in the lower left quadrant, with high claims costs and high time off.

Fort Worth’s Provider Network

Fort Worth used these analytics to identify the best providers by injury type and then placed them in its own workers’ compensation provider network. An injured employee must stay within this panel when seeking treatment.

But Fort Worth didn’t just look at its workers’ compensation claims and rank the doctors handing its current cases. Instead, it threw in its health plan claims, too. That way, it identified great doctors not currently handling workers’ compensation cases, but whom the city wanted to in the future.

By sending injured employees to the best doctors, Fort Worth achieved fantastic results ‒ a decrease of 23% in its costs while getting its employees better care!

Benchmarking and Predictive Analytics

Fort Worth didn’t stop there, but incorporated the Official Disability Guidelines (ODG) for benchmarking and predictive analytics, too. ODG is a nationwide database of workers’ compensation and occupational health injuries owned by the Hearst Health Network.

Using these guidelines, Fort Worth not only compares the providers in its network against one another but benchmarks them against national and regional best practices and averages for claims, time off work and other metrics. These other metrics include whether the doctor is seeing the employee more often than usual for a particular type of injury, or whether the doctor is billing unusual procedure codes (which could be either good or bad but bears investigating). In addition, comparing claims against the database allows Fort Worth to categorize them as being within the normal range for that injury type ‒ which the city can pay without further scrutiny ‒ or outside those norms, in which case the city flags the claims for investigation.

Fort Worth also uses the guidelines to perform predictive analytics. When an injury occurs, the city predicts the claims and lost time based on specific factors and then monitors the case and intervenes early when the actual results begin to stray from the predicted ones. For example, using ODG, the table on the left predicts 47 days off and $7,925 in total expenses for an employee suffering a lower back sprain with the following particulars:

  • 40 years old
  • Living in Texas
  • Job involves “medium” physical demands (not sedentary, like an office worker, or heavy, like a construction worker)
  • No risk factors or comorbidities
  • Case involves some time off work, so it is more severe (80% of all workers’ compensation cases involve only medical expenses, no lost time)

The table in the middle shows that keeping everything the same, except adding that the employee has diabetes, increases the prediction to 62 days off and $11,204 in total expenses. And the table on the right shows that, if the employee hires a lawyer ‒ not a comorbidity for an employee, but definitely a risk factor for an employer ‒ everything more than doubles!

Health Plans

You can use these analytics for your health plan, too. When doing so, there are two differences.

As discussed above, in workers’ compensation, many states permit the employer to direct care. In most health plan settings, however, you can’t do that. You can only encourage someone to go to the best doctor. They can go to whomever they want.

So how do you get your employees and their dependents ‒ your health plan members ‒ to the best doctors for what they need? You could ask your TPA to include only the best doctors in the provider network, or at least eliminate the worst ones, but your TPA usually won’t do that. In fact, many of the contracts that TPAs sign with health systems preclude the TPAs from excluding any of the health system’s providers from the network or steering patients away from them.

Although you won’t be able to set the network, you can stratify it. Tier the network and decrease or eliminate co-pays and out-of-pocket costs when members go to the best doctors. If you have an HDHP (High Deductible Health Plan) married with HSAs (Health Savings Accounts), you can even pay employees to go to the top-ranked doctors by contributing to their HSAs when they do so.

You can also give a list of the best providers for each root diagnosis to:

  • The case managers handling your high-cost and chronically ill members so that those case managers can suggest the best providers to them;
  • The primary care physicians (PCPs) in your network to use when referring your members to specialists and surgeons; and
  • The employees themselves so that they and their dependents can look up the best providers for what they need.

The second difference is that your health plan will have not only employees in it but their dependents, too. You won’t be able to use the algorithms above on the dependents because you won’t have any absence data to match against their claims.

See also: Startups Must Look at Compensation Plans

Instead, you can use a different algorithm on the dependents that uses only the claims data. For the employees, we combine the claims and absence data and ask how much it cost and how long it took to get the employee back to work and keep them there. For the dependents, we flip the question and ask how much it cost in claims to keep them well.

