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The Real Cost of InjuryA Workers’ Compensation Perspective
Robert M. Sklar, BS, CRCPJanuary 27, 2010
Insight. In Touch.
It’s after Lunch, I came for a Nap!
• Workplace Injury Claim
• How does the claim evolve – good vs. bad
• What does Safety have to do with it & why should I care?
• What are the financial drivers
• What impact can I have on claims
• What can I learn from claims data
• What priorities should I have based on my claims data
But Wait!
• I am just the Safety Person. Does
this really matter?
• What can I Do?
Regulations on the Increase
HIPPACOBRA
IRATRFARA
FMLAADA
FSLAFRA
OSHAHMO
MSHAERISA
EEOFDAEPA
FUTAADEAMSSALMRA
IRSFLSAFICA
Case LawCommon Law
FRAOSHAHMO
MSHAERISA
EEOFDAEPA
FUTAADEAMSSALMRA
IRSFLSAFICA
Case LawCommon Law
EEOFDAEPA
FUTAADEAMSSALMRA
IRSFLSAFICA
Case LawCommon
Law
LMRAIRS
FLSAFICA
Case LawCommon
Law
Case LawCommon LawCommon Law
1900
2010
Safety
• Identifying hazardous working conditions – develops strategies to eliminate or mitigate the identified hazard.
• Provides accident injury and illness profiles and data
• Identify accident trends, sources, and factors that
contribute to occupational injuries and illnesses
• Safety training programs:– Workplace violence Driving
– Ergonomics Lifting & Moving
– LOTO HazCom/HazWopper
What does Safety have to do with Claims?
Everything!
Claims are the result of failure. Management of Claims is managing
failure! Failure to act in a Safe Manner Failure to maintain Proper
Housekeeping Failure to use proper PPE Failure to Drive or Work Safely. Failure to adhere to Safety Policies
Workers’ Compensation - Defined
• A law in each U.S. state that requires employers to
assume obligation for employee injuries and some
occupational illnesses, as defined, that “arise out of
and in the course of employment.”
• Such obligation applies regardless of fault. The
obligation can be satisfied by an insurance policy or
by an approved self-insurance plan.
Workers’ Compensation
• Medical Treatment
• Payment of lost wages
• Payment for medical expenses
• Return to Work Program
• Vocational / Occupational Rehab
• Legal Expenses
• Psych Expenses
• Permanent Disabilities
• Claim Settlement
• Lifetime claims
Let’s talk about Claims
• Where does a claim start?
• Employer Knowledge– Personally Reported
– Verbal or Written
– Evidence of Medical Treatment• “Oh yeah, he did say he got hurt, but never told me it
was work related….” “So I never reported it.”
– Sometimes your first notice is a Petition or legal
action.
Definitions– DOL = Date of Loss (Date of Injury)– LT = Lost Time - When more than x days off
work– TTD = Temporary Total Disability
• The temporary wages paid during time off (66 2/3)• PLUS any medical bills (statutory coverage)
– TPD – Temporary Partial Disability• Can work limited duty but not full time• Partial Benefits are paid to supplement wages
– MMI = Maximum Medical Improvement• The doctor deems your as well as your going to get• No further improvement is ever expected
Definitions
– RTW = Return to work
• The employer can accommodate the employee’s
restrictions and provide some form of job to the
employee (can be temporary or permanent)
– AWW = 13/26/52 Week Average Weekly Wage
• The employee’s gross salary for 52 weeks prior to
the injury is added and then divided by 52 to derive
the average weekly wage.
Definitions
• IW – Injured Worker, Claimant,
Applicant– EE – Employee
– ER – Employer
• DC – Defense Counsel
• AA – Applicants Counsel
How does a claim start?• You've done it a thousand times.• It comes naturally to you. • You know what you're doing.• I don’t need to worry about that.• I can take care of myself.• Etc.• Etc.• Etc.
NOTHING CAN GO WRONG, RIGHT?
Think Again.
Injuries can be Acute or Cumulative
Acute Injury / Traumatic Injury?
1. A traumatic injury is a wound or other condition of the body caused by external force, including stress or strain.
2. The injury must occur at a specific time and place, and it must affect a specific part(s) or function(s) of the body
3. Must be caused by a specific event or incident, or a series of events or incidents, within a single day or work shift
+ =
Cumulative Injury or Occupational Disease?
1. An Occupational Disease is a condition produced by the work environment over a period longer than one work day or shift.
2. The length of exposure, not the cause of the injury or the medical condition which results, determines whether an injury is traumatic or occupational.
Examples: The condition may result from infection, repeated stress or strain, or repeated exposure to toxins, poisons, fumes or other continuing conditions of the work environment, carpal tunnel from daily use of computer keyboard, etc.
