Self-Assured Resolutions 2022 Workers Comp?? Post-pandemic (?)
The self-assured resolutions of 2022 Workers Comp should be seen as a bridge between the pandemic and the post-pandemic era.
For the past 13+ years, including 2021, I have written about labor competition resolutions. Our self-insured customers and article/newsletter readers always remind me not to forget 15% of the market – which is self-insurance. Like every year for the past 13 years, I agree and publish an article for companies and organizations that pay paid workers out of pocket.
Check out the 2021 self-insured resolutions for workers at this link.
Update – I decided to add the 2021 resolutions below to save time and prevent the reader from having to go back and forth between 2021 and 2022. Check the bottom of the list for those added for this year. I removed all outdated recommendations and italicized any additions to 2021 resolutions.
- You pay directly from your budget. With the advent of COVID – reviewing your losses online, not on paper, at monthly or quarterly intervals is more than critical now. Following payment patterns becomes critical if you have incurred multiple claims. Monitoring claims payment outflows cannot simply be an exercise in looking at a series of losses. You need to drill down to the granular level of individual payments. Remember that adjusters spend directly from your accounts.
- These purely medical claims usually turn out to be your worst nightmares. Watch closely for claims that have no indemnity paid but have a large amount of medical bills paid quickly or a medical reserve under construction with no closeout. Festering complaints become a ticking time bomb if these complaints are not monitored. We have heard of numerous claims where treatment has stopped because injured employees did not want to go to a doctor during the pandemic. Most industrial accident board/worker’s compensation board decisions that I have seen have ruled in favor of the injured employee during office visits and other treatment reluctance.
- Is your business still large enough in one state to warrant self-insurance? Businesses change location quickly. Many states require minimum cash and bonds per state, not per company. Look at the minimums in each state. If your business has had to downsize, self-insurance may not be the right option. Fixed costs per state may not justify being self-insured in states where you were self-insured in the past. The risk manager or consultant of a self-insured should thoroughly analyze this concern. Payroll and production may have been reduced to a level where self-insurance may cost more than it saves the employer.
- Having a working relationship with your claims adjusters becomes a must from day one. See #1 above. Your TPA adjusters become quasi-employees because they spend directly on your budget. One of the first tasks we often perform in a self-insured review is to establish which experts are working on which claims. Most claims adjusters accept questions by email if they are not vague or reasoned. With the shift to in-home experts, it is even more recommended to email the expert instead of calling. The only time a call is recommended is when there is an emergency or when a new adjuster takes on a claim such as a “hello” phone call.
- Obtain and understand your LDF (Loss Development Factor). Yes, your company may have moved away from the E-Mod system. The FDLs become your claims and risk management GPS. Many software packages will produce LDFs. Entries in equations sometimes cause confusion and skewed numbers. If you don’t feel comfortable calculating your FDLs, ask for help. DFLs can become more inaccurate if loaded with complete claims payment data, even though your current and future workforce may have shrunk. Take a very close look at the number you submit to any actuary.
- Becoming self-insured is not a fashion statement. I have analyzed and advised many self-insured people to stay where they are in the insurance process. Just because you’re now old enough to be self-assured doesn’t mean you have to take steps to ditch the E-Mod system. See #3 above, is your business still big enough or is it going to be big enough in a certain state to warrant self-insurance? Every business wants to be self-insured, but should you stick with self-insurance – hard to call.
- Defining your level of reassurance can be tricky. Most potential self-insured people think $250,000 is the only level. Many active reinsurers reinsure from $100,000 per claim. Yes, insurance costs more than $250,000 per claim. You have to stop and think if they would have claims that would be split between $100,000 and $250,000.
- Ask for help from the state. States have become much more helpful to self-insured. Every state’s insurance department doesn’t want to have a bucket of defaulting self-insureds on their lists. Assistance with self-insurance claims appears to have increased over the past 10 to 15 years. Not so long ago, the process was almost a guessing game.
- Looking at other insurance markets. Alternatives to self-insurance have become something of a cottage industry. Many consulting firms, agencies, and captive managers have lined up their services as alternatives to self-insurance without incurring the full risk. These companies have quietly positioned themselves in certain markets and performed well. PEOs have become a very viable option since the start of 2020. Yes, PEOs are about going back to a premium structure more than self-insurance.
- Intensify the use of My Six Keys. Keys have helped self-insured people very often over the past 20 years. See this page for the Six Keys. You probably already know them. The keys haven’t changed since the 1980s. Return to work will take on a new connotation this year with the return to work of home-based workers. The return to work of injured employees may have been delayed due to COVID-19. We’ve seen many office visits and surgeries postponed or canceled since March 2020. Patience with medical treatment delays seems to have worked for most employers. Office visits and some surgeries have started again in some states. Each state has its own protocols on medical treatment. #11 below has become very important in 2020.
- Medical networks are becoming increasingly critical to the success of self-insurance over the years. Having an industrial-minded physician with a good bedside attitude lowers claims costs. Remember that you are spending directly from a budgeted account. Returning to work becomes synonymous with the success of your program. As with the recommendations for the uninsured, COVID-19 may have made your workforce very distributed over a larger area. If someone is injured while working from home, where to send them for treatment if they have a homeworker injury? Yes, they are coming. Workers’ compensation boards don’t like requiring an injured employee to drive 1.5 hours for workers’ treatment.
- Your program will likely take a beating over the years. Not every year can be considered a record year. Risk is risk. Expect the best but prepare for the worst (reinsurance, medical networks, back-to-work program, etc.). Update – check out next week’s articles where a self-insured 2022 worker may have been shorted against an E-Mod based insured. I will add a link to the new article when I finish it next week.
- Keep your C-level executive or business owners informed of the program’s progress over time. Several times, as a consultant, I briefed executives on what was happening in their programs. A truncated loss series with a mini-loss status works most of the time. Do not operate on an island. With many employees spread over a larger area, including your injured employees, C-level executives need to know up-to-date information about the company’s workers’ compensation program. A loss analysis report works well. Be concise. With all the remote work going on, this is one of the biggest concerns we’ve heard from business owners and C-level executives – they don’t know what’s going on as well as when everyone was in the same office.
- Monitor the budget of expenses (ALAE) that are not directly related to the settlement of claims. Private investigators, defense attorneys, rehabilitation nurses (well worth it) and other ALAE are now paid directly from your budget. In some states, claims handling and facilitation costs totaled more than claim payments (ouch!)
- New – Treatment Delays – Check with your medical network and TPA providers to ensure there are minimal delays in employee treatments. Surgeries and office visits have often been cancelled, leaving injured employees out of the treatment system. Telemedicine appointments are among the most popular ways to keep injured employees in the medical treatment loop.
- New – Dual Return to Work Management – If an injured employee is released to return to work, but no positions are available due to the pandemic or a business downturn, you may need to pay until a job becomes available.
I could cover more items. I didn’t want the 2022 Workers Comp Self-Insured Resolutions to turn into a booklet that was too long to read in five minutes.
This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.
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