We define being well in terms of healthy days, which we can see in the claims. Healthy days are days that the person does not spend in the healthcare system (e.g., hospital stays, doctor’s visits, etc.) or at home in a non-functional state (e.g., recuperating or otherwise unable to carry out their normal activities).

We put this information in a fraction. The numerator is the patient’s risk-adjusted claims for a particular root diagnosis during the year, and the denominator is the patient’s healthy days during that year. We then rank each provider by root diagnosis, from the best with the lowest average risk-adjusted claims per healthy day when treating patients with that condition, to the worst with the highest.

Not only can you rank providers based on their claims per health day, but you can rank wellness programs and just about anything else, too. The chart below compares the risk-adjusted claims per healthy day to keep employees with behavioral health issues at work (instead of out sick) against the claims per healthy day to keep employees without those issues at work (almost everyone has some claims and absences during a year). The risk-adjusted claims per healthy day for a person without any issues is $10, while the claims per day for a person with headaches is double that at $21 per day, and the claims per day for a person with drug and alcohol problems is double that again at $44.

Better Care at Lower Costs

,Fort Worth busted the myth that better care costs more. By sending injured employees to the best doctors the city drove down its costs, while getting its employees better care.

This article originally appeared in the March/April 2021 issue of Public Risk, the member magazine of the Public Risk Management Association (PRIMA).

Navigating the Vaccine Mandate

OSHA’s Emergency Temporary Standard (ETS) regarding COVID-19 vaccine mandates leaves employers facing a complex compliance challenge involving both OSHA and laws on accommodation and leave of absence. What exceptions are allowed? How can employers track compliance? How will the courts respond?

The latest Out Front Ideas with Kimberly and Mark webinar included expert guests discussing these questions and more. Our guests were:

  • Bryon Bass – senior vice president workforce absence, Sedgwick
  • Travis W. Vance – partner, Fisher & Phillips

Court Decisions on Mandate Challenges

A lottery conducted by the Judicial Panel on Multidistrict Litigation determined on Nov. 16 that the Sixth Circuit will hear the consolidated legislation regarding OSHA’s ETS. This court has the power to modify or nullify the stay issued by the Fifth Circuit. To keep employers on track with the ETS’ Dec. 6 effective dates, it will be critical that the court decides by Thanksgiving. The Sixth Circuit’s active and senior status judges include eight Democratic appointees and 20 Republican appointees, which could prove favorable for vaccine mandate challengers. If the legislation is sent to the Supreme Court, it is unlikely that the circuit court’s decision will be overturned.

While OSHA’s ETS is currently suspended due to a stay ordered by the Fifth Circuit, if the stay is overturned, employers should be prepared to follow the provisions outlined in the ETS.

Key Points of OSHA’s ETS

Generally, an OSHA standard requires up to 10 years to go through the rule-making process, which involves a comment period, meeting with different industry groups and working through several rounds of drafts. An ETS provides an exception to that rule when there is a grave danger to the workplace, allowing OSHA to issue citations immediately. OSHA’s ETS regarding COVID-19 vaccination and testing will last six months, meaning on May 5, 2022, they can move this to permanent status. To cover all future pandemics, OSHA could potentially finalize the Infection Disease Standard (developed in 2009 after the H1N1 outbreak). 

The ETS applies to 29 states that use federal OSHA regulations. Following their own plans, the remaining states are required to decide whether to adopt the federal ETS, rely on existing regulation or make their changes. Some states on the state plan will be expected to fight the ETS, meaning the federal government may sue to ensure they adopt the regulation. 

Some of the crucial dates outlined in the ETS include:

  • Nov. 5, 2021 – The deadline to start collecting documents from employees to detail their vaccination status.
  • Dec. 6, 2021 – All provisions of the ETS go into effect except for testing status. This includes employee training, written policies and a vaccination roster. All unvaccinated employees will also need to begin wearing masks indoors if they are not already. The vaccination status of each employee will need to be known.
  • Jan. 4, 2022 – Weekly testing begins for all unvaccinated employees.