How does a claim start?
• Employer Knowledge.– Once the employer has knowledge than a claims
MUST be filed with your insurance carrier / TPA.• Even if you think it is False / Fraudulent
• Employer may be aware of accident
– Local Manager or Supervisor
– Some States – Treating Physician can initiate a claim
by filing a treatment form.• Late reports can result in penalties against the
employer/carrier. Think OSHA Penalties as well.
Benefits of early claim notice
• Provides baseline / time line for claim
investigation
• Documents incident facts while they are fresh– Witnesses
– Symptoms
– Recovery potential
– Identification of Red Flags
– Direct Care
Investigation of Claim
• Employer and Insurance Carrier investigate claim– Contact Employee, Supervisor, Witnesses, review medical
reports, policies, etc.
• Adjuster from Insurance Carrier/TPA may call and
take recorded statements (Not all States)
• Determine if RED Flags exist?
• Make a decision to Accept, Delay, Deny or take
other action.– Often anything other than accept Litigation.
Claim Process – Red Flags
– Horseplay
– Unauthorized activities
– Assaults
– Timing
– Delayed reporting
– Conflicting evidence
– Outside activities
– Nature of injury
– Treatment
Suspect Fraud?
• Refer to SIU
• Refer to State Insurance Commission
Usually want to deny the claim and let
the Applicant prove their claim in court.
Prepare for Litigation – you need to
defend your denial
Directing Care
• Established relationship with Occupational Medicine
Clinics
• Some states you can tell the worker where to treat
• Medical Management– PPO
– MCO
– MPN
• Workers will try to treat with friendly doctors– Keep out of work
– Delay medical reports
Directing Care
• Options against malingerers– Independent Medical Exam (IME)
– Nurse Case Management
– Compensability review
• Current condition denial
• Partial denial
• Do not authorize further treatment
– Legal review
The Workers Comp Claims Process
• Three point contact by adjuster:– Contacts employer– Contacts “Gate Keeper” Doctor– Contacts employee
• Administration of claim– Medical payments, drug payments, rehab etc
• Case Management, Litigation, Claim Determination
Compensability Decision
• Injury vs. Occupational Disease– AOE/COE
• Pre-existing, Major Contributing Cause
• Presumptions
• Operational / Employment issues – WC is not a
dumping ground for bad employees
• HR Issues
• LP Issues
• Failed Drug Screen???
Make sure to
SHARE information
Make sure to
SHARE information
Accept Claim
• You pay for everything
• Benefits are issued based on State Specific
criteria– Loss Time Payments are generally 66 2/3% for
Average pre-injury wages
– Light duty needs to pay at the pre-injury rate
– Provide treatment, move case toward closure
Deny the Claim
• Litigation
• Go Away
• Some claims can be denied even after initial
treatment– May still have some payments on the claim
• Litigation adds 30-40% to the value of the claim
• Improper Denials – Recent RICO Case
Retaliation Claims
• Workers will get hurt
• Workers will get terminated
• Workers will hire attorneys
• Workers will allege that their termination was a
result of filing a Work Comp Claim.
THE BURDON OF PROOF WILL NOW BE ON THE
COMPANY TO PROVE OTHERWISE
Return to Work / TAW / Modified Duty
• Goal of early and safe Return-to-Work– Return the worker to suitable employment with little or
no loss of earnings
– Employer’s Responsibilities• Contact worker ASAP after accident
• Maintain the communication
• Attempt to provide suitable work
• Provide all information to Adjuster
– Benefits can be terminated if you Offer and employee refuses
work
Return to Work
• Suitable employment• Productive• Available• Medically approved / appropriate
– Within worker’s physical ability– Within worker’s skill set– Will not slow recovery
• Not demeaning• Restores pre-injury earnings close as possible• Temporary or Permanent (ADA)
Safety Violations
• Some states allow for the reduction of claim
benefits or even denial if the Injured Worker
violated safety policies:– Must have known about them (training)
– Employer makes reasonable efforts to enforce
– Employee or Employer intentionally violated rule
– Injury is proximate cause to violation
• This is where your compliance / Safety Awareness
Programs can be vital.– Can you show proof of training?
Safety Violations
• CA +/- up to 50%
• GA up to 100% reduction (denial)
• FL up to 25% reduction
• OH Penalties against Employer up to 50% +
$ 50K
• NC +/- 10%
• MO 25-50% reduction
What does the claim data tell us?
• What is driving the costs of claims?
• Frequency?
• Medical Costs?
• Severity?
• Location?
• Morale?
• Seasonal?
Why is Looking at the Most Expensive Claims Important?
