new orleans, la, september 12, 2013
DESCRIPTION
Workers’ Compensation: National Trends Promoting Your Company Impact of Formula Change on Experience Mods S. Guenther, ALCM, ARM, CIC, CRM Sr. Vice President, Willis of Colorado. New Orleans, LA, September 12, 2013. - PowerPoint PPT PresentationTRANSCRIPT
New Orleans, LA, September 12, 2013
Workers’ Compensation:National TrendsPromoting Your CompanyImpact of Formula Change on Experience Mods
S. Guenther, ALCM, ARM, CIC, CRMSr. Vice President, Willis of Colorado
Work Comp Cost Drivers: Rates Source:NCCI Regula./Legis. Trends Workshop: May, 2013
State 2012 2013 Misc.
AK +2.7% -3.6%
AL -9.3% +4.8%
AR -4.1% -7.4%
AZ +5.2% +4.0%
CA +37% Refrms
CO +3.7% +5.2% 2014 +3.7%
CT +4.5% +7.1% Sandy Hk.
DC + .4%
DE 38.0% Reforms
FL +8.9% +6.1% Legis./Case Reserves = >5% prem.
GA +2.9% -2.4% Bene. Caps
HI +3.6% +5.2% Drug Caps
IA +4.4% +7.9% 2 inc. in ‘13
ID +2.9% +3.9%
IL +3.5% -3.8%
IN +2.6% +5.0%
KS - .5% +2.3%
KY -7.9% -7.5%
LA +6.0% +2.5%
State 2012 2013 Misc.
MD +1.4% +3.8% St. Fund Chg
ME -3.2% -1.8% +3.9% in ‘13
MO -3.0% +2.1% St. Fund Chg
MS +9.9% +4.1%
MT N/C -5.4% -22% in ‘11
NC N/C .5%
NE +4.9% + .3%
NH +6.7% + .6%
NM +7.4% +5.1%
NV +1.0% +2.6%
OK - 1.7% + .4% Can Opt Out
OR +1.9% +1.7%
RI +5.3% +8.0%
SC +3.0% +1.1%
SD - .3% - 3.2%
TN + .4% +2.3% -5.1% ‘12 law
TX - .3% -3.8% 30% Opt Out
UT -1.6% ’11 +1.5%
VA +10.5% - 5.7%
WV - 7.6% ‘11 -7.6%
Come up and see me if you want to see how your state stacks up for most or least expensive in the nation for workers’ comp. rates.
Cost Drivers: Avg. Wage Benefit vs Days to HealState Days w/
Wage Benefits
Days to Heal (MMI)
AK 67 203
AL 87 195
AR 73 175
AZ 78 146
CA 80 267
CO 80 177
CT 60 149
DC 110 163
DE 81 236
FL 56 97
GA 173 175
HI 53 215
IA 47 125
ID 47 136
IL 125 145
IN 70 132
KS 91 117
KY 106 159
LA 178 354
State Days w/ Wage Benefits
Days to Heal (MMI)
MA 107 303
MD 99 161
ME 90 318
MI 108 241
MO 73 81
MS 110 182
MT 72 177
NC 188 137
NE 59 120
NH 79 230
NJ 70 140
NM 86 218
NV 80 135
NY 116 138
OK 143 183
OR 46 134
PA 132 318
RI 72 162
State Days w/ Wage Benefits
Days to Heal (MMI)
SC 167 132
SD 61 99
TN 89 176
TX 71 213
UT 51 128
VA 108 178
VT 90 187
WI 38 102
Source:NCCI: TTD Duration Brief Aug, 2013 Based on 2009 Injuries at a 36 month analysis (2012)
Longest Duration by Age Group to Heal: 41-50 = 130 days
Shortest Duration by Age Group to Heal: 31 and under – 83 days
Work Comp Cost Drivers and National Trends
Increased Use of Pain Killers
Rx drugs make up 18% of total WC med. costs
Top Drugs Prescribed (Source:NCCI Regula./Legis. Trends Workshop: May, 2013)
Oxycontin/Oxycodone HCL (47% of narcotic costs), Lydoderm, Lyrica, Celebrex, Gabapentin, Cymbalta
Opana HCL/ER, Meloxicam, Tramadol HCL,
Two are anti-inflammatories
One is for depression
All the rest are for PAIN
Opiate-derivatives/developed for cancer patients
Controls: blood tests, pill-counting,
Docs Rx less-addictive meds
Work Comp Cost Drivers and National Trends
Physician Repackaging of Prescription Medicines
Purchase in volume
Repackaging allows for set own price on meds
Outside the Average Wholesale Price
States have enacted legislation to regulate
States have banned the practice, completely
States have limited costs of drugs through state workers’ comp. fee schedules
NCCI: National Council on Compensation Insurance
One of Several Rating Bureaus
Independent Bureaus: CA, DE, HI*, IN*, MI, MN*, NC*, NJ, NY*, PA, TX*
* State shares data with NCCI
Monopolistic States: “NOWW” ND, OH, WA, WY
NCCI: State Administrator for Work. Comp. in 37 States/Jurisdictions
Gather statistical data