Only employees who are entirely isolated or working by themselves full-time, like truck drivers, or employees working exclusively outdoors are exempt from the ETS. (Only 8% of outdoor construction workers fall into this group.) While testing won’t be required, employers will still need to know the vaccination status of these employees.

See also: On COVID Vaccine: Do the Math

Federal Contractors and CMS Mandates

Apart from the ETS are two mandates that apply to federal contractors and the Centers for Medicare and Medicaid Services (CMS). Unlike the ETS, these require all employees to be vaccinated by Jan. 4 and do not provide a testing option. The federal contractor mandate applies to anyone involved with a project, even if they are only involved a portion of the time. The only exemptions to these mandates are medical or religious exemptions, where accommodations will need to be made.

Leave of Absence Requirements Related to the Vaccine

Under the ETS, paid leave is required for employees receiving a vaccine and those experiencing side effects from a dose. An employee may request up to four hours to have a vaccine administered and up to two days to recover from side effects. An employer can require an employee to use accrued sick leave but cannot ask them to take future sick leave. If they do not have any remaining sick leave, the employer must pay for the necessary time.

COVID-19 testing costs can be passed on to unvaccinated employees, per the ETS. This regulation runs counter to specific state laws that require employers to cover the time and costs of testing. It is recommended that testing be done during regular business hours to avoid overtime pay considerations. If any employee decides to get a vaccine or testing done outside of work hours, the employer is not responsible for covering the time or costs.

Disability and Medical Accommodations

If an employer already has a policy in place that mirrors the testing and mask requirements of the ETS, the employer does not necessarily need additional accommodations for unvaccinated employees. However, the mandates that require vaccination state that individuals with medical conditions covered under Americans with Disabilities Act (ADA) guidelines must be provided a reasonable accommodation. Regardless of the medical condition, employers should stay consistent in their practices, following previous standards.

For employees that fall outside of the reasonable accommodation group, like those who cannot wear a mask or get tested, further determination of an ADA-qualified disability may need investigation. Employers should not change their process with this group, and continue to engage with them and know their restrictions. Reasonable accommodations for this group may include remote work opportunities, separation capabilities, like offices with doors, or temporary work schedule modifications. Remember that accommodations do not need to last forever, and employers should use follow-up mechanisms to determine if it is still appropriate or causes a business hardship. Employers should be vigilant in their documentation and outline effective dates.

Religious Accommodations

Employees only need to demonstrate that they have a sincerely held religious belief, observance or practice that precludes them from getting vaccinated to request an accommodation. These accommodations have the same guidelines required by those that fall under the ADA, per Title VII. An employer would need hard evidence to prove an employee may be abusing this policy. As with medical accommodations, employers should be extremely consistent in their practices of religious exemptions.

How Employers Can Prepare

While many employers have already started tracking the vaccination status of their workforce, there is certainly more to the ETS orders. Employers should implement the following to stay on track:

1. Draft a written policy by Dec. 6.

2. Inform employees of the policy by Dec. 6.

3. Adopt procedures for determining employee vaccination status, including:

  • Maintaining confidential records of employee vaccination status.
  • Inquiring with employees about their vaccination status, which is lawful under the EEOC, but this should end the inquiry detail.
  • Collecting proof of vaccination or creating a confidential list of vaccinated workers.
  • Reviewing state laws regarding confidentiality and privacy of medical records.

4. Have an employee vaccination roster ready by Dec. 6.

5. Determine if you will mandate the vaccine or allow the unvaccinated employees to be tested weekly. The ETS allows employers to require vaccinations without providing the alternative for weekly testing. If an employer is planning on weekly testing, consider the logistics involved.

