Risk Insider: Jason Beans

Workers’ Comp: Like a Nasty Divorce

By: | April 17, 2015 • 4 min read
Jason Beans is the Founder and Chief Executive Officer of Rising Medical Solutions, a medical cost management firm. He has over 20 years of industry experience. He can be reached at [email protected]

I have followed the ProPublica/NPR article series on “The Demolition of Workers’ Comp,” and the subsequent reactions with interest. From the implication that the system is being decimated at the expense of American workers, to various points of disagreement from industry parties, I have found a lot to consider.

ProPublica ignited a debate that is still alive, and one that I felt it prudent to give considerable thought to before weighing in.

One major realization I’ve come to is that workers’ comp cases can be a lot like a nasty divorce.

In the aftermath, there are two households to support and both sides believe the other is “screwing” them. One spouse is certain they are “right” and the other is clearly “wrong.” But the truth, as it so often does, lies in shades of gray.

I think this is where we find ourselves in the ProPublica debate.

In workers’ comp, employers often have to cover massive costs, typically for a person who is no longer working or producing. The injured worker does not have the same earning power or quality of life.

Nothing the insurer can do will take away the fact that someone has lost a limb or is a quadriplegic. The story is a sad one, no matter what the outcome.

If we can help 10 injured workers have a better life, but cost thousands of U.S. jobs, have we done a good or bad thing for society?

To be frank, when I began reading the ProPublica report, my initial reaction was that it likely amounted to sensationalism masquerading as journalism. There are some well-founded points, though we do everyone a disservice — injured workers, employers, and insurers alike — if we do not look past the anecdotes to the tough questions.

As in a nasty divorce, it is tempting to point fingers and place blame. But if we want to truly understand the realities of workers’ comp today, we must resist the urge to oversimplify.

If you’ve been following all of the punches and counter-punches, then you know significant attention has been given to ProPublica’s use or misuse of statistics. So instead I will touch on some of the other issues raised but in a much broader context.

The Costs of Competition

Workers’ comp does not function in a vacuum, it operates in a national and global free market system. The cost of labor is a major factor in this system and determines where companies hire and expand.

In a global economy, every state and country compete to see if the job can be done better, faster, cheaper. Additionally, labor markets are increasingly competing with robotics and automation.

That means every action has a reaction, and that includes consequences for every increase in workers’ compensation costs and benefits.

If we can help 10 injured workers have a better life, but cost thousands of U.S. jobs, have we done a good or bad thing for society? We have to consider the larger price we may pay for the decisions we make today.

Consider, too, that if employers and insurers cease to turn a profit, they cease to exist.

The ProPublica article contends that worker’s comp reforms are being driven by employers seeking to increase profits. Any dubious math aside, it is important to understand that in insurance, some measure of profitability has more to do with market forces than with work comp laws. Massive amounts of capital are needed to underwrite insurance, and the majority of that capital rests with reinsurers.

Reinsurers invest wherever the risk is lowest and the returns are highest. Higher risk/lower return investments (such as workers’ compensation in U.S. states) will see less capital, subsequently driving prices up, while low risk/high return markets will see a flood of capital that drives prices down.

Overall, insurance profitability must match the market’s profitability or we will have no insurance. What then?

Don’t Oversimplify … or Overcomplicate … Comp

We face tough decisions with no perfect answers in workers’ comp. For example, when a carrier underwrites workers’ compensation, their liability is unknown. Cases from the 1950’s are still open.

There is no way to predict medical improvements. A prosthesis might have been all that was available when a carrier wrote a policy fifty years ago. Now they are expected to cover a robotic limb that can cost hundreds of thousands of dollars. Is that fair? It’s not a simple issue.

Overall, insurance profitability must match the market’s profitability or we will have no insurance. What then?

We as an industry can also complicate matters by tripping over dollars to save pennies. This is devastating to workers and, over time, the payers’ bottom line.

The best payers I have seen jump to take care of injured employees. When you do everything possible to help workers get to pre-injury status or maximum improvement, it’s pretty easy to identify the frauds.

Really, there are two choices in claims management. Distrust everyone until they prove they are legitimate, or assume they are legitimate until they prove otherwise — the latter produces better results.

Despite ProPublica’s implications to the contrary, the vast majority of people I know in workers’ comp are well-intentioned, want the best for injured workers, and want a system that supports them. But we face challenges, and how we address these difficult issues will have far-reaching, even global, ripple effects for employees, employment rates, employers and carriers alike.

