Tag Archives: workers compensation

Will Watson Replace WC Professionals?

The Japanese firm Fukokui Mutual Life Insurance has replaced more than 30 office workers with artificial intelligence (AI), in this case the famed IBM Watson. Watson, or one of its doubles, is in fact affecting nearly all industries in multiple ways. Eliminating workers is a major goal. But could Watson replace workers in workers’ comp?

AI has been around for decades, but now with advanced technology it has fully caught on, and its applications are widely varied. AI is what drives driverless vehicles and operates machinery sans human involvement. More practically, AI enhances worker productivity, accuracy and efficiency. But AI should never reach workers’ comp if more pragmatic, technology-based strategies are implemented now.

Replacing workers’ comp professionals with Watson is not feasible at this point or, I hope, ever. Yet, it is a wake-up call to the industry.

See also: 10 Questions That Reveal AI’s Limits  

Imagine injured workers navigating the workers’ comp system without claims adjusters and medical case managers. Picture Watson managing claims. It could make payments without difficulty and even review the bills effectively. Watson could also determine which claims are the most challenging and refer them to medical case management.

Stop there!

Envisioning Watson as medical case manager is a real stretch. Human interaction is central to effective medical case management. Likewise, Watson delivering claim management services without dialogue with the claimant would be spotty and unpleasant at best. Accuracy and efficiency under Watson management could be nearly perfect, but claim adjusting relies heavily on human interaction. Injured workers managed by Watson would feel victimized in a heartless system. The only recourse would be to litigate. Watson might have trouble with that.

While replacing professionals with technology like Watson is going too far, it should prompt workers’ comp payers to engage current technology to improve processes and outcomes—just to keep up. Clearly, the momentum in every industry is more technology to gain efficiency, and workers’ comp cannot afford to lag. To stay in the game, technology designed to assist workers with task-relevant knowledge and decision support that makes them more accurate, more efficient and, yes, smarter is crucial.

Watson will replace health insurance industry administrative workers fairly easily. Essentially, bills are paid if they match the benefit plan and the treating doctor is in the PPO. However, the workers’ comp industry is very different from general health and much more complex. The question is how can the workers’ comp industry optimize efficiency and productivity without discarding its professionals and alienating injured workers? The answer is to apply currently available predictive analytics technology to make WC professionals smarter, more accurate and highly efficient. Of course, that also spells profitability for the organization.

Apply predictive analytics to understand historic data and the cost drivers inherent in it. Monitor the data continuously to identify risk conditions as they occur. Create apps that inform claims reps of conditions and events in claims that need attention in real time so action is taken early.

Assist claims reps by providing information for decision support such as the probable ultimate medical reserve amount for a claim. Time and effort are saved, while accuracy and efficiency are gained. Rather than labor with decisions such as adjusting reserves, you can present a timely and accurate projection, optimizing efficiency.

See also: Next Big Thing: Robotic Process Automation  

Similarly, relevant information should be available for medical case managers so they can avoid searching for claim information and status. Timely alerts and shared information promote collaboration and integration of efforts between claims and case management decision-makers in the organization. Watson is thwarted.

Florida’s Mess on Workers’ Comp

Sometimes stories in the news are simply that: stories. You read them; you ponder the significance for those strangers who are affected by the news; and then you move on. Other times, you find yourself directly affected by the news of the day, and it leaves you with a slightly greater awareness as to the potential impact the story might have. Such is the case here in Florida with our most recent twist in the winding tale of workers’ compensation reform.

My company has used the services of a professional employer organization (PEO) for much of its 17-year existence. However, due to growth and multi-state employment needs, we are extricating ourselves from that relationship and taking payroll, benefits and HR administration in-house. That change includes securing a direct workers’ compensation insurance policy for our company.

Now, workers’ compensation in Florida has become anything but mundane, as court decisions in recent months have stripped key sections of the comp code. The two primary cases that have driven the storyline are Westphal and Castellanos. Westphal ended a 104-week cap on temporary benefits. In reality, that decision will only affect a very small percentage of claims in the state. Castellanos, on the other hand, is having much broader impact. It found that income caps on attorneys for injured workers created an imbalanced level of representation, and declared the limits unconstitutional.