6. Have a plan for addressing non-compliance by employees. If an employee does not get tested or refuses vaccination, discipline will need to be outlined.

7. Develop a plan for handling accommodation requests. The policy should be robust and clear to address religious and disability issues. Communicate and administer the accommodation process thoughtfully, emphasizing individualized, confidential consideration of each request.

8. Prepare for OSHA complaints and inspections. The vaccination ETS will not displace current compliance duties related to COVID-19 prevention and mitigation. OSHA will also likely ask for your COVID-19 response plan and training, so it is critical to develop a policy and communicate its requirements to your employees. Train managers and supervisors on what to do and say if OSHA arrives for an inspection.

See also: Extreme Weather, COVID, Home Claims

The archive of our complete Navigating the COVID-19 Vaccine Mandate webinar and guests’ resources from this session, can be found here.

Why Some Workers Don’t Heal

It’s well-known in workers’ compensation that 20% of cases account for 80% of costs. It’s been a mystery why four out of five cases progress fairly routinely, and why that fifth one is an outlier. Struggling to find the answer, we’ve continued to do versions of the same things over and over again for these patients, without success – the very definition of frustration and insanity. If it were easy to define who the 20% of patients were, we would have done it years ago, but the problem has essentially eluded us.

As an industry, we have spent countless hours and dollars looking for extrinsic causes to the problem. Could we build a better healthcare delivery network? Perhaps we need to change our drug formulary. Maybe the problem lay with the individual adjusters approving or denying care. All of these are viable and appropriate question, but they place the locus of control for the problem on the world around the patient. I submit that the reason 20% of patients struggle and fail with recovery is purely an intrinsic problem and the solution to the problem is easily fixable once it is identified.

The Real Reason Why That 20% Languishes

The core problem is twofold: Patients do not respond the same way to treatment, and they experience trauma and suffering in very different ways.

A one-size-fits-all approach simply does not work for everyone, because their symptoms and suffering are different. 

The nature of an injury is not just a broken bone or a laceration. While the physical manifestation of trauma is easy to see and treat, trauma expresses itself in emotional ways, as well. So far, our approach to treating injured workers has been primarily biologic – and pharmaceutical. Only recently have we begun to identify the ramifications of mental and emotional health on an injured worker’s recovery and ability to return to work. 

These emotional wounds and physical suffering express themselves differently in different individuals. We need to recognize these variations and develop customized and innovative ways to treat them on an individual level that are cost-effective and long-lasting and can provide patients with a truly positive experience.  

Why Are the Psychosocial Factors So Powerful? 

In 1997, George Engle introduced the bio-psycho-social construct for understanding the human condition as it relates to medical conditions. By identifying the fact that humans are much more complex than biologic creatures, he opened the door to detecting the underlying reasons why some people persevere in the face of grave illness or injury while others languish. To address this interplay, it is critical to understand two constructs.

First, there is a direct relationship in the brain among pain, trauma, depression and anxiety. They are inextricably tied through the neural pathways of the brain. When someone suffers from one of these issues, the others are directly correlated. In physics terms, for every action there is an equal and opposite reaction, and those reactions are not always positive. 

Second, a work-related injury is a life-changing event. Consider what the patient is facing:

  • Anxiety about continuing in their job and being able to support themselves and their family.
  • A loss of sense of self – will I ever be the same again?
  • A loss of identity – our jobs, our professions, our roles in the family and the community are representations of who we are. With an injury, those identities may permanently change.
  • Fear of the unknown – success in treatment is not guaranteed to restore full function.
  • Time to ruminate and worry during the recovery process.
  • A loss of control for their own healthcare – patients are reliant on their adjuster and payer to grant access to care for their problem.

See also: Impact of PTSD on Workers’ Comp Costs

If you consider the biologic connectedness of trauma and mental health and then factor in the emotional impact of a workplace injury, it’s no wonder that anxiety, depression and other mental health problems are present in most cases that drive volatile claims cost and poor patient outcomes.