Detailed claims data
Detailed payroll data
>700 insurance carriers report to NCCI
The Experience Modification Factor
Introduced in the 1970’s
All Employers Paid Same Premium Rate for WC
Some employers had > injuries than others
Needed a Remedy to Reduce Socialization of Costs
Employers with Injuries < Avg= Credit Modifier
< 1.00 – produces a premium credit
Employers with Injuries > Avg= Debit Modifier
> 1.00- produces a premium debit
Designed to Properly Assess/Apply WC PremiumsWas never intended to reflect safety
The Experience Modification Factor - Formulas
NCCI’s Formula Changes to the Mod Factor
The Out of Balance Theory
NAIC
The Importance of 1.00 Avg. State Mod
Experience Rating Adjustment Plan (1997)
22 States for 16 Years
Removes 70% of $ for all med-only clms.
These $ eliminated from mod calculation
Split Point Formula Change
Initiated in 2013
Adopted Different Dates in Each State
Impact to Interstate Businesses
The Experience Modification FactorWhat is the Split Point?
Every Injury/Claim USED in the Mod Factor Has Two Components
Primary Portion (Prior to 2013: was $5k)
Excess Portion (Prior to 2013: all $ > $5k)
Primary Losses Weighted Heaviest in Mod Calculation
Go right to the “bottom line” of the mod factor
Smaller, “frequency” losses
Theory: Frequent losses = severe losses
Five claims at $5k > impact to mod factor than
one claim at $25k.
The Experience Modification FactorWhat is the Split Point?
Excess Losses – Have weights/ballasts placed against it in mod factor calculation
Dollars are lowered in the mod calculation
Excess loss portion receives less weighting
“Cushions the impact” of larger, more severe
or catastrophic losses on the experience mod factor
This is the “Split Point” – Amt. of Primary vs Excess Loss Dollars Used in the Mod Calculation
For 20 Years $5,000 Was the Split Point
The Experience Modification FactorWhy Did the Split Point Change?
NCCI:
►The Cost of Workers’ Compensation Claims Have Tripled in the Past 20 Years
► Mods Will Be More Responsive to Loss
► Mod factors Will Be More Credible
► Employers Will Have More Incentive to Operate Safely
But Will They Report Their Injuries?
Fines and Penalties for Failure to Report
Beware of Paying Your Own Claims
Be sure your state permits it
The Experience Modification FactorHow Did the Split Point Change?
In 2013:
Split Point Will Be Changed as Each State Completes its Annual Filing with NCCI
Example: Your Policy Renewed on Jan. 1, 2013
Oregon: Jan. 1, 2013 $10k of Each Claim
Colorado: Jan. 1, 2013 $10k of Each Claim
Idaho: Jan. 1, 2013 $10k of Each Claim
Nevada: Mar. 1, 2013 $5k of Each Claim
Louisiana: May. 1, 2013 $5k of Each Claim
The Experience Modification Factor
How is the Split Point Being Adopted?
2013: Split Point Doubled from the First $5k of Each Claim to the First $10k of Each Claim
2014: NCCI Proposing a Split Point of $13,500 2015: NCCI Projects a Split Point of $15k+ Index 2016: Split Point Will be Indexed, Annually by NCCI
CA: Indep. Rating Bureau 2011 - $5k to $7k Only
MO: Change Will Begin in 2014 - $5k to $7k
The EMR Split Point Formula Change Impact
NCCI is Offsetting the Impact with ELR & D Factors
If They Did Not, Estimates Show the Average Mod Factor Increasing by +11 Points
NCCI Estimates:
.1% of Employers= Change of >15% to EMR 11.9% of Employers= Change of 5% to 15% to EMR76% of Employers= +/- 5% to EMR
11.3% of Employers = + 5% to +15% Change to EMR .7% of Employers = Increase of > 15% to EMR
Source: NCCI Annual Symposium exhibit page 59
What Creates a Debit Mod? Increased Injuries/Severity
Culture? Aging Workforce?