To make a long story short, there is now a huge unfunded liability for attorneys’ fees that may be due from any cases still open from much of this past decade. Some estimates are that employers and carriers will shell out as much as $2 billion for past cases alone. Litigation is expected to surge, resulting in a recommended and approved rate increase of 14.5% effective Dec. 1.

That is where the news of the day potentially affects my firm.

See also: How Should Workers’ Compensation Evolve?  

My agent sent me a quote for coverage effective Jan. 1, 2017. The quote, of course, included the approved rate increase that would be effective at that time. Just two hours later, a Circuit Court judge in Tallahassee blocked the approved rate increase, declaring that NCCI, which had generated recommendations for the state, violated state sunshine laws by not conducting the analysis in public meetings.

This is going to be a mess.

Litigation is already starting to increase in Florida. According to Deputy Chief Judge David Langham, petition filings rose 12% in 2016 (ended June 30, 2016), and thus far in 2017 (beginning July 1) the petition volume is up an average of 6%.

Ironically, while everybody and their brother knows that an increase in lawyer fees WILL drive litigation and costs up in Florida, it was a lawsuit brought by a plaintiff’s attorney, acting as an employer, that brought a screeching halt to the rate increase. If that group is looking to avoid its share of blame and divert attention for the increasing costs, that strategy is not going to work.

However, there is plenty of blame to go around.

As I’ve said previously, these court decisions “were largely the result of some really shortsighted legislative decisions, which were largely the result of greedy actions on the part of a select few who exploited the system for their own selfish gain, which was largely the result of some people screwing around with claims that should have just been paid to begin with.” There is little doubt that abuse existed in Florida. Before reform, attorneys were entitled to fee awards any time they brought action that “benefited” a client. Stories abound of cases where, technically, benefit was obtained, but it was in no way substantial. There was the case where an attorney gained an increase in weekly indemnity of 10 cents for a client, and received a $16,000 fee for the filing. Yet another (that one of my employees witnessed) where an attorney received a decision that awarded an injured worker $5. The attorney got $2,500 for his efforts.

There is little doubt that the reforms, starting back in 2004, had their intended effect. Fees for attorneys for injured workers, which were $215 million in 2003-04, fell to $136 million in 2014-15. However, the ratio of legal fees between plaintiffs and defense attorneys indicatted future problems. In 2003-04, Florida attorney fees were near parity, with 49% going to plaintiffs’ attorneys and 51% going to defense counsel. By 2014-15, however, that ratio had shifted dramatically, with 37% for plaintiffs and 63% for defense counsel (Source: Judge Langham’s Blog). There was indeed a representation imbalance created, and that caused a lot of problems here for some injured workers, particularly those with very temporary lost time and lower-value cases.

The real problem here in Florida was that our legislature took a very broad brush to stop a few bad actors, and ended up painting everybody into a corner.

But now, attorneys who will be the most immediate financial beneficiary have played a role in blocking the rate increase many know is needed to finance the reversal. Left unresolved, this portends big problems for the state. Carriers, facing certain cost increases but prevented from preparing for them, may simply choose to stop issuing new policies. Longer term, some could leave the state. At a minimum, those employers with a less-than-stellar experience level are most certainly facing the chopping block for their coverage.

See also: Healthcare Reform’s Effects on Workers’ Compensation  

As for my company, we’ve had one workers’ comp claim in 17 years. Our current loss run over that time shows zero dollars. We are in pretty good shape, but I do find myself wondering what our agent will be telling me when we chat later today. In the movie O’Brother Where Art Thou, when the boys find themselves surrounded by the law and trapped in the loft of a barn with no apparent way out, Everitt, played by George Clooney, kept repeating the obvious by saying, “Oh, we’re in one heckuva tight spot.”

I know how they felt. Let’s hope that someone comes along to re-write a sensible ending to this scene.

