Tag Archives: workers compensation

What Robots Mean for Workers’ Comp

History provides interesting insights into the debate around automation and employment. In 1632, King Charles I of England banned casting of buckets, for fear that allowing it would ruin the livelihood of the craftsmen who were making the buckets the old-fashioned way. In 1811, the Luddites in England started a movement where they smashed machines that they viewed as threats to employment. These examples have occurred with increasing frequency since the industrial revolution began. Not coincidentally, the per capita income in the world doubled every 6,000 years prior to the revolution and every 50 years afterward.

According to a Pew study, 52% of Americans think that much of our work can be done by robots, but only 38% believe that it could replace the type of work that they do. Additionally, 76% of Americans believe that robots would increase the inequality between the rich and poor.

But standing in the way of change, when viewed through the lens of history, has rarely worked. The key is to focus on the dislocated individuals and provide training to make sure that they can move into new positions. Historically, new positions tend to be more highly compensated, fueling an upward cycle.

It is clear that the pace of change and automation is increasing. In January, the parent company of Giant, Martin’s and Stop & Shop said it would introduce 500 robots to its supermarkets this year. Sure enough, if you Google “Marty the Robot” – a large, grey cone with a bright smile and “googly” eyes — you will find out that he is hard at work at 40 Stop & Shop’s in New Jersey, finding and reporting spills in the aisles and calling for a mop.

It will be interesting to see what retailers follow suit. Walmart has given robots a thumbs up. Target? A thumbs down.

The pros and cons of automation are widely written about. The pros: eliminating mindless tasks, saving money on employee costs, having a safer working environment. The cons: reducing human contact with the customer, eliminating jobs for people who need then and decreasing flexibility in the workplace as automated tasks occur at programmed times.

See also: What’s Beyond Robotic Process Automation  

As providers of workers’ comp insurance, we are watching the rise of automation in the workplace closely. One of the ways we do this is to analyze actual claims that are submitted by our insureds, which are most often small to medium-size businesses. In the restaurant sector, we analyzed over 84,000 claims. and in the retail area we looked at more than 20,000.

One area where we are convinced automation could help reduce worker injuries is in coffee shops. Workers who operate espresso machines eight hours a day are reporting repetitive motion injuries akin to “tennis elbow.” In fact, so-called “Barista Wrist” is now a recognized medical condition. Our study of workers’ comp claims in the restaurant industry found that cafés had more lost time due to injuries than any other restaurant type. And the cause of the highest number of days needed to return to work in cafés – 366 days – was due to wrist injuries.

In a parallel from the retail sector, workers in hair salons are reporting hand, wrist and arm injuries from drying hair with a blow dryer, setting the stage for a new condition that could be called the “Brazilian Blow Out Arm.” Perhaps an innovative, automated “Robot Blow Out” could eliminate these repetitive motion injuries.

Among the most dangerous and expensive injuries in our retail analysis (which includes some wholesale) came from workers engaged in the preparation of meat, poultry and fish, which involves cutting hazards caused by sharp tools and machinery. The average paid claim for a worker who sustains a cut ranges from $4,200 – $7,800, depending on whether it was caused by a non- powered tool, by a powered tool or by being caught in or between machinery.

But once again, repetitive motion injuries in meat, fish and poultry preparation are by far the most expensive at $16,200 for the average paid claim. Clearly, this is an area where more automation would be helpful.

See also: How Robotics Will Transform Claims  

All of this gets us back to our original thesis that history has shown that automation is a net positive for workers which, over time, leads to people taking higher-paying jobs. Yes, jobs are eliminated, for sure. With machines, come risk and injuries, that’s undeniable. But it is also clear that robots will take over the mindless, thankless (and dangerous) jobs and likely lead to a workplace that is safer overall.

With all that said, there is one robot that I don’t want to see and that’s: “Matt, The Workers’ Comp Insurance Executive.”

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.

Electrodiagnostics: a More Powerful FCE?

My recent post on functional capacity exams (FCEs) is a great lead-in to considering another level of related technology. Let’s explore electrodiagnostics as arguably a more powerful arrival in functional exams.

First, let’s recap what quality means in a functional capacity exam: An FCE requires a process that is objective and consistent with the proper balance between specificity to body parts and sensitivity to critical indicators, including pain, range of motion and strength. An FCE must indicate illegitimate effort and attempts to “game” the test by subjects.

I submit to you that, the more a functional exam process can move away from human-tester interventions and totally separate testing steps, the closer it gets to nirvana. This construct is the essence of electrodiagnostics.