We have to approach the tough questions — and answers — we face with the understanding that things are never simply black or white, and reaching solutions often lies in the shades of gray.

Kind of like a good marriage.

More from Risk & Insurance

More from Risk & Insurance

2017 Teddy Awards

The Era of Engagement

The very best workers’ compensation programs are the ones where workers aren’t just the subject of the program, they’re a part of it.
By: | November 1, 2017 • 5 min read

Employee engagement, employee advocacy, employee participation — these are common threads running through the programs we honor this year in the 2017 Theodore Roosevelt Workers’ Compensation and Disability Management Awards, sponsored by PMA Companies.

A panel of judges — including workers’ comp executives who actively engage their own employees — selected this year’s winners on the basis of performance, sustainability, innovation and teamwork. The winners hail from different industries and regions, but all make people part of the solution to unique challenges.

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Valley Health System is all-too keenly aware of the risk of violence in health care settings, running the gamut from disruptive patients to grieving, overwrought family members to mentally unstable active shooters.

Valley Health employs a proactive and comprehensive plan to respond to violent scenarios, involving its Code Atlas Team — 50 members of the clinical staff and security departments who undergo specialized training. Valley Health drills regularly, including intense annual active shooter drills that involve participation from local law enforcement.

The drills are unnerving for many, but the program is making a difference — the health system cut its workplace violence injuries in half in the course of just one year.

“We’re looking at patient safety and employee safety like never before,” said Barbara Schultz, director of employee health and wellness.

At Rochester Regional Health’s five hospitals and six long-term care facilities, a key loss driver was slips and falls. The system’s mandatory safety shoe program saw only moderate take-up, but the reason wasn’t clear.

Rather than force managers to write up non-compliant employees, senior manager of workers’ compensation and employee safety Monica Manske got proactive, using a survey as well as one-on-one communication to suss out the obstacles. After making changes based on the feedback, shoe compliance shot up from 35 percent to 85 percent, contributing to a 42 percent reduction in lost-time claims and a 46 percent reduction in injuries.

For the shoe program, as well as every RRH safety initiative, Manske’s team takes the same approach: engaging employees to teach and encourage safe behaviors rather than punishing them for lapses.

For some of this year’s Teddy winners, success was born of the company’s willingness to make dramatic program changes.

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Delta Air Lines made two ambitious program changes since 2013. First it adopted an employee advocacy model for its disability and leave of absence programs. After tasting success, the company transitioned all lines including workers’ compensation to an integrated absence management program bundled under a single TPA.

While skeptics assume “employee advocacy” means more claims and higher costs, Delta answers with a reality that’s quite the opposite. A year after the transition, Delta reduced open claims from 3,479 to 1,367, with its total incurred amount decreased by $50.1 million — head and shoulders above its projected goals.

For the Massachusetts Port Authority, change meant ending the era of having a self-administered program and partnering with a TPA. It also meant switching from a guaranteed cost program to a self-insured program for a significant segment of its workforce.

Massport’s results make a great argument for embracing change: The organization saved $21 million over the past six years. Freeing up resources allowed Massport to increase focus on safety as well as medical management and chopped its medical costs per claim in half — even while allowing employees to choose their own health care providers.

Risk & Insurance® congratulates the 2017 Teddy Award winners and holds them in high esteem for their tireless commitment to a safe workforce that’s fully engaged in its own care. &

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More coverage of the 2017 Teddy Award Winners and Honorable Mentions:

Advocacy Takes Off: At Delta Air Lines, putting employees first is the right thing to do, for employees and employer alike.

 

Proactive Approach to Employee SafetyThe Valley Health System shifted its philosophy on workers’ compensation, putting employee and patient safety at the forefront.

 

Getting It Right: Better coordination of workers’ compensation risk management spelled success for the Massachusetts Port Authority.

 

Carrots: Not SticksAt Rochester Regional Health, the workers’ comp and safety team champion employee engagement and positive reinforcement.

 

Fit for Duty: Recognizing parallels between athletes and public safety officials, the city of Denver made tailored fitness training part of its safety plan.

 

Triage, Transparency and TeamworkWhen the City of Surprise, Ariz. got proactive about reining in its claims, it also took steps to get employees engaged in making things better for everyone.

A Lesson in Leadership: Shared responsibility, data analysis and a commitment to employees are the hallmarks of Benco Dental’s workers’ comp program.

 

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]