Work Comp Rule That Nobody Follows

The rule is straightforward: “If a party requests that a defendant provide a computer printout of benefits paid, within twenty (20) days, the defendant shall provide the requesting party with a current computer printout of benefits paid. The printout shall include the date and amount of each payment of temporary disability indemnity, permanent disability indemnity and vocational rehabilitation maintenance allowance, and the period covered by each payment, and the date, payee, and amount of each payment for medical treatment…. A defendant that has paid benefits shall have a current computer printout of benefits paid available for inspection at every mandatory settlement conference.” — California Code of Regulations Title 8 §10607.

The benefits printout is the foundation of every workers’ comp claim evaluation. Yet, workers’ comp professionals often ignore the basic exercise of examining claim expenditures. Attorneys sometimes come to mediation with a rolling cart holding boxes of documents. But when asked for the printout, they have to contact their office or the adjuster. Stranger still are the answers I sometimes get to the question, “How did you get to that number?” When I ask participants how they formulated their demand or offer, their answers may have no relation to actual claim exposure.

See also: How Should Workers’ Compensation Evolve?  

Showing up at a mediation or mandatory settlement conference without having scrutinized the printout numbers is inefficient and maybe even sloppy. Better practice is to obtain the printout in advance and create projections to support your claim evaluation.

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Workers’ comp professionals should review past medical expenses to project future expenses. Of course, parties may disagree about what expenses are reasonable and the likelihood and duration of future care. A medical recommendation for a new treatment (which may be disputed) can skew the numbers. For example, resolution of one mediated case hinged on a medical recommendation for a newly available prosthetic device.

The printout is also critical to resolving retro and overpayment disputes. When parties disagree about whether payments in a given period should have been paid at the permanent disability (PD) or temporary disability (TD) rate, the printout is the best evidence of what was actually paid.

See also: 25 Axioms Of Medical Care In The Workers Compensation System  

When both sides look at the printout together, they can often resolve their disagreements with a little help from a mediator.

I Got 99 Problems, but a Glitch Ain’t One

I have taken some time to review notes from the Workers’ Comp Roundtable 2016 WC Summit. The laundry list of glitches and gripes is bountiful with few surprises. Although the notes themselves do little to move the needle, they clearly show where the needle points.

The collected bulk of issues contributed from various corners illuminate a fantastically disjointed hopelessness. If nothing else, this summit is a general acknowledgement of workers’ comp as a systemic failure. This is very useful. Accepting failure is essential to force a widened perspective and arrest the status quo.

Accepting failure means we don’t need a complicated sorting of issues to provide sense and direction. We need to stop glitch-fixing and work from a higher level. In that spirit, only two items picked from the vast summit notes are necessary to depict the problem and re-align a solution focus:

Item #1: “Every single service provider makes more money if the case goes south.”

Item #2: “80% of the system is working appropriately, but 20% needs addressing.”

Consider that Item #1 is a truth caused by the incorrect assumption that “20% needs addressing,” per Item #2. The WC claims failure rate of between 10% and 20% has been an accepted statistical constant since at least the start of my career in the 1980s. It has not changed. Therefore, I submit that we must realize that this 20% is a societal-social-human element, which no part of the WC vendor arsenal can, nor should be expected to, fix. We need to stop addressing the 20% as if it has any potential for cure and return to work (RTW) and resolution.

See also: States of Confusion: Workers Comp Extraterritorial Issues

Fueling item #1 is the decades-long growth of various for-profit interventions, managed care controls and other misguided efforts aimed at the 20%. These remain alive and well, all “going south” for profit. No one corner of the industry has incentive to change. Each has a value proposition that makes some sense standing alone but falls apart and creates cross purposes in practice. Consider that most of the other summit notes are a sub-set of this fact, relating directly to glitches in execution and the lack of human consideration in the process-monster this industry has created, All address the 20%, with the backdrop of legislative pendulums swinging to over-correct and triggering counter forces to over-react.