A routine FCE process involves various separate tests, including nerve conduction, range of motion and strength. Even with the most advanced equipment, this presents separate processes to assess for validity and to try and formulate into a whole-body issue. What if one test did all of this at once?

Contemplate the electrodiagnostic functional assessment (EFA), where a test subject performs a single test sequence on specialized EFA equipment that measures multiple factors. This provides instant objective credibility. Stated simply, combined factors of muscle strength, pain and range of motion and others need to align in a logical pattern as depicted by computerized readout, or the subject is immediately shown as self-limiting his capability.

The EFA is arguably more accurate than the common FCE in assessing work capacity. EFA has also been proven useful in more specific applications, such as determining the need for hardware removal in post-surgical cases with alleged recurring pain problems.

Consider further that, because the EFA is such a consistent test, it is highly credible as a comparison to prior baseline. The EFA used as a base-line test at time of hire can be saved as a data file without opening until an employee might have an alleged injury at some later period. At such occasion, a new EFA can be performed to compare with the baseline to see what, if any, alleged changes in capacity and pain threshold have occurred. This definitive comparison has held up in court cases, making the EFA evidence as worthy as an MRI would be in comparing pre- and post-injury pictures of a joint or body part.

Quick Tip: Learn More About EFA and the Possible Application to Your WC Claims

– Google “electrodiagnostic functional assessment” to review white papers and scholarly details around the EFA and its applications and case studies.

– For more information, search out Emerge Diagnostics, which has pioneered the application of EFA and which is making efforts to bring EFA to the forefront of medical and legal use. I do not promote specific vendors in “Quick Tips,” and this article is for informative purposes only. However, the EFA is currently a sole-source situation, and reviewing the studies and successes of Emerge Diagnostics is of educational benefit.

– If you want to be cutting edge, do a trial. Pick a WC case or two that is stalled without adequate determination of disability, causation, apportionment or need for surgery, etc. Work to get an EFA entered as evidence and see if the case can turn.

– If you do try EFA, let me know your results. I would like to continue related reporting on this and see how much future influence EFA might have on the larger WC landscape.

workers' comp

Workers’ Comp: Where the Smart Money Is…

What’s with all the investor interest in workers’ comp services? There are several dozen private equity (PE) firms looking hard at the workers’ comp services business today, with many pursuing acquisitions of companies large and small. While their approaches, priorities and goals may differ slightly, there are several reasons why their attention will likely persist for some time.

First, there are a lot more investment firms out there these days than five or 10 years ago, with a lot more capital to invest. That means lots of smart people with big bank accounts are looking to park millions of dollars, which means there’s a lot of competition for attractive companies.

Second, some comp services companies have gotten pretty big, with earnings in the tens of millions of dollars and revenues north of $200 million. Finding potential targets, conducting due diligence and going through the deal process takes about the same amount of time and staff if it is a $50 million or $350 million deal. Obviously, PE firms would rather do a couple or three large deals than a bunch of smaller ones as it’s a lot less work on the front end, and a lot less to manage and oversee after the deal is done. And PE firms just seem to like companies with more revenue.

Third, what used to be considered a problem — the regulatory risk associated with a workers’ comp company — is now seen as a strength when compared to a non-work comp healthcare firm. Investors see the 51 regulatory bodies affecting workers’ comp as creating far less risk than the single regulator driving Medicare, Medicaid and most health insurance programs. Investors don’t know what’s going to come out of CMS as reform is implemented, so PE firms are hedging their bets by going where, in a worst-case scenario, they’re going to get hurt in one or two big states.

Fourth, there are a lot of inefficiencies, stodgy business practices and just plain poorly run sectors of the workers’ comp business. PE firms make a lot of money by stripping out inefficiencies, delivering better performance, streamlining workflows and processes, removing cost and delivering more value. Anyone who’s spent any time at all in work comp knows that there are a plethora of opportunities out there to do all of these.

Bill processing, analytically driven medical management, intelligent utilization review, provider clinics, complex case services, IMEs/peer review and chronic pain management and addiction services are just a few sectors where there’s a ton of opportunity.

Interestingly, no PE firm has yet taken advantage of the biggest opportunity in workers’ comp. That opportunity is to buy a comp carrier/TPA, rationalize the claims and medical management process, write workers’ comp insurance and make huge profits by controlling medical costs and delivering much better outcomes. The investment executives I’ve spoken with about this seem to be afraid of the risk; what if they do it wrong, or get a bunch of bad claims, or whatever?

To which I respond: You can’t do it any worse than many of the current comp carriers, so what are you waiting for?

