Risk Insider: Bill Minick

Cost Shifting: Candy Stores and Scapegoats

By: | June 15, 2016 • 3 min read
Bill Minick is president of PartnerSource, a risk management consulting firm specializing in workers’ compensation alternatives. He can be reached at [email protected]

Listening to a workers’ compensation insurance company trade group at a conference these days is like watching a kid in a candy store. They are so very happy and excited about the opportunity to deflect their own industry’s shortcomings to the evil “Option” to workers’ compensation.

Carefully avoiding any discussion of comparative data, they cast allegations of Option program operations and results that often have no factual or legal support.

A favored treat says that Option injury benefit plans shift costs to government programs more than workers’ compensation systems. Professor John Burton and others continue to point to fiscal challenges for the Social Security Disability Insurance (SSDI) Trust Fund due to (1) the shifting of responsibilities (i.e., “coordination of benefits”) from workers’ compensation, and (2) inadequate workers’ comp cash benefits.

However, this wide-scale, data-proven problem of cost-shifting within workers’ compensation systems has not been demonstrated within Option injury benefit programs.

In fact:

As confirmed by an independent, former NCCI actuary in the review of more than 160,000 claims over a 10-year period, Option programs have a shorter average duration of disability, and both the initial and sustained return to work rates are much higher.

Until these fundamental, systemic failures to reasonably cooperate and practice evidence-based medicine are addressed, meaningful progress on cost-shifting by workers’ compensation to SSDI will not occur.

Also relevant is the fact that many (including almost all large) Option employer programs pay wage replacement benefits from the first day of disability, at a higher percentage of pay, and with no weekly dollar cap. This is far more generous than workers’ compensation systems.

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Recent trends also show the percentage of disability benefits in Option programs to be increasing, moving from 85 percent up to 90 percent or 100 percent of pre-injury pay.

Lastly, Option employers are now rallying behind injury benefit plan provisions making clear that benefits will not be reduced by or coordinated with benefits from government programs, such as social security disability or survivor benefits. Such changes are easy to make when any coordination of benefits with government programs has rarely occurred.

This ability of Option programs to bear more of the direct costs of occupational injury is the result of requiring more employee and medical provider accountability.

Workers’ compensation systems could also better address SSDI’s cost-shifting concerns if state legislatures would seriously consider the toll taken upon injured workers and the economy by:

  • Late reporting of known accidents and injuries
  • Delays and a lack of persistence in medical treatment
  • Failures to follow medical provider treatment instructions, and
  • Medical providers who do not obtain a comprehensive medical history, do not perform an adequate physical examination, do not review current and past diagnostic tests and imaging, and instead rely on speculative reasoning.

Until these fundamental, systemic failures to reasonably cooperate and practice evidence-based medicine are addressed, meaningful progress on cost-shifting by workers’ compensation to SSDI will not occur.

Instead, we will continue to see workers’ compensation insurance company trade groups (supported by some regulators and trial lawyers) search for scapegoats, while Option program sponsors emphasize the more common-sense pursuit of better medical outcomes and a higher level of social responsibility.

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]