Comorbidities?
Poor Management of Claims
Wrap Up Projects
Contingent Mods
Shift Payroll to Cheaper Classes
Mod Factors With Errors
Shifting Policy Period Eff. Dates > 90 Days
Reduction of Payrolls/Shifting Payrolls to Jt. Ventures
Buying a Company with a Debit Mod
Other Ways to Influence an EMRSmall Deductible Plans
Fourteen (14) States Have “Net Reporting”
All dollars under the deductible are removed from the mod factor calculation
Net Reporting States (* States with $10k Ded. Max.)
Alabama Kansas*
Colorado* Kentucky*
Florida Maine
Georgia Missouri
Hawaii New Mexico*
Idaho Oklahoma
Iowa OregonSource: NCCI Basic Manual, 2012
Claims Management and the Mod ImpactEmbrace Injuries and Communicate
Learn from, talk about, train from your injuries
Fraud and Strategic Surveillance/Holidays
Subrogation- Veh. NAF Acc=4 Employees Injured
Engage Carrier and Agent Partners
Choose Quality Medical Provider (Where an Option)
Invoke Statutes and Penalties
Know State Laws/Culture Before You Bid
Crucial Periods for Claim Reviews
8 mos. pre-renl. (stats to NCCI @ 6 mos)3 mos. pre-renl
Credit EMR Through Return-to-WorkKeeps $ Out of the Experience Mod
Pay employee wages once – taxable
Wages in mod – impacts prems. for 3 yrs!
Keeps Employee Productive
Makes a contribution
Avoids muscle atrophy
Could lower their permanency rating
Social interaction helps avoid depression
Light Duty is NOT for everyone!
Positive Drug Tests or Threats to Co-Workers
Temporary Progressive Be Committed
The Most Common Errors in the Experience Modsheet
Not the Employee of the Policyholder
Not Net of Deductibles (in net reporting states)
Claims Reported in the Wrong State
Dollars Never Removed With 3rd Party Recovery
Data is for Wrong Employer
Data blended for unrelated employers
Payrolls are Estimated
Payrolls/Policy Years Missing Completely (contingent)
Payrolls in Wrong Class Code
Work with Agent/Carrier to Correct Stats
NCCI will revise within days
Debit Mod Factors – A Poor Gauge of SafetyState Rate Changes
Ann. Change in ELR & D Factors
Mod Formula Changes
Split Point Change
Avg. mod is +11 pts. unless ELR/D adjust.
Experience Rating Adjustment Plan
Removes 70% of all $ for med-only clms.
Out of Balance Theory – State Administrators
Employee Injured by Third Party’s Negligence
Maximum Caps on Severe Claims
Data Has High Error Ratio / Contingent Mods
Debit Mod Factors – A Poor Gauge of SafetyEMR’s (Experience Mod Rates/Factors) Used in
Bidding Process
Energy and construction industries
Disqualified for >1.00, >.90, >80 mods
Discourage this practice
Larger payroll = lower mods
Small/mid-sized employers = higher mods
Pre-Qual letters from agent/carrier
Reliability/credibility of mod factors
Some Pre-Qual. Requirements Are Changing
Generals/Owners/Energy Companies Are Listening
Moving to 1.10 EMR to Bid
Asking to Review the NCCI Modsheet
Asking to Review Safety Policies/Procedures
Asking for Actual Work. Comp. Loss Documents/Loss Runs
Less Weighting Assigned to the EMR in
the Pre-Qual. Assessment Factors
Meeting with Subs. Who Have Debit EMRs
Change the Focus Away from a Number
Recent State/Industry/Association Safety Awards
Compare Incident Rate to Industry
Lowered Lost-Time Injuries
Reduced Frequency of Losses
# of Days Without An Injury
Mod Impacted by 3rd Party Negligence?
Frequency of Safety Training
Frequency of JSA’s
Return to Work Commitment
Full-Time Loss Prevention Specialist(s)
Certifications/Designations of LP Spec(s)
Engage Outside Firms in Loss Prevention
Train from Your Injuries?
Behavioral Modeling Programs
Standards for Inj Reporting 8hr/12hr/Same Shift
Compliance/Disciplinary Programs in Place
Pre-Hire Integrity Testing
DART Rates
Letters from External Loss Prevention Specialists – Carrier/Agent
New Safety Programs Implemented in the past year
Buddy Systems for New Hires
Post Accident Investigations
Near-Miss Investigations
Certifications by Employees
Safety Committees
Drug/Alcohol Policies
Pre-Employment Fit-For-Duty Physicals
Citation Free?