A Smell Test for Wellness Programs

Here is a wellness needs analysis to help you choose the best approach for your company. It is based on wording, definitions, regulations and related government proposals from the Employee Benefits Security Administration, Department of Health and Human Services and other ACA-related government writings easily found via Google. This serves to set a high-level framework — certainly not “legal advice,” yet respecting that, when it comes to government, today’s suggestions are tomorrow’s compliance issues.

More importantly, this perspective takes out the profit-driven vendor’s depiction of what might be best for your company. The essence is pleasantly simple. Wellness is defined by government in two forms:

1) Participatory Wellness: Provides health-related opportunities equally to all workers, such as reimbursed gym membership, classes on weight loss, smoking cessation and other health/lifestyle issues. Participants can be offered low-level rewards like gift cards.

2) Health-Contingent Wellness: Programs that seek to identify individual health factors and set individual requirements for risk conditions. The incentive/penalty aspects can be as much as 30% of the premium costs for the individual. Basically, smokers and employees with high cholesterol or body mass indices pay more unless they follow a “reasonable” regime with “reasonable” results to address these problems — “reasonable,” as a government term, being clear like mud.

I would wager most readers gravitate toward participatory programs, correctly assuming that they are less expensive, less intrusive and, frankly, more respectful of employees’ desires. Participatory programs generate goodwill, in the spirit of wellness, and help individuals who are determined to help themselves. Optimally applied, they offer a gentle positive push via passive awareness efforts, essentially “farming” for participants as opposed to actively “hunting” for candidates via the health screenings required in health-contingent programs.

Participatory programs seem like a no-brainer and therefore raise the question: Is there any logical place for health-contingent programs? After all, they cost a ton (averaging more than $600 per employee annually) and have not been shown to improve health or return dollar savings.

In some sense, they are totally illogical in presuming that today’s employees are tomorrow’s health risk for the employer. Consider that when any employee leaves, the employer has wasted the health-contingent wellness dollars spent on him. Further, few employers today offer retirement health plans and therefore do not “own” the highest-risk period of most employees’ lives.

Let me simplify further. When selling a house, you cancel and pro-rate your homeowners insurance on the day of closing. I submit that health-contingent wellness is as silly as allowing the next homeowner to use the remainder of the policy you already bought.

So, back to the question: Is there a logical place for health-contingent programs? Surprise! Absolutely! And the impact would be strong and immediate.

Health-contingent wellness makes sense in workplace environments with “presumptive benefit” requirements for workers’ compensation. Police, firemen and first responders in most jurisdictions are granted “presumptive” WC benefits for heart, hypertension, lung and related issues arguably connected to the stress of the job. Movements are in play to widen these benefits to include mental health disorders and cancers and to include other classes of public employees.

Most public workforces have low turnover and retirement health plans. Therefore, investing in tomorrow’s health today is a justifiable hedge against long-term risk. Also, and more importantly, presumptive benefits involve issues that can be mitigated by condition-specific wellness programs. Controlling cholesterol, high blood pressure, weight, anxiety, smoking, alcohol, etc. is effective and constitutes money well spent. Health-contingent wellness would identify those with health risks and set them on a personal improvement plan with expected milestones. Targeted employees would have as much as 30% of premium contribution at risk for noncompliance. The workforce, as well as the public, would be better served.

Editorial comment: I realize that engaging some public unions in health-contingent wellness presents a difficult collective bargaining issue. However, I submit that these employees must consider public interest. They should not be able to have it both ways. One can’t argue that the nature of the job is clinically connected to health conditions yet avoid known methods to mitigate those health risks. One can’t enjoy a luxury of expanded WC benefits without personal responsibility for health. Besides, the ACA says it should be so!

Quick Tip – Consider the Spectrum in Choosing Your Wellness Approach

For many employers, participatory wellness makes more sense. But don’t assume too quickly before making a critical assessment of your workforce.

Start from the extreme example of public employees with presumptive WC benefits and work backward to find your risk level. Questions to ask include: Do you have low turnover? Do you have an aging workforce? Do you have retirement health obligations? Are there specific issues that you can identify affecting today’s workers’ comp costs such as obesity, diabetes or other co-morbidities? What are today’s health costs telling you about your workforce? Can you make a near-term, dollar-savings case for addressing individual employees head-on in a health-contingent wellness program?

If you answered any with “yes,” then you may choose the route of health-contingent wellness. Approach this with precision. Manage health issues with proven programs and specific improvement expectations. My personal suggestion for vendor contracting is to install some mid-program “escape clause” if interim expectations and milestones are not met.

Common sense can prevail when it comes to wellness. Good luck!