When the injured worker is in pain, as most are, the recovery is longer, discomfort persists on a daily basis and emotional problems are exacerbated. Sleep is interrupted, delaying the healing process and increasing anxiety and depression. This downward spiral is clinically referred to as the fear-avoidance cycle, and it continues, often ending in permanent disability and addiction, because patients, and oftentimes medical providers, do not know how to break this vicious cycle. 

As noted, pharmacology has been the traditional answer for both pain and emotional/mental health issues. These medications were the only resource available to us clinicians, so they became the proverbial “hammer” and everyone we treated became the “nail.” We’ve seen what long-term reliance on painkillers can cost in terms of addiction, more suffering and even death. A pharmacological solution alone doesn’t work. Not only does it fail to resolve the source of the pain, but it also fails to treat the array of psychosocial symptoms that are related to pain. If anything, narcotics and pharmacology have the potential to make these problems worse. 

Science Leads to a Solution

Fortunately, recent breakthroughs in technology, science and clinical care offer alternatives to effectively treat the 20% of outliers that have long stymied us for their lack of response to the current biologic treatment paradigm. The innovation is understanding that the brain has the ability to promote neuroplastic change when given the appropriate clinical cues for the right frequency and duration. This neuroplastic change promotes a biologic re-wiring of the brain to create permanent resiliency to the symptoms related to the traumatic event. It is imperative that the biologic changes be coupled with social and psychologic training and education to provide an individualized level of support for the patient. The ability for a clinician to use a single therapeutic modality to address all three of these humanistic pillars is unparalleled.

This disruptive approach consists of four components: 

  1. Virtual reality technology: This technology is used to immerse the patient and to distract from the maladaptive sensations. The brain’s ability to create new pathways (neuroplastic change) reprioritizes these signals to create resiliency in the patient. Using the immersive technology, patients report an immediate decrease in their symptoms as well as a residual, or legacy, effect. This equates to acute relief from their symptomology with continuing relief even when they have removed the VR platform. Previously, similar results could only be accomplished with prescription drugs. The results using VR are obtained in a purely non-pharmacologic and safe manner. In addition to the reduction in symptoms (pain, depression, anxiety or PTSD), patients are also reporting a dramatic increase in the quality and quantity of sleep, which is essential to healing following any traumatic event – physical or emotional.
  2. Individualized behavioral counseling and coaching: The coupling of masters-level behavioral health specialists to coach and guide the patient through the virtual reality platform allows for an extremely customized and individual therapeutic experience. These weekly encounters help maximize the protocols within the virtual world as well as drive engagement and behavioral change skills in the real world. The coaches have been charged with helping traumatized patients return to their version of normalcy in their lives or helping them identify and adapt to a new version of normal as they move forward.
  3. An exceptional patient experience: Digital engagement in a virtual setting means that patients don’t need to leave home to engage in therapy. Patients receive direction as to when and how to use their platform from their personal coach, and then it’s available any time of the day or night. When a person is injured at work. there is a loss of control in their life, as their daily routine is interrupted. With this unique therapy, traumatized workers have complete control of one aspect of their healthcare—this is an extraordinarily powerful tool that helps engage these patients and gives them some ownership in the treatment plan. 
  4. A time limit: The 90-day duration of treatment is designed to promote the necessary neuroplastic change, coupled with behavioral change and goal-setting education. The goal for any therapy should be to create change in a timely manner. Furthermore, a true biopsychosocial program needs to drive the patient toward a graduation event—accomplishing a series of goals promotes positive behavioral change.

See also: Why to Provide Life Insurance for Workers

Through this combination of virtual reality technology and customized behavioral counseling, we now have a solution to effectively bring relief to injured workers in a holistic and patient-centric manner. The goal is to be synergistic and complementary to other therapeutic modalities, while promoting a safer and more efficacious treatment pathway. Simply put, this treatment modality delivers on the notion of the triple AIM – better patient outcomes, lower financial burden, and exceptional patient experiences.

