Managing ClaimsProtecting the Bottom Line

September 30, 2010

Betty Arinder, Attorney – Wells Marble and Hurst, PLLCHal Caudell, District Manager – CorVel CorporationBob Fusinatto, Regional Claims Manager – Safety National Casualty CorporationSteve Link, Executive VP of Marketing – Midwest Employers Casualty Corporation

Claims ManagementImpacting Outcomes

Timely Report of Injury Investigate and Adjudicate Predict and Intervene – Right Resources at

the Right time! Concurrent Reviews Analytics and Trending Impacting Outcomes

Important Guidelines for Claims Handling

Agent Reporting◦ Why is the Center for Medicare Services (CMS)

Requiring Reporting Complying with Medicare Mandatory Insurer

Reporting Requirements (MMIRR) Identifying Authorized Representative,

Account Manager and Account Designee Testing Going Live

Medicare’s Effect on Workers’ Compensation

What are the CMS Requirements for MSA’s◦ Claims estimated to settle for more than

$250,000 when the beneficiary will become eligible for Medicare in less than 30 months

◦ Claims estimated to settle for more the $25,000 when the beneficiary is already eligible for Medicare

What about Liability Claims?

Medicare Set Asides (MSA)

Current Medicare Guidelines and Affect on Settlement Values◦ Major Cost Driver’s – Pharmacy

Real Life Example of MSA Impact: Lifetime Medical Treatment - $22,528.08 Lifetime Medicare Prescription - $611,994.04

Total $634,522.12

What Type Settlement Should I Pursue What Interventions/Options are

Available

Medicare Set AsidesThe Affect on Claim Settlements

CONTROL LITIGATION COSTS

Top Five

AVOID LAWYERS Explain workers’ compensation process to

injured employee Employer: stay in touch with injured

employee; re-assure of employment Adjuster: communication is key; prompt

payments

CHOICE OF PHYSICIAN Explain choice of physician to injured

worker Make sure that employee has clear choice Document choice

RETURN TO WORK Temporary Longer out of work, less likely to return Permanent

TEAM WORK Attorney represents employer, not just

carrier Communication with adjuster and attorney Providing information and documents

promptly

MEDIATION You have more control Less costly than hearing More options for concluding; can be more

creative Maintains relationships

Claims ControlExcess Coverage

Reduces Direct Costs (losses)

Reduces Indirect Costs (Lost productivity, increased labor costs, etc.)

Reduces Excess Premium

and Self Insured Retention

Improves Employee Morale-Increased Productivity

How Does Proactively Managing Claims Protect the Bottom Line?

Investigation Medical Management Vendor Management Reserving Recoveries Return to Work – Settlement Supervision, Documentation, Action

Plans

Proper Management of Claims

Excess Reporting

Proper Management of Claims – (cont.)

Excess Reinsurance 101 We Share the Risk of our Clients TPA “Quality is Critical to our own Mutual

(Client/Excess Insurer) Success High Quality Claim Administrative Services

Alone cannot Guarantee an Employer will Achieve Best Practice Results

Best Practice Results can only be Achieved Through Proactive Employer Management of all Aspects of the Program

4.5%3.5%

2.8% 3.2% 3.5%4.1% 4.6% 4.7%

4.0% 4.4% 4.2% 4.0% 4.4%3.7% 3.4%

5.1%

7.4%

10.1%

8.3%

10.6%

7.3%

13.6%

7.6% 7.2%6.2%

9.2%8.6%

5.8% 6.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Change in Medical CPIChange Med Cost per Lost Time Claim

WC Medical Severity Rising at Twice the Medical CPI Rate

Sources: Med CPI from US Bureau of Labor Statistics, WC med severity from NCCI based on NCCI states. Insurance Information Institute.

Average annual increase in WC medical severity from 1995 through

2008 was more than twice the medical CPI (8.1% vs. 4.0%). New

healthcare reform legislation is unlikely to have any impact on the

gap.

Medical Distribution of Total Costs

Indemnity54%

Medical46%

Source: NCCI (based on states where NCCI provides ratemaking services).

Indemnity47% Medical

53%

Indemnity42%

Medical58%

1988

1998

2008

Medical Claim Cost InflationWC Insurers Experience Inflation More Intensely than

2009, CPI Suggests

Healthcare Costs Are a Major WC Insurance Cost Driver. They Are Likely to Increase Faster than the CPI for the Next Few Years, at Least

Source: Bureau of Labor Statistics; Insurance Information Institute.

1999

2008

1990

No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30%

Obesity EpidemicObesity Trends* Among U.S. Adults

BRFSS, 1990, 1999, 2008(*BMI 30, or about 30 lbs. overweight for 5’4” person)

Source: CDC Behavioral Risk Factor Surveillance System

Questions?