Consider the absurdity in this simple example: What if state law required restaurants to prepare food with 20% of their raw ingredients spoiled? Would any of their dishes be fit for consumption once the 20% was blended into recipes with the 80%? What if the restaurant’s solution was to charge more money to engage more specialized cooks and more expensive spices and techniques that promised to make the spoiled parts more palatable? What if the restaurant charged even more money to predict which dishes would be the most spoiled, yet served them anyway? What if over time the entire restaurant industry saw fit to lose money on the actual menu items but have profit rely entirely on the added services aimed at placating diners’ fears over spoiled food? This absurdity is our workers’ comp system. 

A restaurant should be able to throw away ingredients unfit for use. It is not that simple in WC, yet is it so far-fetched to consider legitimizing the statutory marking of such WC cases early or at any stage in real-time?  Can some escape-hatch of “skipping medicine for resolution” be a legitimate mutual position from the claimant and defense side? Can the system open means for very early strategies and legal methods to dispatch the 20% without a need to pretend to “cure?”

This has happened, in small doses. Remember back when California mandated vocational rehabilitation, and it became mostly an under-the-radar holding pattern to failure and a means to propel claimants into bigger and badder disability positions? Recall that the solution at one point was to allow the option for claimants to be paid the value of Voc Re, as if they attended. This situation is a legislative acknowledgement of my main point. Let’s expand this thinking on a grander scale.

Let us also agree that employers should have 90% of the responsibility to identify the 20% – they should know their employees better than any predictive model, and adjusters should have the time and mandate to properly decipher real-time information with employers. Further, employers should strive to reduce the 20% as part of overall workplace culture efforts, just as a restaurant supplier is expected to minimize the delivery of spoiled produce. This is not just about WC. Better employer culture serves to better overall productivity.

See also: Are Our Working Patterns Outdated?

The industry needs to eliminate much of what it does that keeps claims churning open. Fees for claims and related services should be based on outcome performance. Eliminate rewards for false notions of “saved” medical dollars or simple transaction fees for late-timed or ill-fitted interventions. Think of how efficient the WC process would be if the 80% with outcome responsibility suddenly became the 99%. Many managed care schemes and other interventions would become unnecessary.

Legislatively, we need an acceptance of the 20% as a human/societal anomaly and need to require judges to account for it in tougher court decisions. We need to craft law reforms that open different avenues to resolve these cases very early under a “nuisance” presumption.

We don’t need to fix the 20%. We need very big changes that relieve workers’ comp of this 20% burden. Once that happens, most every other item from the summit notes will be minimized or vanquished.

Note: PDF downloads of complete summit notes can be found here.

The REAL Objection to Opt Out

I have never really understood why the Property Casualty Insurers Association of America has been so vehemently against opt out.

While it seems that opt out returned to the back burner for this year with constitutional defeats in Oklahoma and political stalemate in other states, PCI has reignited the debate with an inflammatory paper.

The basic arguments, which PCI supports with some data, is that opt out results in costs shifting to other systems and that a lack of standards and transparency is detrimental to consumers (i.e. injured workers).

PCI also argues that opt out is all about saving employers money to the detriment of consumers by denying more claims earlier and paying less with capitations and restrictions not found in traditional comp.

I get that alternative work injury systems must meet certain standards and need to be more transparent to consumers — to me, that’s a no-brainer.

But the objections that PCI raises are exactly the same complaints made against traditional workers’ comp: inadequate benefits, unnecessary delays, cost shifting, etc.

See also: Debunking ‘Opt-Out’ Myths (Part 6)  

Each statistic cited by PCI against opt out can be asserted against traditional workers’ comp — just use another study or data source.

For instance, just a couple of years ago, Paul Leigh of University of California at Davis and lead author of the study, Workers’ Compensation Benefits and Shifting Costs for Occupational Injury and Illness, told WorkCompCentral, “We’re all paying higher Medicare and income taxes to help cover [the costs not paid by workers’ compensation].”