• Traditional approaches to workplace loss prevention and safety
focused on decreasing the number (frequency) of accidents to
reduce the costs of WC. (OSHA Likes This)
• Data from Insurers and Company Management indicates that more
effective prevention and cost control might come from identifying
and preventing those factors (costs) that turn an average claim into
one of the most costly.
Why is Looking at the Most Expensive Claims Important?National Data
Least Costly85%
Most Costly15%
All WC Claims Least Costly15%
Most Costly85%
Claims Costs
Insurer data indicates that 15% of WC Claims make up 85% of the total Comp. Costs
Most Costly Claim Trends
• Most of the 15% had noted
Surgery Issues:
– Multiple Surgeries
– Failed Surgeries
– Predominance of Back
Surgery
• Many noted Psychological
Elements:
– Stress
– Anxiety
– Suicide
– Chronic Pain Syndrome
– Insomnia
– Psych
– ED
Most Costly Claim Trends (Age Distribution)
30%
20%
4%
11%
35%
Under 30 30-39 40-49 50-59 60+
• Age range is 24-63 Average age is 41 Median age is 40
• The age group of 30 - 39 represents over 1/3 of the costliest cases.
Gender Comparison Frequency (Fx) and Cost ($)
66%
78%
22%
34%37%
63%
All Claims Fx
All Claims $
Most CostlyFx & $
Female
Male
Fx = Frequency Analysis $ = Cost Analysis
Typical Claim Financials
Paid Reserve Total IncMedical 155,000 276,000 431,000 Indemnity 81,256 124,777 206,033 Expenses 26,210 21,080 47,290 Recovery - Other 8 8
Total 262,474 421,857 684,331
Where does the $$ Go?Cost Data
Benefit Payments
18%
Settlements41%
Other2%
Employer Legal1%
Medical 38%
Most Costly The Role of Surgery
2 Sx26%(14)
1 Sx51%(27)
5 Sx4%(2)
4 Sx8%(4)
3 Sx11%(6)
Most Costly and Surgery
Extremities12%
Back62%
Internal6%
Carpal Tunnel
6%
Head4%
Amputation10%
Most Costly: Psychological Elements
• 46% claims had some “psych” issues alleged.
• Post Traumatic Stress
• Anxiety
• Insomnia
• Depression
• Low Self-Esteem
• Suicidal Thoughts
• Hopelessness
Most Costly and Dispute Activity
• 60% of the claimants had some kind of dispute between
themselves and the insurer/employer.
• The NOC (Notice of Controversy) serves as notice that either
benefits or other elements of the claim are in disputed pending
WCB resolution.. There are many things that can be disputed:
– Causation - Service - Mileage
– Treatment - Doctor’s Services
– Supplies
– Diagnosis - Etc.
Why Accidents Happen
0%10%20%30%40%50%60%70%80%
UnsafeActs
UnsafeConditions
• Unsafe Behaviors/Acts = 80% of accidents
• Unsafe Conditions = 20%
• Inspections (Self & OSHA) – Usually are overly focused
on conditions– Include safe and unsafe
behaviors in your checklist
• Watch People Work!
Underlying Causes of Most Workplace Injuries• #1 - Management
Behavior - nearly every
unsafe action and condition
can be traced back to a
lack of adequate safety
management / Supervision
(enforcement)
• #2 - Employee Behavior -
is often a reflection of
safety training and
enforcement
• Dupont Chemicals, • Congress 1994, Jeff Wilson,
manager, says when an injury occurs, instead of the typical reaction:– “What could that
person have been thinking?”
the better response is:– “Where did we (the
company) fail?”
Other Prevention Techniques“Before the Accident”
• Hiring Practices
- Drug screening
- Prior employers
- MVR’s
- Competency tests
- Criminal records
- Prior Claims
• Authority to STOP if danger
is imminent
- Employees need this to
work safely
• Health
- Helps keep employees alert and focused
- Eat well balanced meals
- Avoid alcohol, drugs & tobacco
• Exercise
- Body reacts better
- Reduces stress
- Less likely to be injured
Loss Control: Claims Mitigation
Communication with Employees• This is where most employers fall short
– Do you have the ability to track and prove training?• Serious and willful violations +/- $$
• Put yourself in the injured employee’s position:– Injured on the job– Alone, in pain, disabled, at hospital/home– No flowers, no get well cards, no calls of concern from employer– Resentment builds– TV attorneys care more than you!
• Employees less likely to seek a lawyer with a concerned employer
Are you paying the IW to watch this?
Or This?