Navigating the Future of Risk Management

The pandemic and the economy are presenting various challenges for risk management teams across the nation, including difficulties within the insurance marketplace, emerging risks and the challenges associated with changing business operations. 

The recent virtual conference, Elevate, presented by Out Front Ideas with Kimberly and Mark, hosted a panel of risk management professionals discussing the array of issues they face. Guests were:

  • Melora Copeland – director of insurance, Compass Group USA
  • Kelly Oyler – senior director, insurance risk, Walgreens Boot Alliance
  • Jane Sandler – vice president, global Risk management, McKesson
  • Dawn Watkins – director, integrated disability management, LAUSD

Risk Transfer Programs and Renewals

The Los Angeles Unified School District is largely self-insured and represents the second-largest school district in the nation. LAUSD faced challenges before the pandemic began, with most of its students below the poverty line. For some students, the lunch they received during their school day might be their only meal of the day, creating a crisis when schools were shut down over the pandemic. LAUSD launched a feeding program, offering a meal to anyone in need, providing over 100 million meals in the process. Other parts of their program have provided school supplies, diapers and COVID-19 testing and vaccinations.

Mirroring most employers, LAUSD has been inundated with requests for reasonable accommodations for a disability, extended remote work opportunities and vaccine policies. However, the reduction of silos and encouragement of departmental integration helped address these requests, providing more timely resolutions. Their workers’ compensation program has also adapted quickly through telehealth, outreach to injured workers and increased efforts to resolve claims through settlements. 

Compass Group, a leading food and hospitality company, has felt the effects of the hard market on its insurance program while paying particular attention to cyber during this renewal season. Its strong relationships with technology partners and carriers have proved vital. Articulating to its brokers how it has specifically invested in technology has also been important during renewals.

Everyone is affected during a cyber event, and handling a breach correctly and communicating across your enterprise can make all the difference. You also want to get ahead of your renewal and make sure that you are not overbuying, as hard market trends will likely continue across 2022.

As a leading provider and distributor of products and services to the healthcare industry, McKesson has seen much of the same with a challenging market after 14 consecutive quarters of pricing increases. Successful management of various implications has come down to strengthening relationships and avoiding silos. It has partnered with brokers and carriers and invested in tools to manage the total cost of risks. Not expecting the return of a soft market anytime soon, it has focused on better positioning its risk management program, including:

  1. Network use – Work with your risk managers, rely on your market relationships and have various options to maximize your coverage.
  2. Analytics use – Using a risk finance optimization study can help visualize a risk profile and draw insight into the pricing for your particular risk. It can also help frame internal dialogue around limits, deductibles and self-insured layers. McKesson employs captives and has grown them through building out a portfolio of products that strengthen its ability to support the business, including funding high deductibles, quarter share layers with insurers and taking in its own layers where pricing was not right.
  3. Loss-control, risk-mitigation investments – These should be included in the overall strategy; risk managers must understand in detail how they can support the company’s critical mission.

Walgreens credits its successful program in part to its relationships with underwriters within its carriers. While price is certainly important during renewal season, trust in partnerships can provide an incredible impact. Analytics also play an important role in driving conversations with senior executives to uncover their views on risk appetite and ensure strategies are aligned when developing a program. 

See also: The Woes of Absence Management

Impacts of Social Inflation

Non-economic factors affecting premiums, like increased litigation and higher jury verdicts, can be associated with anti-corporate sentiments and racial inequity movements. This phenomenon is often referred to as social inflation. While insurance premiums continue to rise, there are a few ways to offset some of the losses due to social inflation:

  1. Safety and loss prevention – Technology can help determine the cause of accidents, thus handling claims accordingly and ultimately avoiding litigation. Training to prevent accidents can also help.
  2. Claims handling – Some general liability claims can be resolved through early settlements. Typically, leaving these claims to a jury results in a worse outcome. 
  3. Diversity, equity and inclusion initiatives – Embracing the community can help you understand the mindset of individuals, including clients and employees, and builds a better foundation. Hiring minority-owned law firms can also provide a different perspective that your organization may not have seen before.