That study, published in the April 2012 edition of the Journal of Occupational and Environmental Medicine, found that almost 80% of workers’ compensation costs are being covered outside of workers’ compensation claims systems. That amounts to roughly $198 billion of the estimated $250 billion in annual costs for work-related injuries and illnesses in 2007. Just $51.7 billion, or 21%, of those costs were covered by workers’ compensation, the study said.

Of the $250 billion price tag for work-related injury costs, the Leigh study found $67.09 billion of that came from medical care costs, while $182.54 billion was related to lost productivity.

In terms of the medical costs, $29.86 billion was paid by workers’ compensation, $14.22 billion was picked up by other health insurance, $10.38 billion was covered by the injured workers and their families, $7.16 billion was picked up by Medicare and $5.47 billion was covered by Medicaid.

The study drew criticism from the workers’ comp crowd, which defended its practices, challenged the data and anecdotally attempted to counter argue, with limited success.

If one digs deep enough in the PCI study, I’m sure one could likewise find fault with the data and the reporting on cost shifting — because the truth is that absolutely no one has a fix on that topic.

My good friend Trey Gillespie, PCI assistant vice president of workers’ compensation, told WorkCompCentral that “the fundamental tenets of workers’ compensation [are] protecting injured workers and their families and protecting taxpayers. The general consensus is that the way programs should work is to protect injured workers and taxpayers and avoid cost-shifting.”

Of course! All work injury protection systems should do that.

But they don’t.

See also: What Schrodinger Says on Opt-Out

That’s what the ProPublica and Reveal series of critical articles about workers’ compensation programs across the country tell us, both anecdotally and statistically: Injured workers aren’t protected, costs are shifted onto other programs, and taxpayers are paying an unfair portion of what workers’ comp should be paying.

Indeed, in October, 10 federal lawmakers asked the U.S. Department of Labor for greater oversight of the state-run workers’ compensation system, to counteract “a pattern of detrimental changes to state workers’ compensation laws and the resulting cost shift to public programs.”

I started thinking about the one truism that governs human behavior nearly universally: Every person protects their own interests first. And I thought of PCI’s name: Property and Casualty Insurers Association of America. “Property and casualty.” Ay, there’s the rub!

There’s no room for P&C in opt out! ERISA-based opt out uses only health insurance and disability insurance.

Workers’ comp is the mainstay of the P&C industry, the single biggest commercial line and the gateway to a whole host of much more profitable lines.

If opt out spreads beyond Texas, it is hugely threatening to the interests of the PCI members because they stand to lose considerable business, particularly if opt out migrates to the bigger P&C states.

PCI is protecting its own interests (or those of its members) by objecting to opt out.

And I don’t blame them. Their impression of this threat is real.

Michael Duff, a professor of workers’ compensation law at the University of Wyoming, told WorkCompCentral, “These are interested observers. They’re going to have an agenda. They represent insurers who are in the workers’ comp business.”


“Every commercial actor that participates in traditional workers’ compensation has an interest in seeing traditional workers’ compensation continue,” Duff went on. “But that traditional workers’ compensation imposes costs on employers. There is now a group of employers who would like to pay less, and Bill Minick has developed a commercial product that is in competition with this other conceptual approach to handling things.”

Here’s THE fact: Traditional workers’ compensation and ANY alternative work injury protection plan require vendors pitching wares and services to make the systems work.

Insurance companies are as much a vendor in either scenario as physicians, bill review companies, utilization review companies, attorneys, vocational counselors, etc.

Each and every single one makes a buck off workers’ comp, and each and every one has an interest in maintaining the status quo.

See also: States of Confusion: Workers Comp Extraterritorial Issues

Arguing that one system is better than the other without admitting one’s own special interest is simply hypocrisy.

Workers’ compensation is going through some soul searching right now. Employers leading the debate are asking, “Why stay in a system that facilitates vendors’ interests ahead of employers or workers?”

THAT’s the question that BOTH the P&C industry and the opt out movement need to answer. Further debate about the merits of one over the other is simply sophistry.

This article first appeared at WorkCompCentral.