Loss Control: Claims Mitigation• Communicate with Medical Provider
– Learn if they were told about the accident/injury
– Compare notes!• Return to Work/Light Duty Program
– Message to injured employee that you care– Screens out fraud cases– Message to other employees – Reduces Indemnity pay (for time off)
• Reduces overall claim payment– Insurance carrier can stop payments if
employee refuses to return to work
Old School
• “as in many workplaces, safety issues — like environmental issues — were seen as a nuisance, a drain on profits and a drag on production. Safety was delegated to safety inspectors, who were routinely ignored.”
• The larger problem is in the executive suite. The CEO is not going to fall off the staging or have a forklift mash him into the wall. He’s got a safety guy to take care of all that stuff, and mostly what he wants to hear from the safety guy is nothing. Don’t bother me, buddy, I’m working on cost containment, quality control, financing, CEO stuff, stuff that makes us money. Safety? Not my job.
http://thechronicleherald.ca/NovaScotian/1113824.html
10-K: DOLLAR GENERAL CORP, 3/24/09
“Our increased sales levels favorably impacted SG&A, as a
percentage of sales, in addition to a reduction in workers'
compensation expense, resulting from safety initiatives
implemented over the last several years,...”
“Our third priority is leveraging process improvements…”
“Examples of cost reduction initiatives in 2008 include…
reduction of workers compensation expense through a
focus on safety,…”
10-K: QUALITY DISTRIBUTION INC. 3/13/09
• “We have made safety the main focus of
our organization. We implemented several
comprehensive process improvement
programs to further identify and implement
opportunities for sustainable safety
improvement. Tangible results of this focus
have already manifested themselves in a
substantial decrease in preventable events
and claim frequency.”
Safety and What it means to Sr. Mgmt.
• Becoming ever more important
• Increase in Sr. Management Awareness
• They are now starting to realize that Safety
translates to decrease in expenses which
means they can add to the bottom line.
• What’s the ROI?
Let’s make it evident! Safety Pays
• Pay for your Safety Programs with Saved Dollars– Back Claims:
• $ 33,000 average expense
– Store with 12% Profit Margin• $ 275,000 In Sales just for the claim
• + Overtime
• + Lost Productivity
• + Hiring and Training Costs
• $ 577,500 savings by preventing 1 back claim!
Cost of Claim Matrix
Cost of Claim 2% 4% 5% 8% 10% 12% 15%
2,500
125,000
62,500
50,000
31,250
25,000
20,833
16,667
5,000
250,000
125,000
100,000
62,500
50,000
41,667
33,333
10,000
500,000
250,000
200,000
125,000
100,000
83,333
66,667
25,000
1,250,000
625,000
500,000
312,500
250,000
208,333
166,667
50,000
2,500,000
1,250,000
1,000,000
625,000
500,000
416,667
333,333
75,000
3,750,000
1,875,000
1,500,000
937,500
750,000
625,000
500,000
100,000
5,000,000
2,500,000
2,000,000
1,250,000
1,000,000
833,333
666,667
250,000
12,500,000
6,250,000
5,000,000
3,125,000
2,500,000
2,083,333
1,666,667
Indirect Costs
• Recruitment Expenses
• Increased Training
• Overtime
• Lost Productivity
• Customer Service Decline
• Moral / Increased Stress
• Property / Equipment Dmg.
OSHA Estimates the Indirect costs of a
Workers’ Comp Injury to be 4.5 x the direct
costs.
Liberty Mutual Study:
5-6 X indirect costs
Indirect Cost Calculation
If Direct Cost Is
Use ThisMultiplier
$0 - $2,999 4.5
$3,000 - $4,999 1.6
$5,000 - $9,999 1.2
$10,000 or more 1.1
2,500 * 4.5 = 11,250 + 2,500 = 13,750 /
8% = $ 171,875
75,000 * 1.1 = 82,500 + 75,000 =
157,500 / 8% = $ 2M
http://www.mwecc.com/Files/SIB/Stop%20Looking%20The%20Wrong%20Way%20December_03.pdf
Cost of Claim Matrix + IndirectCost of Claim 2% 4% 5% 8% 10% 12% 15%
2,500
125,000
687,500
62,500
50,000
31,250
25,000
20,833
16,667
5,000
250,000
125,000
100,000
62,500
50,000
41,667
33,333
10,000
500,000
250,000
200,000
125,000
100,000
83,333
66,667
25,000
1,250,000
625,000
500,0
00 1,050,
000
312,500
250,000
208,333
166,667
50,000
2,500,000
1,250,000
1,000,000
625,000
500,000
416,667
333,333
75,000
3,750,000
1,875,000
1,500,000
937,500
750,000
625,000
500,000
100,000
5,000,000
2,500,000
2,000,000
1,250,000
1,000,000
2,100,000
833,333
666,667
250,000
12,500,000
6,250,000
5,000,000
3,125,000
2,500,000
2,083,333
1,666,667