Workers’ Compensation Programs

First and foremost, your workers’ compensation program should be worker-centric. It is a major tenet of managing risk within your program. Connect with injured workers early and often and advocate for your employees so they have a contact in the event of a claim. Successful programs also include a strong focus on medical management and holistic care for the individual and on ensuring individual business locations are not paying to bring an injured worker back to work. 

Using specialists, physical therapists and rehabilitation facilities can help get an injured worker back to work and potentially settle a claim. Settling those lifetime claims can prevent a high-dollar event from occurring. Presumptions are also changing what occupations have compensable claims, particularly involving COVID-19. The best way to manage claims cost, though, is to understand the data behind your program. Understand what departments are driving the losses and why.

View the archived recording of this session here.

The Woes of Absence Management

Keeping track of employees, an important function for corporate HR departments under normal circumstances, has been even more challenging during the COVID-19 pandemic. Eight in 10 employers say the pandemic taught them the importance of absence management, according to a recent Guardian study.  

Further, state laws around regulated leave can change, and federal regulations are highly complex. Complying with related state and federal leave programs is one of the greatest absence management-related challenges your customers’ HR teams will ever face.  

Managing absences, especially using spreadsheets, is hard in the best of times, but has been doubly challenging during the pandemic, with some employees working remotely and others returning to the office. It’s no wonder HR teams are overburdened.

The growing complexity has led employers to look to insurers for more integrated, turnkey solutions. It has also served as a catalyst for insurers to develop automated absence management systems. Employers want to be in compliance, have up-to-date customer data, reduce the cost and time for HR departments and see real-time employee absence patterns and trends. For their part, employees want better tools for monitoring their attendance and tracking vacation time and related benefits. 

The new generation of automated absence management systems can help employers stay in compliance and track employee absences by connecting to a greater digital ecosystem of HR management systems. These systems also have the advantage of easily integrating with federal and state regulations or third-party vendors that monitor and update regulations as they occur. By bringing all these systems together, insurers can make reporting and data analysis easier for HR teams.

But not all absence management systems are created equal. Ease-of-use should be a given, but the following features are important to ask about:  

Employees providing input

Automation lets your customers’ employees schedule their own absences or log sick days. Claims that don’t meet eligibility requirements can be auto-rejected without the involvement of your customers’ HR teams.

Knowing what to expect

An absence management system should provide additional information and avenues to next-stage claims management. For example, your customers should be able to create a rule that a certain type of absence indicates whether physical therapy is likely in store for that employee, or if an absence related to an accident can help trigger a related claim. 

The importance of centralized data to spot patterns

When all employee data is in one place, absence patterns are easy to identify. Maybe your customer has an employee who is absent every second Friday, or an entire team is requesting vacation time the same week. Absence management software can help uncover patterns with tracking and reporting.

See also: Designing a New Employee Experience

Integrating changing regulations

Absence management systems should have the capability to integrate with third-party vendors that manage changing regulations to remain fully compliant with all federal and state regulations related to absence, including FMLA, disability and ADA. They should also have the ability to integrate with internal compliance systems. This feature, which is driven by the need for technology based on application programming interfaces (APIs), is a game-changer for organizations that run across multiple states.

A link to HR/health systems 

When absence management software links to HR management systems and health management software, it’s easy to monitor all the functions together in a single, seamless ecosystem, which is the ultimate goal.

Managerial efficiency

Finally, absence management software should allow managers to access all leave requests in a central place, ensuring appropriate coverage and deadline management.

Giving your customers the ability to add data and analytics and communicate across digital platforms is critical. Absence management software can do just that – collecting, managing, analyzing and reporting on important data and giving HR teams the information they need to maintain compliance, increase efficiency and reduce costs simultaneously.